The Shapoorji Pallonji Group (SP Group) has requested an additional two-month extension on the repayment of ₹14,300 crore in maturing bonds due to delays in its debt refinancing efforts. Originally planning to raise ₹28,500 crore in two tranches, the group has scaled back the first tranche to ₹22,000 crore from ₹25,500 crore, as it navigates rising hedging costs and seeks more time from creditors.
The refinancing, orchestrated by Deutsche Bank under the SP Group's Project Ascent programme, faced disruptions earlier this year when Reserve Bank of India measures led to increased hedging costs, which surged to over 5% from around 2.5-3%. This made large offshore borrowing economically unattractive, delaying the fundraising process. The first part of the refinancing, initially expected to close by the end of May, is now anticipated to conclude by mid-July, with the second tranche likely in September.
The SP Group, controlled by the Mistry family, had previously secured a two-month extension on the repayment of bonds issued by its Goswami Infratech unit, moving the deadline from April 30 to June 30. The group is now seeking another extension as it works to finalize the refinancing deal. Additionally, the group has sought bondholder approval to extend a temporary relaxation of a key loan-to-value (LTV) covenant on Porteast Investment's 19.75% notes until September 30 from July 15.
The refinancing plans were initially disrupted by a sharp rise in hedging costs due to RBI measures on the offshore foreign exchange market. Although market conditions have improved, with hedging costs for private sector borrowers easing to around 3%, they remain higher than the 1.5% available to state-owned companies under the RBI's dollar-rupee swap facility.
Both the Goswami and Porteast debt facilities are secured against SP Group's 18.38% stake in Tata Sons. The bonds, originally issued at yields of 18.75% and 19.75%, have seen yields increase to as high as 21.75% due to market volatility and a decline in the shares of Tata Consultancy Services, which form a significant portion of the collateral backing the Porteast notes.
Background
The SP Group's refinancing efforts are significant due to the group's substantial stake in Tata Sons and the financial implications of its bond obligations. The group's ability to navigate these challenges will impact its financial stability and its relationship with creditors.
As the SP Group continues to navigate its refinancing challenges, the market will be closely watching the completion of the fundraising deal and any further developments in the group's financial strategy. The outcome of these efforts will have significant implications for the group's financial stability and its ability to meet future obligations.
