ABG Shipyard gets court nod to recast Western India Shipyard

ABG Shipyard has received clearance from the Bombay High Court to go ahead with the restructuring of loss-making Western India Shipyard (WISL) and hopes to complete the process by the end of next month.
The scheme provides options for the long-term restructuring or one-time settlement of the debt of the secured lenders of WISL, along with other matters, including reorganisation of the share capital of WISL.
Dhanajay Datar, chief financial officer, ABG Shipyard, said the secured lenders have two options. Under the first, they can convert up to 36% of their secured liabilities into equity shares of WISL, 42% into a convertible zero-coupon loan bearing 0% interest per annum and the remaining 22% into a term loan at 11% per annum payable after 9 years.
In the other option, secured lenders can opt for a one-time settlement for 42% of their liabilities.
Datar added that the company’s immediate aim is to know which option the lenders will opt for and see to it that WISL has the funds to pay the lenders off. “Once the scheme is implemented, we will look at acquiring a 60% stake in WISL,” Datar said.
“WISL will not find it difficult to get funding from banks as, after the restructuring, the balance sheet will look healthy with Rs 60 crore equity and Rs 110 core debt… Also, the company will be a part of ABG, which would be reassuring to banks,” he said.
WISL’s secured liabilities stand at Rs 270 crore as on March 31, 2009.
According to a source, ABG is likely to shell out Rs 35 crore for a 51% stake in WISL through the purchase of convertible shares.
As a step towards rehabilitating WISL, ABG will grant a Rs 25 crore loan to WISL and provide technical and marketing expertise through a service provider agreement.
However, the interest-free unsecured loan of Rs 25 crore or part of it will not be repaid without the consent of ICICI Bank, which is acting on behalf of all secured lenders.