Date post: | 20-Jan-2015 |
Category: |
Business |
Upload: | udayan-sikdar |
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FCCBForeign Currency convertible bond issued by a
country in a currency different than the its own currency
Powerful instrument by which the country raises the money in the form of a foreign currency
Bond acts like both a debt and equity instrument
Bondholder the option to convert the bond into a company’s equity share
Retain all features of a convertible bond
Current Crisis
FCCBs became the favored instrument to raise capital
for Indian companies during the bull run from 2004 to
2007
A large number of FCCB issued by Indian companies,
due to mature in next future
Equity market not trading at the levels assumed when
the bonds were issued
Majority of the bonds have not been converted to equity
Companies struggling to meet their obligations on the
debt
Emerge from the crisis
Need to repay an estimated Rs. 33,000 crore
(over $7 billion)
The Chinese banks may emerge as the big
winners
Reset the conversion price
Approaching Investment Banks to be mediator
Utilising the unused portion
Restructuring of FCCBs
Restructuring is the reorganization of a company's
outstanding obligations
Mostly done by reducing the burden of the debts on the
company by decreasing the rates paid and increasing
the time the company has to pay the obligation back
Alternative available to Indian companies is to
restructure the terms of the FCCB in consultation with
the bondholders
May provide a temporary relief to the issuing companies
Reprising of FCCB Bonds
Government has allowed Companies to reprice their FCCB with QIPs
Companies can use the last two weeks’ average price as the minimum conversion price.
ConditionsApproval of the board and its shareholders for
reprisingPricing should not breach FDI limitsFresh agreement with FCCB holdersApproval by the RBI
Redemption Call
FCCB
CMP(Rs ) *
Amt ($ mln)
Maturity date
Conversionprice (Rs)
Diff **(%)
Panacea Biotec 210 36.8 Feb 11 358 -41.3Amtek India 64 47.0 Oct 10 120 -46.5Bharati Shipyard 272 46.9 Oct 10 498 -45.33i Info 68 20.2 Mar 11 115 -41.0Bajaj Hind 129 99.6 Feb 11 465 -72.4HCC 63 100.0 Mar 11 248 -74.7Videocon Ind 263 42.3 Feb 11 449 -41.4Amtek Auto 167 136.1 June 11 210 -20.6Aban Offshore 813 66.1 Apr 11 2789 -70.8India Cement 115 75.0 May 11 306 -62.5Jubilant Life Sci. 313 142.1 May 11 413 -24.2Glenmark Pharma 324 30.0 Jan 11 583 -44.4Punj Lloyd 125 49.7 Apr 11 273 -54.0
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