A group of investors led by BlackRock Inc. has agreed to buy rights to a portfolio of arbitration awards and claims on projects tied up in litigation from Hindustan Construction Company Ltd (HCC) for Rs 1,750 crore ($254 million).
The deal with the world’s largest asset manager is part of the Indian company’s efforts to repay debt and ease concerns related to stalled projects that have also prompted it to sell non-core assets.
“This unique transaction will help unshackle HCC from mismatches in our cash flow caused by prolonged litigation cycles. HCC will stand substantially deleveraged as a result, which will bring us towards the end of our financial turnaround process,” said Arjun Dhawan, director and group chief executive officer, HCC.
HCC said in a stock-exchange filing it will use the amount to prepay debt of Rs 1,250 crore, including its entire term loan of Rs 942 crore and Rs 308 crore of optionally convertible debentures.
The remaining Rs 500 crore will be used to fund its working capital and grow its business.
The company had gross debt of Rs 3,490 crore at the end of December 2018, according to its quarterly financials. That’s down from Rs 3,844 crore from a year earlier.
Shares of HCC jumped on the deal announcement and closed 9.07% higher at Rs 15.64 apiece in a Mumbai market that gained 1.1%.
HCC said it will continue to retain a material amount of awards and claims with the transaction being limited only to an identified pool of awards and claims.
The transaction is subject to formal sanctions by lenders and requisite approvals from the investors.
The Mumbai-based engineering and construction company has been shedding assets in the past months.
In September last year, HCC agreed to sell a road asset to I Squared Capital-backed Cube Highways and Infrastructure Pte. Ltd for Rs 372 crore. In February, it sold Charosa Wineries Ltd to Grover Zampa Vineyards Ltd and one of its investors, Dubai-based Quintela Assets Ltd, for Rs 1.76 crore.
HCC also completed its Rs 497.6 crore rights issue this fiscal year, increasing the promoter group holding to 34.85%.
In the fiscal year ended 31 March 2018, HCC clocked a 9% rise in revenue to Rs 4,575.1 crore from Rs 4,195.9 crore the previous year. Net profit jumped 30% to Rs 77.5 crore.