Morepen to part-pay debt as StanChart PE buys stake

MUMBAI: The debt-ridden Morepen Laboratories has got a fresh lease of life. Standard Chartered Private Equity (SCPE) has picked up 10% equity in Morepen through an issue of fresh shares. The Delhi-based mid-sized pharma company is now ready to repay around Rs 103 crore debt to banks and financial institutions as part-settlement under the corporate debt restructuring (CDR) scheme.

Meanwhile, lenders have set a deadline of June 30 to conclude the deal. “If the deal is not concluded this month, we will pull out the CDR support,” said one of the lenders, adding that the CDR package is under negotiation for almost a year.

“The settlement with banks was a major milestone in the revival path of the company. The company would be making necessary arrangements for settlement with fixed deposit holders once the CDR process is over,” Morepen chairman and managing director Sushil Suri told ET.

Sources close to the development said the company has been negotiating with its lenders to restructure debt for almost seven years. The debt restructuring programme was delayed partly due to difference among its 31 lenders. Sources said the promoters and SCPE would infuse Rs 100 crore each. Following this, promoters’ stake will increase from 33% to nearly 50%, while SCPE will hold 10% equity. The lenders, who will convert their debt into equity, will hold another 12% and the balance will be with the public.

Morepen had a total debt of Rs 757 crore, out of which lenders to the tune of Rs 574 crore have opted for one-time settlement (OTS) between 15%-25% of their principal outstanding. Lenders for Rs 161 crore have opted for restructuring the outstanding debt wherein Rs 72 crore will be serviceable at an interest rate of 8.25% per annum which is repayable in 7 years and another Rs 64 crore will be zero-coupon instruments payable in the ninth and tenth years.

As part of the settlement, debt worth Rs 103 crore has been converted into equity and optionally convertible preference shares (OCPS). The company has allotted 75.17 lakh shares Rs 20 each amounting Rs 15.03 crore. The company has also allotted OCPS amounting to Rs 88.03 crore. The OCPS carrying a coupon rate of 0.01% would be redeemed or converted into equity shares at the Sebi-determined price at the end of seven years, sources close to the development said. They said that the cash component of the settlement will be paid off within a month.

The issuance of equity has resulted in an increase by 3.43% in the issued equity share capital. The company proposes to settle the cash component of Rs 98.5 crore as per the CDR OTS settlement within one month. The company has already tied up the necessary funding with international investors.