Indian chemicals and pharmaceuticals company Southern Petrochemical Industries Corporation (SPIC) have completed a high profile, complex debt restructuring deal worth around US$1 billion.
SPIC has four business lines: the fertiliser division, the pharmaceuticals division which manufactures Penicillin-G Potassium (fermentation-based), active pharmaceutical ingredients, the engineering/construction services division offers specialised and turnkey project-based solutions mainly in fertilisers and the agri-business division, which offers products for agricultural development like hybrid seeds and bio-fertilisers.
In its heyday, SPIC was among the top 10 industrial houses in the country and thrived during the licence raj, but subsequently saw fortunes slump, and dramatically so in the mid-2000s where its debt burden spiralled to around Rs 2,800 crore.
The debt restructuring process began in 2004 with finance and insolvency specialist Terry Green leading Clyde & Co’s UK team in advising SPIC. Clasis Law Partner Sakate Khaitan managed the Indian aspects of the transaction assisting the client in seeking SEBI approval under the Takeover Code, advising on de-listing of some of the group entities, advising and executing the divestment of the group assets and advising on financing arrangements.
As part of the restructuring deal, promoters in SPIC and its group companies were permitted to increase their investment in SPIC and its group companies beyond the limits allowed under India’s 2011 Takeover Code, itself a landmark document in India’s growing M&A and capital markets. The process also saw significant capitalisation of SPIC and divestment of group assets and entities to make funds available to creditors.
The deal is the first of its kind in India, and includes all secured and non-secured creditors in a one-time settlement approved by both the Madras High Court and the Securities and Exchange Board of India.
Key Parties on the Transaction
Sakate Khaitan & Terry Green
Partner of Clasis Law and Clyde & Co respectively:
“Clasis Law (Sakate Khaitan) and Clyde & Co (Terry Green) were very pleased to have acted on the successful restructuring of the debts of SPIC and its group companies through a court approved process. Both Terry and Sakate have known the client for many years and this helped with the process. The original debt was USD 1 billion. The process started in 2004 and finalised early in 2014 when final payments were made to the creditors following much negotiation, creditors meetings and visits to the Indian Court. Clasis Law also assisted the client in seeking SEBI approval under the Takeover Code, advising on de-listing of some of the group entities, advising and executing the divestment of the group assets and advising on financing arrangements. It was good too to be involved with the first ever landmark Scheme of Arrangement in India to include both secured and unsecured creditors. Terry worked closely with Sakate and his team and dealt with the US and UK aspects of the transaction including capital market work and interaction with the Trustees, BNY Mellon.”