The board of Hindustan Construction Company Ltd (HCC) has approved a debt resolution plan of the firm in a bid to reduce its debt worth over Rs 10,000 crore (about $1.38 billion).
Under the plan, HCC will transfer up to Rs 4,000 crore (about $551 million) worth of liability to subsidiary Prolific Resolution Pvt Ltd. It will also transfer the “economic interest”, that is, awards of up to Rs 2,749 crore ($379 million) and claims of up to Rs 2,136 crore ($295 million), to the arm.
The plan approved by the board on May 27 will be subject to necessary approvals.
The investor identified by lenders will acquire 51% stake in the subsidiary for Rs 25 crore.
“Additionally, the investor will infuse Rs 75 crore in Prolific Resolution in the form of priority debt. The return on this investment to the identified investor will be limited and capped to an agreed threshold,” the company said.
Moreover, HCC's corporate guarantee to lenders of Prolific Resolution will be limited to 20% or maximum Rs 800 crore of the debt transferred.
The Mumbai-based engineering and construction company has been shedding assets over the last two years.
Last year in February, it announced a plan to reduce its debt by Rs 2,100 crore ($290 million).
It had said that HCC will have no debt servicing obligations for the next 32 months and interest costs will reduce by at least Rs 240 crore per annum.
HCC's total long and short-term debt outstanding stands at over Rs 10,000 crore ($1.38 billion).
This year in March, the group firm’s infrastructure development arm HCC Concessions concluded its conciliation with National Highways Authority of India (NHAI).
This provided an exit to private equity firm The Xander Group which had picked up a 14.5% stake in HCC Concessions for Rs 240 crore in 2011.
In April 2019, HCC agreed to sell a big chunk of project claims under litigation to an investor group led by BlackRock Inc for Rs 1,750 crore ($254 million).
Last year in September, it completed the sale of a road asset to I Squared Capital-backed Cube Highways and Infrastructure Pte Ltd for Rs 372 crore two years after signing the deal.
In February 2019, 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.