Pharmaceutical company Wockhardt Ltd is seeking shareholder approval through a postal ballot process to continue to restructure its debt, in according with a corporate debt restructuring package. The company had suffered sizeable derivative-related losses when the global financial crisis hit companies. It also had substantial debt taken for overseas acquisitions. The global economic slowdown affected business and its inability to service debt and derivatives-related losses pushed it into a corner. The company resorted to a CDR package, which appears to have given it some breathing space.
In its latest round of financial restructuring, Wockhardt is seeking shareholder approval to:
- Increase the amount of preference shares it can issue, by Rs 200 crore to take the total to Rs 1,000 crore.
- Issue these additional preference shares to lenders, in lieu of its liabilities, which will be either optionally or compulsorily convertible into equity shares. Optionally convertible preference shares will be convertible after September 2015, based on the then prevailing price. Compulsorily convertible preference shares will be converted at a price, using the CDR date of July 4, 2009 as the reference date.
- Issue foreign currency convertible bonds to replace existing FCCBs held by bond-holders. It had announced on June 13 that it is proposing to issue new FCCBs which will be compulsorily convertible into equity shares. Since its share price has been trading below the bond conversion price, bond-holders would have chosen to redeem, which would stretched its resources further. About $74mn or about Rs 350 crore worth of bonds are still outstanding. The company had said that bond-holders owning about $42mn worth of FCCB have agreed for the conversion.
Wockhardt had earlier sought approval to issue preference shares amounting to Rs 800 crore, and has issued Rs 674 crore worth of shares. The new approval will give it additional headroom to meet its incremental liabilities. The banks who will be issued convertible preference shares, as part of the CDR package, are ABN Amro Bank, Calyon Bank, Union Bank of India, Kotak Mahindra Bank, and Corporation Bank.
The company had also announced its results on Friday, for the June 2010 quarter, in which its sales fell by about 4% but its operating profit went up by nearly 30%. Wockhardt’s share price was up by 1.6% at the time of posting this article online.