McLeod Negotiates With Investors To Monetise Assets, Infuse Fresh Capital

As part of the restructuring with secured lenders, debt-laden McLeod Russel India Ltd is in the process of negotiating with "multiple investors" to monetise assets and infuse fresh capital, but these talks are still in the fluid stages and nothing has been finalised, an official with the bulk tea major said.

The final third credit rating of the company, which was delayed due to the Covid pandemic, is likely to be submitted by January 10, the official said.

The BM Khaitan family, the existing promoters of McLeod Russel, however, still remain hopeful of retaining the management control of the company that produces 73 million kg of tea from a few dozen of gardens mostly in Assam and also in Africa and Vietnam.

"We are holding talks with several investors to monetise assets and infusion of fresh capital as part of the ongoing debt restructuring. Nothing has been finalised yet. Once finalised, the plan will be put before the board of directors and then we will be able to discuss the details," a top McLeod official said, declining to be quoted.

"If something is circulating about finalisation of any plan, then those are mere market rumors," he said.

Earlier, Carbon Resources had made a non-binding offer to McLeod Russel's lenders to acquire a controlling stake. The Carbon Resources offered to pay in full to the secured lenders of the tea company, while unsecured lenders would receive 55 per cent of their total dues.

"The McLeod promoters have met us and offered some plans including a lump sale of gardens. We are discussing informally to evaluate internally all the options offered to us. But, our existing non-binding offer with the banks remains intact. We have also updated the banks that the existing promoters are in touch with us," a senior Carbon Resources official said.

The carbon product manufacturer had earlier picked up a 5.03 per cent stake in McLeod Russel in September and subsequently made a Rs 1,245-crore offer for the resolution of the debt of the bulk tea producer.

Carbon Resources is the second largest shareholder of the bulk tea major with a 5.03 per cent stake, while the Khaitans' holdings remain at 6.2 per cent.

McLeod Russel promoters have also been in touch with M K Shah Exports Ltd, but no concrete plans have been made.

MK Shah stood by the Khaitans and offered support for their restructuring plan after the offer by Carbon Resources came on the news. McLeod Russel, had earlier sold its gardens to MK Shah to pare debt.

The carbon product maker had claimed that their non-binding offer was "more lucrative", and it wanted Rs 300 crore equity infusion.

"The existing debt-restructuring plan by the Khaitans does not have any substantial cash infusion component, while our offer is solid and far more beneficial for the bankers in terms of recovery," the Carbon Resources official had said earlier.

In the last annual general meeting of the tea company, McLeod Russel chairman Aditya Khaitan had informed shareholders that the banks have been extremely supportive, and they have reached a consensus regarding the appropriate debt-restructuring resolution.

The debt of McLeod Russel currently stands at around Rs 1,800 crore.

To settle McLeod Russel's outstanding debt, the carbon product manufacturer offered upfront equity capital valued at Rs 300 crore, and a debt component of Rs 945 crore in the Rs 1,245-crore plan.

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