Sterling Biotech restructures $250 mn bond funding

Dec 1, 2013

Bondholders have approved restructuring for five years Vadodara-based Sterling Group, having diversified industrial interests, informed that the company’s pharmaceuticals subsidiary, Sterling Biotech Ltd’s lenders have approved a restructuring plan of US $250 million (approx. Rs 1,575 crore at current exchange rate) bonds for a period of five years.

Sterling Biotech’s bondholders of Zero Coupon Convertible Bonds which were due in 2012, have agreed to suspend all litigations in India and the United Kingdom, thereby opening a way for the consensual restructuring of the existing bonds.

The Zero Coupon Convertible Bonds are a combination of a zero-coupon bond and a convertible bond. Meaning that the bond pays no interest and is issued at a discount to par value and the bond is convertible into common stock of the issuer at a certain conversion price.

In 2012, the company had faced series of issues, which resulted into losses in the company, thereby leading it to default on Bonds.

The company’s bondholders on Wednesday approved a restructuring by passing an extraordinary resolution at a meeting of bond holders held at Hongkong on November 20.

As per the terms of restructuring, the fresh Zero Coupon Convertible Bonds will be issued to replace existing bonds. New bonds will be due in the year 2018 and will have conversion price of Rs 60 per share.

“The Bond Holders have also agreed and approved (1) that the conversion price of the Bonds due 2018 shall be Rs . 60 per share, subject to Reserve Bank of India, Foreign Investment Promotion Board and such other regulatory approvals, if any, as may be required; (2) to suspend all litigations in India and UK till January 2014 and (3) to withdraw the litigations in India and UK on completion of the exchange and substitution of the Existing Bonds with and for the Zero Coupon Convertible Bonds due 2018,” Sterling Biotech informed in a stock exchange filing.

It was a very long process of negotiation and legal battle, which Company has been successful in resolving in amicable manner, a Sterling Group insider informed.
The agencies involved in advising the company for restructuring were HoulihanLokey and Avista. Brandon Gale, vice-president of HoulihanLokey stated, “Sterling Biotech’s large bondholders believed that litigation will destroy the value of Bonds and company. Large bondholders are confident that in 3 years, the company will revive significantly.”

According to insiders, the conversion price of Rs 60 a share will maintain the economic interests of the promoters – NitinSandesara and family in the business.

NitinSandesara, chairman, Sandesara Group said, “This is a significant milestone in bringing back the glory of Sterling Biotech and we are grateful to bondholders for approving the restructuring process and we are confident that in 3 years horizon Sterling Biotech will get its glory back and create great value for shareholders and bondholders.”

Sterling Biotech shares jumped by close to 20 per cent with heavy volume of over 3.5 million shares traded on Thursday following the development.

Sterling Biotech entered pharmagelatin business in 1995 and became one of the top 5 global players by 2010 with 11 per cent of the world market.

Notably, Sterling Group’s oil and gas exploration arm, Sterling Oil Exploration & Production Co Ltd (Seepco) recently sold 1 million barrels (bbl) of Brent crude from its Nigerian fields in Africa to India’s PSU oil refiner, Indian Oil Corporation.