Wednesday, June 24, 2009

Maytas Infra seeks Rs 700-cr additional loan for revival

Maytas Infra, the construction company promoted by Ramalinga Raju’s family, has sought an additional loan of Rs 700 crore from bankers to revive the company. The company also wants the lending consortium to lower interest rates on loans and allow delayed repayment of debt.

Bankers, which are part of the consortium that lent to the Hyderabad-based company, will meet later this week to decide on a loan restructuring package. Although banks have asked promoters to bring in at least Rs 100 crore as capital, the promoters said they can at best infuse half of that amount over the next two years.

“Banks have a Rs 3,000-crore exposure to Maytas, of which around Rs 2,300 crore is non-fund exposure as a result of guarantees,” said a banker on condition of anonymity. The banker added that ICICI Bank has the largest exposure of around Rs 700 crore to Maytas.

State Bank of India has Rs 340 crore exposure, while IDBI has Rs 200 crore at stake. The balance is with over 10 banks, which are part of the consortium that lent to Maytas. After Satyam promoter Ramalinga Raju confessed to committing fraud at the IT company, the fallout hit other Raju-promoted companies, including Maytas Infra.

Many clients of Maytas Infra cancelled contracts midway, creating a liquidity crisis. Vedanta Alumina, KSK Energy, Hiranandani and Hyderabad Metro Rail are among clients, who removed Maytas from their projects. The cancellations have hit banks, as every contract is backed by a bank guarantee.

The newly-appointed board of Maytas has asked lenders to extend the tenure of its loan up to 2018. The company has also urged banks to lower the interest rate to 7%. “This will not be acceptable to us. We will not reschedule the loan at anything less than 11%,” pointed out one of the lenders. Currently, lenders are charging the company in the range of 9% to 11% for short and long-term loans.

The new management at Maytas Infra, has refused to convert a part its debt into equity. Restructuring has become difficult since the company is not in a position to give fresh assets to pledge with banks.

“Without government support, restructuring the loan would be difficult as cash flows of the company are very weak,” said a Mumbai-based lender. “Without cash flow, banks are unwilling to extend further loans,” he added.

Maytas Infra is involved in 62 projects, including roads, bridges, industrial structures, oil & gas exploration as well as power generation and transmission. Following the Satyam scandal, many contracts have been cancelled midway. This has not only affected the cash flow of the company but has also made it difficult to pitch for new contracts.

No comments: