McLeod Russel, India’s largest loose tea producer, prepares to solve its debt problems as two of its biggest lenders appear to join in a comprehensive debt restructuring underway.
In a virtual meeting the last week of July, the Consortium of Bankers agreed to work on and further refine the plan which includes, but is not limited to, the combination of loan conversion and interest to preferred stock. , extension of the loan maturity period and deferred payment of interest and principal.
Not all banks immediately agree with the plan on the table, but efforts are being made by major lenders to reach consensus. McLeod Russel, who released his annual results on Friday, revealed that professionals appointed by the bank have submitted a draft resolution plan that is under review by lenders.
MRIL, belonging to the Calcutta-based Williamson Magor group, has a debt of around Rs 2,000 crore on the books. Yes Bank and HDFC Bank have the highest exposure totaling around Rs 8.00 crore, while ICICI Bank is the leader of the consortium.
It has been estimated that the company can service the debt of around Rs 1,200 to 1,300 crore, indicating that the lender has to agree to a plan to reduce the debt by Rs 700 crore.
The banks had appointed SBI Caps to develop a plan while a city-based company was tasked with carrying out the technical and economic viability of the company. Lenders turned to the idea of restructuring when it was felt they stood to lose big if MRIL went into liquidation.
“The fact that the company has still not been admitted into bankruptcy proceedings is testimony that bankers are ready to find a solution outside of the courtroom,” said a source familiar with the proceedings.
Previously, the Khaitans, the promoters of McLeod, tried to tie a strategic partner to the company. However, the pandemic put the brakes on the plan due to the ban on international flights to India. Potential investors are not able to travel to perform the necessary due diligence.
“With the ban on international travel in place, the restructuring plan does not immediately involve the induction of a strategic partner. If everything falls into place and the company becomes an attractive investment proposition, a transaction can take place at a later date, ”commented an MRIL official.
The restructuring process has gained momentum at a time when tea prices at auction centers have risen from Rs 70 to Rs 80 per kg following crop losses during the summer months due to foreclosure national. If the price remains at a high level, it can provide additional convenience to lenders.
Given the extreme risk aversion of bankers in India, the plan needs to get approval from the highest level of each bank. It could be a big request, but there is a possibility that it will be done by October.
MRIL had fallen into a debt trap by lending indiscriminately to group companies, in particular McNally Bharat Engineering Co Ltd. an unfavorable opinion of the auditor Lodha & Co, who considered that the loan is doubtful of recovery.
The exit created severe liquidity constraints on the company’s continued operations. He ended 2019-2020 with a loss of Rs 148.19 crore against a profit of Rs 38.81 crore in 2018-19.
“In the company’s books, INNs are assets. We hope to restructure the terms of repayment of ICDs when there is a restructuring of the liabilities (debts), ”said a source.
MRIL continues to have 33 gardens in Assam and Dooars with an annual production of 43 million kg of clean tea. She sold several gardens in order to pay off creditors. The asset sale process is now stalled due to legal entanglement.