The company in this case has been into food processing for more than 4 decades. The company has 3 units in the vicinity of Delhi NCR, each into a different food segment spread over baby food ingredients, dehydrated fruit & vegetables, ketchups, jams, and breakfast cereals, oats, etc.
The company commissioned a new plant into breakfast cereals 3 years ago with a heavy capital expenditure of more than INR 4000 million. The capacity off-take of the said plant got delayed due to long drawn processes of target clients (reputed MNCs like Nestle, Kellogg’s, PepsiCo, etc.) in recognizing the company as an approved vendor.
The company had availed term debt to the tune of INR 2140 million to part-finance the plant and due to delayed ramp-up. It started facing liquidity issues which made it imperative to recast the entire debt.
The company in focus had an existing, high debt of about INR 2750 million and had a low EBITDA. The delay in capacity ramp-up had been leading to liquidity issues, and thus a subsequent delay in loan servicing. Multiple lenders per unit were also leading to operational hassles for the company.
The EBITDA levels of the company presented a difficult debt: EBITDA ratio of 10x and structuring the debt recast presented its own unique set of challenges.
The goal was to refinance the entire term debt with fresh moratorium, thus easing out cash flows for the company, and to consolidate the entire term debt and WC between two lenders.