Lenders to Blackstone-backed Monnet Ispat and Energy Ltd have decided to convert their unsecured loans into equity, which would together give them a 51% stake in the Delhi-based steel company, as per a BSE filing.
As per the Reserve Bank’s strategic debt restructuring guidelines introduced in June, bankers can take over assets in a company by converting their debt into a majority equity stake.
“The outstanding amount to the extent of nearly Rs 368 crore payable to such lenders by the company is converted into equity shares of the company resulting in the lenders holding to be 51% of the total share capital of the company,” Monnet Ispat said in a filing.
However, the management control of the company will remain with the existing management.
Monnet Ispat has not been able to perform satisfactorily, resulting in significant decline in the operating profits and liquidity. Consequently, the company wasn’t able to service its maturing liabilities, the filing added.
“In light of the above referred proposed allotment of equity shares to the lenders, it is proposed to increase the authorised share capital of the company from the existing Rs 257 crore divided into 82,000,000 equity shares of Rs 10 each and 17,500,000 preference shares of Rs 100 each, to Rs 386 crore divided into 21,10,00,000 equity shares of Rs 10 each and 17,500,000 preference shares of Rs 100 each,” as per the filing.
As a result, promoters’ stake in Monnet Ispat would come down to 24.06 per cent post issue of equity from 48.59 per cent at present. Consequent to this, lenders have the right to divest their holdings in the equity of the company in form of a new promoter.
The company has scheduled an EGM for December 21 to get approval on the allotment of equity.