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Tuesday, 29 November 2011 |
Debt-ridden discount retailer Pantaloon Retail is seeking
funds to the tune of $400 million from PE investors including Warburg Pincus and Kohlberg Kravis Roberts (KKR) to ease its debt pressure and meet the working capital requirements. The funds would be raised with an investment in a combination of instruments including compulsorily convertible debentures, preferred stock and mezzanine (short term-high interest) loans.
As of June 2011, the retailer was dealing with a debt pressure of more than Rs 4,500 crores and reported a 36 per cent drop in its net profit for the quarter ended September 2011. Its interest costs jumped 70 per cent to over Rs 200 crores for the quarter leaving the company with net profits of a little over Rs 15 crores on consolidated sales of over Rs 3,000 crores. About 74 per cent of its profit before interest and taxes in the first quarter was spent on paying interest on debt.
For the past two years, Pantaloon has been trying to deal with the situation by looking for fresh investment options. Earlier, the company was reported to have been in talks with PE investors Bain Capital and TPG, which failed to materialise due to differences in valuation expectations and structuring issues. Pantaloon has also been in talks with various foreign retailers to form strategic alliance at some of its business units. It has also decided to sell its stake in Future Capital Holdings, the company’s financial services arm. |
