Emaar MGF Approaches Banks for Restructuring of Debt

October 14, 2009	(Be the first to rate this story!)  Loading ...
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The Delhi-based real estate developer, Emaar MGF, has approached banks for a restructuring of its Rs 5,800 crore debt to them. The restructuring may involve a part write-off of the debt. The company recently filed for an initial public offer (IPO), its second attempt at a public float after the first one failed early last year. The company has asked for a write-off of a fifth of the total debt. A clutch of foreign banks lent Rs 3,000 crore, Indian lenders gave the rest. The lenders include State Bank of India (SBI), Housing Development Finance Corporation (HDFC), Axis Bank, IndusInd Bank, Kotak Mahindra Bank, Citibank, ABN Amro Bank and Standard Chartered Bank.

The company hopes to raise Rs 3,800 crore through the IPO. Of the amount, a little over Rs 1,770 crore will go into repaying or pre-paying loans. The company has been forced to seek debt restructuring as the foreign lenders, led by Citibank, have threatened to revoke guarantees furnished by Emaar of Dubai, one of the promoters of Emaar MGF. According to some bankers, the Indian company has approached the banks after the Dubai company cited its own financial problems.

In a filing with the Securities & Exchange Board of India on September 29, Emaar MGF said it intended to repay Rs 1,772.6 crore of its outstanding debt from the net proceeds of the IPO. The company also proposed to use Rs 199.5 crore of the IPO money to fund Emaar MGF Construction (a special purpose vehicle). Another Rs 820 crore would go into redeeming preference shares. Besides, Rs 276.8 crore would be invested in development and to pay licence renewal charges. The rest of the IPO money would be spent on general corporate purposes, including acquisition and brand building.

The company raised money from banks through non-convertible debentures. Emmar stood as guarantor. Citi picked up $400 million and Merrill Lynch $200 million worth of these debentures. Morgan Stanley is believed to have an exposure of between $150 million and $200 million. Lenders to Emaar MGF also include UTI Mutual, L&T Infrastructure Finance Company and Bank of India. A banker said the debt restructure would involve a write-off of some portion of the debt, so that the company could stay afloat and repay the rest of the loans.

Emaar MGF ran into financial trouble as the real estate sector slumped. Differences also cropped up with Emaar, adding to the troubles of the joint venture. Emaar MGF had been in talks with private equity firms to raise money to repay its long-standing debt to the banks before it decided to float the IPO, which will be its second attempt to enter the equity market. The first IPO had to be withdrawn due to bad market conditions. Bankers said the company was also under the scanner of the enforcement directorate for using foreign funds to buy agricultural land. Emaar MGF began operations in 2005. As on August 31, it had a land bank of 12,544 acres, and 29 projects, with a combined saleable area of 26.3 million sq ft, in various stages of development.

The lead book running managers to the IPO are Kotak Mahindra Capital, ICICI Securities, Duetsche Bank, UBS Securities India, Credit Suisse Securities and HSBC Securities.

News Published Under:   Delhi |

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