Wockhardt stock drops as court allows lenders’ plea

The stock of Wockhardt Ltd fell the most in almost a year after the Bombay high court admitted a petition filed by three creditors to wind up the company.

The stock dropped nearly 10% to Rs312.50, the biggest intraday fall in over a year, before recovering to close the day at `332.95, down 4.1%.

The Bombay Stock Exchange barometer rose 1.46%.
A group of three bondholders, including US hedge fund QVT Financial LP, and an overseas unit of Sun Pharmaceutical Industries Ltd, filed the petition after Wockhardt defaulted on payments of its $110 million convertible bonds that matured in October 2009.

The claimants are looking to retrieve a total sum of Rs634 crore ($140 million), senior counsel for the creditors, Janak Dwarkadas said.

The foreign currency convertible bonds (FCCBs) issued by Wockhardt in 2004 were due for redemption in October 2009, when the company defaulted.

Based on the redemption terms of the bond, Wockhardt was supposed to pay $140 million at the time of maturity if the bond holders decided not to convert them into equity shares at the prevailing price.

As the share price of Wockhardt was not attractive enough, the bond holders decided not to convert.

After Wockhardt defaulted in October 2009, some of the investors in these bonds had reached an agreement with Wockhardt to restructure the tenure of the bonds they held.

The investors who were not in agreement decided to approach the Bombay high court in December 2009 to seek its intervention in recovering their investment in the company.

Following some bad bets it made on foreign exchange hedges, the company had to go in for debt restructuring in 2008 to ensure that it doesn’t default on some Rs3,800 crore debt it had on its books then.

Wockhardt, which also operates hospitals India, will appeal the court’s decision to accept the petition, said NS Rajan, a spokesman with Wockhardt’s external communications company Sampark Public Relations.