The Rajasthan State Electricity Board's financial restructuring plan (FRP) for R38,000 crore of short-term liabilities (STLs) has been approved by three lead banks, Bank of Baroda, Punjab National Bank and Central Bank of India. Bankers involved in the recast said they planned to keep the interest on the loan component, of R19,000 crore, at 12-12.5%, the level at which the SEB was earlier servicing the debt, while allowing the borrower a moratorium of three years on the principal.
The remaining liabilities, of R19,000 crore, will be converted into bonds issued by the state government, at a coupon rate of 9-9.5%, which means banks will take a hit of 300 basis points. The FRP has been submitted to the consortium of 26 lenders for its consideration and is likely to concluded by early June. The consortium has also agreed to give the Rajasthan SEB additional working capital to the tune of R4,000 crore for FY14, at a cost of 2% above the banks' respective base rates. "The R4,000 crore will be shared among 26 lenders to the proportion of exposure they have with the SEB," a banker said.
The FRP envisages that 50% of the SEB's STLs be rescheduled by the lenders and serviced by the discoms, with a moratorium of three years on principal repayments. That means the SEB will continue to service the interest on the loans. The remaining STLs are to be taken over by the state governments and converted into bonds guaranteed by them. According to the formula given by the government to banks, the coupon works out to between 9-9.5%.
Among the other boards, the Karnataka SEB has declined to accept the package while Uttar Pradesh, which plans to restructure R30,000 crore, has submitted its FRP to the bankers. Punjab National Bank, a lead banker to the SEB, is yet to finalise the details of the restructuring package, KR Kamath, chairman and managing director of PNB, said. Of the six SEBs that have so far agreed to the restructuring package, Tamil Nadu Electricity Board's R12,000-crore loan restructuring was recently approved by the consortium of banks. The government's formula for arriving at the coupon on the bonds is based on the existing coupon on the state development loan. In the case of Tamil Nadu the coupon is 10%.
Source - Financial Express