The funds will be used to redeem bonds issued three years ago that have onerous clauses that could take the coupon rate on them to unusually high levels if the debtholders are not paid off by June, they said. The bonds bear a coupon of 20% and are collateralised by shares of Tata Sons, in which the Mistry family holds an 18% stake. The bondholders include credit funds and high networth individuals.
The Mistrys have proposed to Deutsche Bank and Power Finance Corporation that they are looking to redeem the bonds through long-term loans at more palatable interest rates, said the people cited above. The proposal is under consideration only with these two lenders right now, they said.
This will involve the Mistrys floating two special purpose vehicles (SPVs). One will raise ₹11,000 crore and the other ₹4,000 crore. The SPVs will pay off almost 550 bondholders whose investments are to be redeemed. As collateral for the loans, the Mistrys will give the lenders a charge on the bank accounts of the two SPVs. Any proceeds from planned stake sales in the SP Group’s real estate arm will be routed through the SPVs and received by the lenders, against which they can settle dues.
Agencies Secondary Security
Tata Sons shares held by Sterling Investment Corporation will be provided as a secondary security. The Mistry family company holds a 9% stake in the Tata holding company.
SP Group and PFC did not respond to ET’s queries. Deutsche Bank declined to comment.
The new funding being discussed is expected to give the Mistrys substantial time to execute their real estate plans, which are integral to improving the group’s financial position and ease the financial burden on the promoters, who are paying off high-cost debt.
The Mistrys in their personal capacity are estimated to have debt of around Rs 24,000 crore. Their companies have separately taken on Rs 20,000 crore of loans.
“The indebtedness is only a question of time. The family’s stake in Tata Sons is worth several fold what they owe anyone,” said a person privy to the developments.
Still, the group has to execute key elements of its revival plan. Among them an initial public offering of engineering and construction company Afcons. ET had reported on June 21 that the Mistrys had begun discussions for the proposed floatation.
They are also in talks with the Adani Group for the sale of Gopalpur Ports.
With high visibility on infrastructure projects commissioned by the government, the Mistrys expect the SP Group will be able to scale up the construction business over time and also develop valuable land parcels they own in prime locations in major Indian cities to boost the real estate unit.
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