Lenders to paper maker Ballarpur IndustriesBSE -0.89 % (BILT) have proposed to invoke strategic debt restructuring (SDR) and seize control of the flagship unit of the company that contributes as much as 85% of the operating profits of its publicly traded parent, said officials in the know.
A consortium of lenders led by Axis Bank have proposed to invoke the SDR at BILT Graphic Paper Products, a step-down subsidiary of BILT, which has loans amounting to over Rs 4,000 crore as the paper manufacturer struggles to operate manufacturing plants due to a working capital crisis.
The SDR, if approved, could give the lender consortium that includes ICICI Bank, Standard Chartered, Rabo, Goldman Sachs and IndusInd Bank among others a majority stake in the company. Axis Bank leads the consortium. The proposal for the SDR was discussed at a meeting of the joint lender’s forum (JLF) in the last week of December and subsequently at a meeting of the board of directors of BILT on Wednesday, said people directly aware of the matter.
A spokesperson for BILT did not respond to emailed queries till press time, while a spokesperson for Axis Bank declined to comment when contacted by ET. The Reserve Bank of India’s guidelines for strategic debt restructuring stipulate that 75% of creditors by value and 60% of creditors by number must approve an SDR before it is invoked. The guidelines further state that lenders may convert a part or the entire portion of their debt into equity of at least 51% in the borrower company and that the JLF lenders should divest their holdings as soon as possible.
The guidelines allow for a borrower account to be upgraded to a “standard” asset post-change of control. BILT has a consolidated debt estimated to be in excess of Rs 6,000 crore. BILT Graphic Paper Products owns four of the six paper manufacturing units housed in the parent company, which are located at Ballarpur, Bhigwan, and Ashti in Maharashtra and at Sewa in Odisha. Two of the four units have shut down production while the other two are operating at 30% of their capacity due to fund constraints.
In September 2015, BILT — India’s largest maker of writing and printing paper — had announced that its step-down subsidiary, Ballarpur Paper Holdings (BPH), had entered into a definitive share sale agreement for selling its 98.1% equity in Sabah Forest Industries, Malaysia (SFI), to Pandawa Sakti (Sabah), the arm of a local business group Pandawa Sakti. Since then, the deal date has been postponed thrice and finally fell through.
