Shree Renuka Sugars Rallies as Creditors Approve Brazilian Unit’s Debt Reorganisation Plan
Shree Renuka Sugars Ltd. rallied on Monday after creditors approved the reorganisation proposal put forward by its debt-ridden Brazilian subsidiary, Renuka do Brasil S/A (RdB).
The Settlement Plan
Under the reorganisation plan, creditors will receive 30 percent of the value of debt along with interest for the period between the approval of the plan and the repayment of debt, according to Shree Renuka's filing on the exchanges.
RdB's debt under consideration stands at 2,063 million Brazilian reals (Rs 4,301 crore), while another 210.8 million reals (Rs 439.5 crore) of liabilities are covered under the plan. The restructuring plan will bring down total liabilities by 1,592 million reals (Rs 3,318.6 crore) to 682 million reals (Rs 1,422 crore).
Shree Renuka's Brazilian subsidiary had filed for bankruptcy protection on September 28, 2015.
Funding the Settlement
The settlement of debt will be funded by the sale of one of the RdB's mills, Madhu Mill, with a capacity of 6 million metric tonnes. Employees and suppliers will be paid from operating cash flows over the next 12 months. 41.78 million reals from sale of Madhu Mill will also go towards paying employees and suppliers.
Post the sale of the Madhu Mill, RdB will be left with one mill in Brazil, with capacity of 4.5 million metric tonnes.
Narendra Murkumbi, managing director and executive vice-chairman of Shree Renuka Sugars expects to carry out the sale of Madhu Mill in the 90 days following an approval from the judge presiding over the matter.
The reason this can be speeded up is that we are selling this as a UPI which is an Independent Production Unit which is protected under the same bankruptcy law ... the buyer is protected from any residual liabilities from the main company.Narendra Murkumbi, Managing Director and Executive Vice-Chairman, Shree Renuka Sugars
Assurance of Target
Shree Renuka Sugars is not putting in any new capital through debt or equity as part of this reorganisation plan. But any shortfall in reaching the target value of 30 percent will be funded by the shareholders of RdB via cash or sale of Shree Renuka Sugar's controlling stake, the company said in its exchange filing.
In case there is no buyer for the unit, Murkumbi said, that the banks and the management would go back to the drawing board and take up new solutions.
We have a reserve price which will meet the entire obligation of the banks. We also have the option to have a second auction and there if a lower price is discovered then we have the option to make up the difference but suppose there is no buyer for any reason then the banks and we will go back to the drawing board and have a new solution.Narendra Murkumbi, Managing Director and Executive Vice-Chairman, Shree Renuka Sugars
Shares of Shree Renuka Sugars closed with gains of 6.3 percent at Rs 16.95 on the National Stock Exchange as of 3:30 pm.
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