Koutons Retail to be redeemed of debt

Monday, 11 April 2011

Following in the footsteps of Vishal Retail, Koutons Retail, the well known Indian apparel maker and retailer that recently proposed to recast its debt and the proposal has been admitted by the corporate debt restructuring (CDR) cell. SBI Capital Markets has been given the mandate to draft the recast scheme. The company has nearly Rs 660 crores debt on its books, of which Rs 460 crores will go for CDR and Rs 200 crores will be non-CDR.

Koutons Retail is believed to have taken debt at 13-13.5 per cent interest rate. The banks with loan exposure to the Delhi-based retailer include Indian Overseas Bank, Allahabad Bank, IDBI Bank, ICICI Bank and Axis Bank. Last year, there were reports of default on loan repayment, increase in pledging of promoters’ shares and suspension of the company’s fund-based facilities by rating company ICRA. Following the reports, the company’s share price took a hit. Since September, its share price has fallen 87.7 per cent to Rs 33.15 from Rs 269. However, bank executives said Koutons’ account had not slipped to the sub-standard category.

Details of the CDR package will be worked out over the next few days. SBI Caps has already prepared a rough package for the company, which includes debt repayment over nine years, including a two-year moratorium. Koutons’ admission for CDR follows the company’s 18-month efforts to improve declining cash flows and stem losses, which arose due to inventory pile-ups and aggressive expansion. Promoters, which own 32 per cent in the company, have pledged 97.99 per cent with the lenders. Meanwhile, the company has said that non-banking financial services company IFCI raised its stake in the company by invoking the shares pledged by the company’s founders. IFCI’s stake in Koutons Retail has gone up to 10.24 per cent from 5.89 per cent earlier, the company said in a notice sent to the stock exchanges.