Ispat Industries defers financial rejig plan

Mumbai: Ispat Industries, the domestic steel-maker, has indefinitely deferred its decision on the financial restructuring programme worked out with its international bondholders, after the company defaulted on repaying $125-million convertible bonds that had matured in August 2001.

The decision to defer the restructuring programme indefinitely was taken after Ispats domestic lenders reportedly raised objections to the restructuring programme. The Ispat board was to approve the restructuring by the end of June 2002.

The Dolvi-based Ispat Industries, along with other steel companies like Essar Steel and Jindal Vijayanagar Steel, is awaiting clearance of a financial restructuring programme from its domestic lenders.

While the companys lead institution, Industrial Finance Corporation of India (IFCI), is yet to take a financial decision, industry sources say the financial institutions are planning to restructure the entire industry as a whole instead of individual companies. IFCI has disbursed around Rs 550 crore into Ispat.

Ispats restructuring programme with its international bondholders involved repayment of interest due on past loans over the next 18 months and extending maturity till 31 December 2009. It also contained semi-annual cash interest payments ranging between 3 and 4.5 per cent and annual principal repayments between 2006 and 2009.

The 15-member Ispat board has four institutional nominees: A K Doda (IDBI), B M Agarwal and Y P Gupta (IFCI) and U Mahesh Rao (ICICI). Ispats secured loans from all financial institutions and banks till 31 March 2002 stood at Rs 4,990 crore, while its unsecured loans were Rs 630 crore.

Ispat Industries domestic financial restructuring programme entails lowering of interest rates and conversion of part of the FIs loan into equity. The plan included a loan sanction of Rs 518 crore and a term loan of Rs 1,465 crore to fund interest.

There was also the need for Ispat to raise Rs 312 crore to part-finance the second phase of its Dolvi project, by subscribing to equity shares of Rs 245 crore and preference shares of Rs 67 crore by the promoters and associates.

The plan is to bring down the Mittals stake to 48 per cent from the current 54 per cent and raise FIs and banks holding to 48 per cent from the current 35 per cent. As part of the FIs plan to make the Ispat plant viable, the institutions had mooted a proposal with Tata Iron and Steel Company (Tisco) to take over the manufacturing operations of its Dolvi plant few months back. But the Tisco management rejected the proposal.