In year April 2009, Wockhardt approached the domestic lenders for corporate debt restructuring (CDR) led by ICICI Bank. Within a few months, the lenders proposed to restructure existing loans.The lenders included domestic lenders, FCCB (foreign currency convertible bonds) holders, and other foreign lenders. FCCBs are special type of foreign loans that can later be converted to shares at a predetermined price. Most of the secured loans were given by domestic lenders. The plan was to sell some of its assets and raise Rs 7.9 bn and repayment to secured lenders to be done by 2015. The promoters also agreed to get Rs 700 m as fresh equity. In August 2009, promoters sold their personal stake in the hospital chain to Fortis for Rs 9 bn (this business also required more capital which the promoters did not have). In the same year, as per the plan it also sold two companies and gathered Rs 6.8 bn.
As per the CDR, the FCCB holders had an option to convert into shares or redeem the bonds. If they chose redemption, it would have been done at a discount of 65%. This meant a capital loss of 65% for an FCCB holder. To avoid it, one of the large state owned banks went ahead with the conversion of FCCBs into preferential shares. But the terms were not favorable to other FCCB holders. In early 2010, they approached the court and filed a winding up petition against Wockhardt. On the other side, unsecured lenders included a couple of foreign banks who sold structured products to the company. They also approached the court opposing the CDR scheme as they believed that it was only favoring the Indian banks.
The scenario for Wockhardt has surely improved. Wockhardt has restructured most of its debt as part of the CDR. The court has granted the company temporary relief from 'winding up'.
Debt as on March 2010 stood at Rs 40 bn.The repayment will start from 2013.
The future of the company is uncertain. Wockhardt is an example of what can happen to a company having a dubious management at the helm of affairs. If the court does rule in favor of Wockhardt and if it does manage to sell a part of its non-essential businesses, probably the company will see better days. Till then, a cloud still hangs over the business.
