Lenders Approved to Recast $1.3 Billion India Sugar Mill Debt

  • Bajaj Hindusthan Sugar promoters to cut shareholding to 15.43%
  • Part of debt to be converted into convertible debentures

An Indian overseeing committee has approved a proposal submitted by a group of lenders, led by State Bank of India, to restructure an 82.85 billion rupees ($1.3 billion) debt of Bajaj Hindusthan Sugar Ltd.

As per the plan, the company’s debt of 47.89 billion rupees will be considered as “sustainable”, while the rest will be treated as “unsustainable”, India’s top sugar maker said in a statement to stock exchanges on Friday. A loan is considered as sustainable when a company is able to service it from its cash flow.

The debt restructuring was done under the Reserve Bank of India’s Scheme for Sustainable Structuring of Stressed Assets, or S4A. It allows banks to cut the debt burden of borrowers by as much as 50 percent, provided lenders are convinced that the remaining loan can be serviced from company cash flows. The plan also allows a dilution in shareholdings.

The promoters of Bajaj Hindusthan Sugar will cut their stakes to 15.43 percent from 26.02 percent by selling a part of their shareholdings to the lenders. Of the company’s unsustainable debt, 34.83 billion rupees will be converted into optionally convertible debentures, the statement said.

Bajaj Hindusthan Sugar is seeking approvals from its shareholders and individual lenders, according to the statement. It posted losses in five of the last six quarters, according to data compiled by Bloomberg.

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