Sakthi Sugars creditor meeting for scheme vote pushed back to October

By Kali Hays

New York, July 15 – Sakthi Sugars Ltd. said that the High Court of Judicature at Madras has postponed an equity shareholders meeting and a meeting of holders of Sakthi’s series B convertible bonds to vote on the company’s proposed scheme of arrangement, according to a company news release.

The meetings have been pushed to Oct. 5 from July 22 and Oct. 6 from July 23, respectively, at the request of the creditors.

Sakthi’s scheme intends to initiate a compromise with its bondholders regarding the company’s inability to service its current debt.

Leading up to the agreement, the company went ahead with plans to expand in 2008 and 2009 by installing a new sugar plant and a power generation facility. The expansion was based on the assumption that sugarcane availability would be adequate to operate the plant, and Sakthi took on bank loans totaling $60 million to fund the endeavor.

However, the following years saw a severe shortage in sugarcane and the company’s mills could not be maintained at an optimal level along with the generation facilities.

Compounding the shortage, the company said that as India’s sugar industry is “highly controlled and politically sensitive” the sugar shortage caused an increase in the retail price of sugar without a corresponding increase in the selling price, leading to serious liquidity constraints for Sakthi.

Sakthi said that it has been unable to meet any of its bond obligations, and as a result, bondholders holding $1 million of the company’s series B bonds asked the Madras court to order a wind up of the company.

Under the proposed scheme, the company offered the bondholders to convert 50% of the principal amount of the outstanding bonds into equity shares at a conversion price of Rs. 30, with an offer to pay the balance in June 2024.

For every bond with a face value of $100,000, equity shares totaling 74,816 will be allotted by conversion of 50% of the bond.

All fractional entitlements not covered by allotment of the equity shares will be extinguished.

Any equity shares that remain unclaimed after one year will be transferred to the Stock Holding Corp. of India.

The scheme becoming effective is conditioned on the requisite majorities of Sakthi’s shareholders, bondholders and secured creditors voting in favor of the scheme, obtaining permission from the Reserve Bank of India and a court approval order.

If the scheme becomes effective, all litigation related to the company’s bonds and equity will be dropped.

Sakthi is a Coimbatore, India-based sugar producer.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.