Hindustan Construction Company to raise Rs 1,750 cr via sale of claims, awards

Construction giant Hindustan Construction Company (HCC) is looking to raise Rs 1,750 crore by monetising various claims and pending arbitration awards.
To this effect, the company signed an agreement with BlackRock-led consortium of investors on Tuesday. The value of this identified bunch of “specified awards and claims” is pegged at Rs 2,000 crore.
As per the broader contours of the deal, HCC is seeking to monetise a bunch of pending arbitration awards and claims by transferring the beneficial interests and rights of this identified pool to a special purpose vehicle (SPV). This SPV will be led by BlackRock and controlled by the consortium of investors. In lieu of this transfer of rights, HCC will receive Rs 1,750 crore, of which Rs 1,250 crore will be utilised to reduce or prepay company’s debt and the balance Rs 500 crore will go towards working capital and growth. The reduction of debt includes, “its entire term loan of Rs 942 crore which is due in the next three years and Rs 308 crore of optionally convertible debentures.

Consequently, the balance-sheet of HCC would stand substantially deleveraged, with debt servicing over the next four years being limited to its working capital facilities.
As per the transaction, the SPV will issue non-convertible debentures that will be subscribed by the investors. The money received from the investors is to be deposited in an escrow account and to be utilised for the purchase of the specified awards and claims from HCC by the SPV, read a regulatory filing.
On the development, Arjun Dhawan, director and group chief executive officer, said, “This unique transaction will help unshackle HCC from mismatches in our cash flow caused by prolonged litigation cycles. HCC will stand substantially deleveraged as a result, which will bring us towards the end of our financial turnaround process.”

Earlier this fiscal year, Ajit Gulabchand-promoted HCC had come out with a rights issue and had raised Rs 497.6 crore, resulting in an increase in promoter group shareholding that currently stands at 34.85%. This month, HCC had also received formal notification from its lenders that the corporate debt restructuring scheme no longer applies to the company.