Combined promoters' contribution of Rs 950 crore in GTL and GTL Infra will also get converted as part of the CDR exercise.
In a move to raise eyebrows, the lenders to debt-laden GTL Ltd and GTL Infrastructure are planning to convert a part of their exposure into equity, as part of the group's ongoing corporate debt restructuring (CDR) exercise. This may even lead to GTL's promoters' stake getting diluted in the process, even though they will continue to retain the biggest share.
According to sources aware of the ongoing negotiations, the lender consortium has suggested converting 10-15 per cent of the existing debt of the three GTL entities - including that of the special purpose vehicle Chennai Networks Infrastructure Ltd (CNIL) that was used to acquire Aircel's tower portfolio - into compulsory convertible debentures, which will be converted into equity shares after 18 months.
Saving Kingfisher: Is Mallya's plan too little, too late?
The combined promoters' contribution of close to Rs 950 crore in GTL and GTL Infra will also get converted into equity as part of the exercise. Currently, they are in the form of unsecured loans.
The conversion price will be based on a formula of the Securities and Exchange Board of India (Sebi), based on six months moving average, sources added. The forward conversion will also make it difficult at this point to pinpoint the quantum of promoter stake dilution.
Currently, the promoters hold 23.47 per cent and 39.90 per cent in GTL and GTL Infrastructure, respectively. CNIL is in the process of getting merged within GTL Infrastructure and is awaiting court clearances. In August, ICICI Bank took a 29.3 per cent stake in GTL by converting pledged shares into equity after the stock tanked. ICICI Bank, said sources, has agreed to return their equity to the company's promoters after their exposure gets transferred to CNIL. Such a move will again hike the promoter holding in GTL Ltd to 2.77 per cent.
In Focus: Rupee recovers
The combined debt of the three GTL group entities currently stands at a whopping Rs 16, 200 crore. GTL Ltd and its group company, GTL Infrastructure Ltd, are embroiled in a debt-restructuring exercise with 25 lenders, including ICICI Bank, Standard Chartered Bank, Bank of India, Union Bank, Central Bank of India , Andhra Bank and IDBI Bank.
While GTL infrastructure owns the assets and earns rental income, GTL sells equipment and offers other services to operators.
In a similar exercise, lenders to cash-strapped Kingfisher Airlines had also converted their preference shares into equity at a significant premium to the then prevailing market price, thereby posting mark-to-market losses on their books.
However in GTL's case, bankers are hoping there will be a reversal in the company's performance and stock price once the CDR exercise goes through. The other features of the package being worked out include extension of the loan tenure, a moratorium on the payouts and recalibration of the high-cost interest rates.
Since mid-June, the two listed group companies - GTL Limited and GTL Infrastructure - have been facing a bloodbath in the stock markets, shaving off Rs 5,937 crore in their combined market cap. In the last five months, shares GTL and GTL Infrastructure had plummeted 91 per cent and 73 per cent. On Tuesday, shares of GTL and GTL Infrastructure closed at Rs 38 and Rs 8.71, respectively on the Bombay Stock Exchange.
Moreover, the sources said, compared to preference shares, debentures are a safer instruments, being a debt product. During financial defaults, debenture holders will get paid first while equity holders are last in the priority list.
When contacted, GTL did not want to comment on any speculation.
Cartoon: What the drunkard told Anna
A proposal to pool the entire debt that lies scattered across the three GTL companies will, however, be difficult to implement. For, GTL and GTL Infra are both separately listed with different shareholders.
Banks are also debating the proposal of ICICI Bank, where the largest private sector lender intended to transfer its Rs 650-crore exposure from GTL to Chennai Network's book. GTL had taken a Rs 650-crore loan from ICICI against a corporate guarantee from CNIL.
However, the move is subject to the approval from the other lenders of CNIL. These include Union Bank, Central Bank and Indian Overseas Bank.
"We are yet to decide on it," said an official with direct knowledge at one of these banks. "If ICICI Bank comes in as an inferior lender, then probably the other lenders will not have any issues. Also, we need to asses on how this additional debt impacts the servicing capacity of CNIL."