Hindusthan National Glass and Industries, India’s largest glass bottle maker, is being taken to court over loan repayment delay by HSBC, despite other banks having agreed to its Corporate Debt Restructuring proposal.
HSBC asked CARE for a downgrade of the company, however the rating agency has not done that in their September review. Struggling with a slowdown in alcoholic, soft drinks as well as other beverage consumption, HNG like many other companies in the sector, opted for debt restructuring and had its proposal for Corrective Action Plan approved by Joint Lenders Forum. The restructuring scheme was approved in March and includes moratorium for repayment of principal for two years, and thereafter, the loans are to be repaid over the period of 5 to 8 years.
It appears that HSBC didn’t agree to the restructuring scheme, and has approached Calcutta High Court for recovery of its dues, after which the court directed the other lenders to hold a meeting to consider the grievance of HSBC of “unfair and inequitable treatment” while formulating the corrective action plan.
The total amount due to HSBC is about Rs 172.86 crore, including Rs 76.20 crore in short-term borrowings. A debt restructuring proposal can be approved, even if one or more of the lenders refuse to accept, analysts said. As per the Reserve Bank of India guidelines for Framework for Revitalising Distressed Assets, which laid out in the guidelines on formation of Joint Lenders Forum and CAP, if 75% of lenders by value and 60% by number are agreeable to CAP, then it shall become binding on all the lenders.
HSBC wrote to HNG’s rating agency CARE, following which the glass maker approached the court expressing apprehension that it might get de-rated if the development is considered while doing a review of the rating. Any downgrade from its existing BBB- rating would have put the country’s largest glass bottle maker into the default risk category.
In response, the rating agency produced an e-mail dated August 25 showing that its rating committee decided that it would not take any rating action merely on the basis of the letter of HSBC. However, CARE would be at liberty to take any rating action if there are any other events, its counsel told the court. Following this, CARE said on September 3 that it has reaffirmed its rating of BBB- for HNG earlier assigned to its bank facilities.
“While reaffirming such ratings, CARE has also noted improvement in the operating performance of the company in first quarter of FY16 and also taken cognizance of the implementation of debt management exercise by majority of the members of the lender’s consortium,” it said.