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Lenders have option to convert debt into equity: Gammon

Debt-ridden infrastructure company, Gammon India, on Thursday said the company

Debt-ridden infrastructure company, Gammon India, on Thursday said the company has only passed an enabling resolution regarding conversion of restructured debt into equity, in case the company defaults on its corporate debt restructuring (CDR) obligations over the 10-year repayment period granted to it by the CDR cell.

The firm clarified that its lenders have no intention of converting debt into equity at the current juncture.

Gammon chief financial officer Girish Bhat said, ?We are in the CDR process and our package has been approved. This is just an enabling resolution under the CDR requirements, which we have to take so that in case of a default in repaying debt during the CDR process, banks can convert that debt into equity. It is not happening immediately.?

In a notice sent to stock exchanges, Gammon said that company?s board has approved a proposal to increase its authorised share capital from R176 crore to R15,047 crore, as banks that have lent to the company have been given the option to convert their loan into equity shares. Should the banks choose to do so, Gammon will issue up to 168 crore shares at R27.05 apiece to the CDR lenders on a preferential basis. The company will also be seeking shareholders? approval for the same through ballot.

?Such a situation will occur only if we default on our CDR package over 10 years, which is the time-frame given by the banks to service the loans,? he said.

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First published on: 29-11-2013 at 05:09 IST
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