Yes Bank Ltd has acquired an 18.55% stake in tours and travel services company Cox & Kings Ltd by invoking pledged shares, the private-sector lender informed stock exchanges on Friday.
Yes Bank acquired 32.75 million Cox & Kings’ shares, whose current value stands at Rs 43.72 crore. The shares were pledged in exchange for loans availed by the company from lenders and capital markets players.
However, the company failed to service its debt and defaulted on several debt payments, prompting invocation of the pledged shares. This has also resulted in a massive 93% drop in its market value since last August.
Shares of Cox & Kings hit a lower circuit of 5% on the BSE on Friday to close at Rs 13.35 apiece. The stock quoted at Rs 214 on August 1 last year and has since been on a declining path.
Shares of Yes Bank jumped nearly 10% on Friday to close at Rs 96.10 apiece. The stock gained on reports that Yes Bank may seek capital from private equity investors TPG Capital and Advent International.
Cox & Kings had availed credit for its wholly owned UK subsidiary Prometheon Enterprise in 2012. It later refinanced the loan. That loan was worth Rs 1,338.30 crore as on August 9 last year, regulatory filings show.
In addition, Cox & Kings has additional outstanding loan worth Rs 450 crore with Yes Bank as on April 9 this year.
According to the Ministry of Corporate Affairs, Cox & Kings has outstanding loans worth Rs 3,130 crore. A large part of its debt was accrued when it had acquired Holidaybreak through Prometheon Holdings in 2011. The deal was pegged at $510 million (Rs 2,260 crore). Holidaybreak gave it a bouquet of units in the travel and tours space, especially focussed on the European market, including hostel brand Meininger.
Besides the loan availed for the Holidaybreak acquisition, Cox & Kings had floated commercial paper – short-term debt instruments – but failed to service them despite having nearly Rs 1,900 crore of cash and cash equivalent on its balance sheet, according to a report by The Economic Times.
Rating agency CARE raised the red flag at the end of June over the company’s failure to explain the reason for default despite sufficient liquidity, according to the report. It added that some investors complained to capital markets regulator Securities and Exchange Board of India (SEBI) and Serious Fraud Investigation Office (SFIO) to investigate the company’s financials. Investors have accused the company of diverting the funds.
In March this year, stressed assets investor SSG Capital Management – which backs Cox & Kings – acquired an additional 11.58% stake in Prometheon Holdings, taking its overall holding to nearly 46%.
In November 2017, SSG had picked up a 34.4% stake in Prometheon Holdings for $200 million via a secondary transaction that saw The Rohatyn Group, another PE investor, exit its five-and-a-half year investment in the company.
