Mumbai-based telecom tower operator GTL Infrastructure Ltd is in talks with its foreign currency bondholders to roll over the bonds worth $228.3 million, which are due for redemption in November 2012, sources with direct knowledge of the development have said.

“The company is in talks with the bondholders to roll over the bonds with new covenants and reduced conversion price,” one of the sources detailed. According to the official, the company does not have the wherewithal to pay the bondholders and redeem the bonds. Therefore, the bondholders are trying to roll over the bonds to avoid a case of default.

“The coupon will be higher and the premium will be more reasonable,” the person said but refused to divulge details of the restructuring. The company has signed non-disclosure agreement with the bondholders and is in advanced stages of discussions, and an announcement is likely soon, another person involved in the discussion has said.

However, the company’s spokesperson refused to comment on the development in response to an e-mail query by VCCircle.  

In July 2011, the company’s board of directors approved the corporate debt restructuring after the debt became unmanageable. GTL Infrastructure raised Rs 16,200 crore debt from 22 lenders, with Union Bank having the most exposure.

GTL Infra raised $300 million zero coupon foreign currency convertible bond in 2007. The bonds offered a yield to maturity of 6.9 per cent, with a conversion price of Rs 53.04 per share. Citigroup Capital Markets and Standard Chartered Bank were the advisors to the company at that time.

According to a recent Edelweiss Capital report on outstanding FCCB of Indian companies, the redemption of GTL Infra’s foreign currency bond will result into an enhanced debt-to-equity ratio of the company to 2.5. With the company already under stress, the higher debt repayment will also take a toll on the company’s balance sheet. According to the report, the effective conversion price for the company (after factoring in premium) will be Rs 74 a share and will result into higher equity dilution, considering the company’s battered share price.

“This will cause a cumulative mark to market loss of Rs 293.25 crore to the company,” the report released in December 2011 stated.

On Tuesday, share prices of the company closed at Rs 11.46 a unit on the BSE, 1.97 per cent down from the previous close.

GTL Infrastructure offers ready-to-use infrastructure, such as mobile phone towers, to telecom operators, and owns around 32,650 towers. As of December 2011, the company booked a loss of Rs 1.43 crore on Rs 135.97 crore of revenue, as against a loss of Rs 61.99 crore on revenue of Rs 123.96 crore in the year-ago period.

According to GV Giri, an analyst with Mumbai-based India Infoline Ltd who tracks GTL Infra, both the bondholders and the company have an incentive in rolling over the bond. “Rather than booking a default, rolling over at revised terms and conditions is one of the best options,” he said. “Whether it will be beneficial for the company will be determined after the exact terms and conditions of the new bonds are known.”

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