New York-based DA Capital and Asian special situations investor SSG Capital Management are bidding for the promoters’ stake in four Amtek Group entities after a consortium of lenders that controls the company decided to sell shares to retrieve money owed to them.
The consortium led by IDBI and other banks has decided to conduct an auction this week to find a suitable buyer. IDBI Capital and SBI Capital Markets are lead managers in charge of the auction.
If successful, it would dilute promoter stake by half. If all goes well, the total deal is expected to be worth about Rs 5,000 crore and the buyer will assume a major portion of the debt.
Lenders have decided to auction stakes in Amtek AutoBSE 4.95 %, Metalyst Forgings, Castex Technologies and Amtek Ring Gears Ltd, according to three sources. The lenders want to bring in equity capital and settle 25 percent of the total debt of Rs 20,000 crore with the auction. As a second tranche, 25 percent of the debt would be retired once the group regains operational stability.
The remaining 50 percent of Amtek’s dues would be repaid through a “long-term arrangement” involving a mix of low-coupon debt and equity, sources said. After the deal, promoter stake in the group would be down by at least 50 percent to about 27 percent. Currently, the promoters hold the majority stake in most group companies.
Amtek Auto is an integrated auto component manufacturer. Arvind Dham and family holds 52 per cent in the company, but lenders including IDBI and SBI controls the entity. Castex Technologies, formerly Amtek India, produces engineered components including cylinder head, cylinder blocks, and turbocharger housing.
The promoter group’s 46 per cent is divided between Amtek Auto and Metalyst Forgings. Metalyst Forgings, formerly Ahmednagar Forgings, produces axle beam and crankshaft for the auto industry.
Amtek Auto owns 54.4 per cent while WLD Investments owns 4.42 per cent. Amtek Group declined to offer comment on the story. DA and SSG did not return emails seeking comments sent on Friday.
IDBI and a few others also did not respond to ET’s detailed questionnaire. Amtek Auto and group companies landed in a debt trap due to a massive expansion in India and overseas markets.
In September 2015, the company reneged on bond payments worth Rs 800 crore – the papers mainly held by banks and mutual funds. Repayment negotiation with bondholders at higher rates triggered more defaults down the road. In a matter of few months, the Amtek Group was staring at a debt burden of Rs 20,000 crore.
The lender consortium tried various means to recoup losses, but “high valuation expectation of lenders” derailed stake and asset sale efforts. Lacklustre earnings of Amtek group companies also made it impossible for to raise capital from equities market.
In August 2016, New York-based DA Capital approached the lenders with a plan to take over select assets of Amtek group through an “equity cut-debt” deal structure. A complete proposal was presented by the fund in December of 2016, which the main lenders approved.
“But towards February, the lenders went back on their word… They did not want to be seen talking to an external party (DA Associates, in this case) about the company,” said a person close to the development.
