New Vernon-backed Celebrity Fashions allots shares worth 24% stake to SBI in lieu of debt

Celebrity Fashions, a Chennai-based manufacturer of garments and the parent company of garment brand Indian Terrain, has allotted shares representing over 24 per cent stake of the firm to its lender State Bank of India (SBI), as a part of debt restructuring exercise.

Celebrity Fashions disclosed that it allotted 74,69,100 equity shares on a preferential basis to SBI. The company’s scrip last traded at Rs 4.1 a share; so the share allotted is valued at Rs 3 crore.

The company also allotted 2,51,04,500, 1 per cent cumulative redeemable preference shares of face value Rs 10 each to SBI.

The above allotments are pursuant to a conversion of part amount of loans outstanding with the bank and in accordance with the terms and conditions of the re-structuring package sanctioned to the company, the firm said in a stock market disclosure.

Celebrity Fashions is a garment exporter focused on manufacturing large volume of trousers in the country. It also operates apparel brand Indian Terrain and has overseas clients like TimberLand, Armani Jeans, Dockers and GAP.

In 2005, New Vernon Capital, the New Jersey-based private equity and hedge fund founded by former Merrill Lynch honcho Arshad Zakaria picked up a minority stake in the company for a consideration of Rs 25 crore and later put in Rs 9 crore more. Celebrity Fashions went public in early 2006 and New Vernon continues to hold on to its stake which is deep underwater.

Its holding is worth just Rs 1.4 crore, which means it is sitting on an unrealised loss of over 96 per cent, as per VCCircle estimates.

For the year ended March 31, 2013, the company posted revenues of Rs 186.37 crore and a net loss of Rs 4.68 crore. While its topline has remained more or less flat for the last three years (after declining previously) it has managed to cut losses.

(Edited by Joby Puthuparampil Johnson)

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