India’s Jain Irrigation Systems faced a cash crunch, but gave itself breathing room with a restructuring of its US$740m-equivalent onshore and offshore debt, while also raising fresh capital.
The irrigation, food processing and renewable energy company was forced to slow its expansion plans when customers, including the Indian government, delayed payments.
Domestic banks pushed for restructuring, which meant Jain was also forced to revamp debt at its overseas subsidiaries, even though they were performing well.
That debt included US$200m of 7.125% bonds due February 1 2022 issued by Netherlands-incorporated wholly owned subsidiary Jain International Trading with a guarantee from the parent.
The onshore Rs40bn (US$541m) debt was split into sustainable and non-sustainable portions, and lenders including State Bank of India were given shares in the company.
The company and its financial adviser Elara Capital (Asia) provided a choice of options to offshore bondholders, aware of the need to raise new capital.
It gave US dollar bondholders three options: term out their bonds by exchanging for new notes, cash out, or participate in a new loan facility in exchange for debt with seniority in the structure.
Bondholders who wanted to cash out were offered 26 cents on the dollar – a loss on the face value of the bonds, but higher than the secondary trading price at the time of around 20 cents. It was also more than the estimated 24% recovery rate if the company managed to sell off its subsidiaries and investments quickly, or 1% in liquidation.
Holders of less than US$7m of the notes opted to take the cash.
Jain International Trading also raised a new US$30m first-lien secured loan facility, having invited bondholders to lend US$150 for every US$1,000 of bonds they held.
Bondholders who lent Jain new money received US$60m of Series A five-year bonds paying a coupon of 7.125%, in a principal amount equivalent to 200% of the money they lent. They also received US$48m of Series B five-year bonds equal to 160% of their new money commitments. These bonds pay 3.5625% until the second anniversary, when the coupon steps up to 7.125% for the remaining term.
These bondholders also received Series C five-year notes, which have the same coupon and maturity as the Series B notes, in a principal amount equal to their outstanding bonds minus the amount of Series A and B notes they were awarded.
Any existing bondholders who did not participate in the new loan facility received only the Series C bonds. A total principal amount of US$85.105m of the Series C notes was issued.
In total, Jain issued US$193.105m in principal amount of new notes in three tranches, extending its maturity profile while raising new money.
Baker McKenzie was legal adviser to the company, while Solomon & Co advised the company on Indian law aspects, and Kirkland & Ellis advised the noteholder committee.
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