NEW DELHI : CG Power and Industrial Solutions lenders have agreed to a one-time loan restructuring to pave the way for Chennai-based Murugappa Group to take over the scam-hit equipment manufacturer.
CG Power had a total debt of ₹Rs 2,161 crore, of which a consortium of 14 banks has cut ₹1.1 billion rupees and restructured the rest.
In separate but nearly identical stock market filings, CG Power and Murugappa Group’s Tube Investments of India Ltd (TIIL) firm said the lenders have agreed to the one-time debt settlement and restructuring.
In August, TIIL agreed to invest ₹700 crore in CG Power for a 56.61% stake.
This, he said, was subject to “satisfactory compliance with the conditions precedent contained in the Securities Subscription Agreement (SSA).”
“The SSA’s conditions precedent, among other things, included a condition that CG Power’s lenders accept a one-time settlement and restructure the financed facilities and secured debt in accordance with the terms of the binding offer made by the company to CG. Power and the lenders in a way that is mutually acceptable, “TIIL said.
Now, CG Power, TIIL and the lenders have “executed the required binding agreements dated November 20, 2020 for the one-time liquidation and restructuring of CG Power’s financed facilities and secured debt.”
The pact states that lenders are paid an initial amount of ₹650 crore. Too, ₹Rs 200 million of debt would be converted into non-convertible bonds with a five-year tenure.
In addition, the lenders would be paid “with the proceeds from the sale of the CG House property at best and as is where the base is, within a period of five years,” according to the documents.
Selling the property would erase another ₹Rs 150 crore of debt off the books of CG Power. This is independent of the value of the sale of the property.
“If the property is sold for ₹100 million rupees, everything goes to the moneylenders, but ₹150 crore would be removed from CG Power’s books. Similarly, even if the property goes by ₹200 crore, only ₹150 crore is spent on CG Power’s books, “said a source familiar with the pact.
The agreement also provides for the “transfer / substitution of non-fund-based facilities from lenders to non-consortium lenders or CG Power that acquire and present counter-guarantees for them.”
TIIL had recently received the go-ahead from the Competition Commission of India (ITC) to acquire CG Power. In five years, CG Power will be debt free.
In August last year, CG Power said its board uncovered “significant accounting irregularities”, including suspicious transactions that have led to an understatement of the company’s liabilities and advances to related and unrelated parties of hundreds of millions of rupees.
It had said that advances to related and unrelated parties and the Avantha Group may have been potentially underestimated by ₹1,990.36 crore and ₹Rs 2,806.63 crore, respectively. Following these accusations, its president, Gautam Thapar, was fired.
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