Rolta India Offers To Swap Defaulted Bonds For New 5-Year Notes

Rolta India Ltd. proposed a restructuring plan to its bondholders under which it will swap two defaulted bonds with a new $500 million five-year bonds as it struggles to repay close to $1 billion of outstanding debt.

The company proposed restructuring the $300 million notes due in 2019, and $200 million notes due in 2018, by extending the maturity date and reducing the coupon rate, Rolta said in a stock exchange filing. The $300 million bonds had a coupon rate of 8.875 percent, and the $200 million bonds had a rate of 10.75 percent.

Rolta has proposed to exchange these bonds with new 5-year bonds of $500 million that will also carry a 2 percent payment-in-kind rate. A PIK coupon rate means that interest will be paid in additional bonds rather than in cash.

"This will effectively provide Rolta with a liquidity bridge until it can return to more normal operations", it said in the exchange filing.

Under the proposed restructuring plan, the company offered to redeem $75 million of bonds in cash within 24 months and sought the right to early redemption of notes within 42 months. Rolta also offered up to $60 million of incentives to bondholders in the form of contingent value rights, payable on certain liquidity-triggering events in future.

The company had a cash balance of around Rs 212.1 crore as of March. It has an interest coverage ratio of 1.8, meaning under the current circumstances it would only be able to pay interest on its outstanding debt for the current year.

Revenue for the company has declined for the last four quarters as contributions from its core business of enterprise solutions began thinning. Income from enterprise business, which contributes almost three-fourths to the total revenue, fell 25.7 percent year-on-year.

Rolta has faced "increased competition" and has hence started shifted focus on made-to-order solutions across different industry verticals, the filing said.

One of the reasons for its low liquidity position has been its frontloading of investment in the Battlefield Management project for the Indian Army in a tie-up with Bharat Electronics Ltd. While majority of the development costs will be reimbursed the "significant" capital expenditure has impacted Rolta's working capital cycle and cash flow, the filing added.

Banks have provided loans worth around Rs 568 crore since March 2016 to fund its working capital. Rolta had a total debt of Rs 5,503.6 crore, as of March. The company's total debt was 5.3 times its operating income.

Shares of Rolta India closed 14.5 percent higher, after surging to almost 20 percent during the day's trade following the announcement. The benchmark BSE Sensex too ended 1.1 percent up.

Details of the full recast proposal by Rolta India can be accessed here.