Koutons debt restructuring on the anvil

Thursday, 13 October 2011

Debt ridden Koutons Retails will finally heave a sigh of relief with its debt restructuring plan being finalised. The lenders are supposed to meet soon for the final approval. The apparel company’s total debt is Rs 660 crores, out of which the long term debt of Rs 500 crores will be payable over a period of 10 years including a two year moratorium. What this means is that the company does not have to pay any money to the bankers for first two years in terms of interest on the principal amount. The average interest rate on the long term debt is around 10.5 to 11 per cent. The company has a total of 10 lenders, which include Indian Overseas Bank, Punjab National Bank, Bank of India & Bank of Baroda.

Koutons Retail is also planning to cut down on its store count from the current 1,060 to 800. Koutons’ market capitalization has come down by 93 per cent over the last one year. The promoters of the venture hold 21.74 per cent out of which 97.04 per cent of the shares are pledged according to the shareholding pattern details available on Bombay Stock Exchange as on June 30, 2011.

During the retail boom in India, Koutons Retail went public in 2007 raising long-term debt from a consortium of banks led by Indian Overseas Bank three years ago. It started as a men’s brand, but later extended its portfolio to accommodate women and children wear. But, the economic slowdown in 2008 had an adverse impact on overall sales and the company had to stall expansion plans. Inventories piled up and it fell short of cash.