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Tuesday, 23 December 2014

RESTRUCTURING: GTL to seal India’s largest CB exchange

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Debt-laden GTL Infrastructure is poised to agree terms with holders of its foreign currency convertible bonds, adding the final piece to its jumbo debt restructuring.

GTL’s CB holders are expected to approve a plan that would give them new notes and, eventually, an equity stake in the company. The exchange offer will be the biggest on record in India’s convertible bond market.

The jumbo restructuring follows a similar agreement with lenders, and will reduce GTL’s liabilities from US$2.35bn to US$1.55bn and reduce its weighted average interest costs by around 400bp.

GTL, which operates telecommunications towers, has a principal amount of US$228.3m of zero-coupon CBs outstanding. Those notes are due to redeem at 140.4 on November 29, and the company has already indicated it will not have the cash to meet the around US$320m redemption.

Under the cashless exchange offer, bondholders will receive 35% of the accreted value of the bonds in one tranche of zero-coupon mandatory convertible notes with a conversion price of Rs10. This equals the par value of the shares, the minimum conversion price under Indian regulations.

The outstanding CBs were quoted at 65/66 last week, and the shares closed at Rs8.60 on October 18. GTL’s stock has lost more than 90% since January 2 2008, when it touched Rs106.50 in intraday trading.

Hard bargain

The remaining 65% of accreted value will be rolled into a second tranche of new CBs with a conversion price of Rs12.64, the price at which several of GTL’s lenders converted to equity. It is expected there will be a condition allowing CB holders to convert at Rs10 if they do so within 60 days of the new notes being issued.

There will be two conversion price resets of 10% each at the end of the first and second years.

After an interest moratorium in the first year, the second tranche will pay a coupon of Libor plus 200bp for the second year, stepping up gradually to Libor plus 500bp after that. Both of the new CBs will have a tenor of five years.

The CB holders have managed to drive a hard bargain: the company has agreed not to raise more debt, pay dividends or make acquisitions without CB holders’ approval, and any acquisitions must be earnings-accretive from day one. CB holders can also dictate the number of new shares issued by the company. The new CBs are unsubordinated, unsecured and unconditional.

Sources said CB holder QVT Financial led the restructuring talks, which have been going on for about a year.

The failure of Suzlon Energy to gain bondholder consent for an exchange offer for its outstanding CBs earlier this month has undoubtedly given CB investors more bargaining power in restructurings.

CB holders will vote on the proposal on November 8, and approval from 75% of those present is needed for it to succeed. Sources said it was likely to achieve that share of the vote.

The company is not expected to have any further capital expenditure outgoings for the next two years and will concentrate on increasing the tenancy of its towers.

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