The RBI mandated overseeing committee has approved the Scheme for Sustainable Structuring of Stressed Assets (S4A) for Hindustan Construction Company Ltd. The ICICI-led Joint Lenders’ Forum had proposed the scheme for the infrastructure major. HCC said it is the first company to secure approval from the committee under the RBI’s S4A scheme. Its total funded debt of about Rs.5,107 crore has been considered under the scheme, which will be divided into two parts.

• The first part (sustainable debt) amounts to Rs.2,681 crore (52.50 per cent of the total debt).
• The second part (unsustainable debt) totals Rs.2,426 crore (47.50 per cent).
• The lenders will subscribe to 24.44 per cent fresh equity (Rs.1,008 crore, assuming a RS.40 rate), which will bring down the promoter holding from 36.07 per cent to 27.44 per cent.
• The share price will be determined as per SEBI guidelines and, accordingly, debt will go down to the extent of the conversion amount.
• The balance of the unsustainable debt will be converted into Optionally Convertible Debentures for 10 years, with a coupon rate of 0.01 per cent.

Do you Know?

• S4A is the RBI’s latest attempt to chip away at the mountain of stressed loans smothering Indian banks.
• The scheme tries to strike a compromise between banks with problematic accounts and corporate defaulters of the non-wilful kind, by converting a portion of large loan accounts into equity.
• For a distressed company to be eligible for S4A, the RBI has laid down three conditions. The project must be operating and already generating cash. The total loans to the entity should be ₹500 crore or more.
• The lending banks are required to hire an independent agency to evaluate how much of the debt is ‘sustainable’. And at least 50 per cent of the debt should be ‘sustainable’.