SBI throws Wockhardt Rs100 crore lifeline
04 April 2009
The State Bank of India, the country's largest bank, has sanctioned a Rs100 crore loan to the financially troubled pharmaceutical major Wockhardt, so that it can meet its working capital requirements.
The Wockhardt board has referred the company to the corporate debt restructuring cell through ICICI Bank for financial restructuring. It is learnt that Wockhardt has made major losses on foreign exchange products sold mainly by the foreign banks. The company will make provisions for all losses in the books of the current financial year.
The Wockhardt board is expected to meet by the end of this month to finalise the accounts. The terms and conditions of the SBI loan have not been disclosed so far. SBI already has the largest exposure of Rs 750crore in Wockhardt, followed by ICICI Bank.
Meanwhile, credit rating agencies Fitch and Crisil have downgraded Wockhardt's rating following its announcement of corporate debt restructuring. Crisil downgraded the rating of short-term debt programme of the drug maker following a default by Wockhardt in interest payment on a loan.
Fitch downgraded Wockhardt's national long-term rating to B from BBB, which signifies high default risk. Crisil downgraded the rating on pass through certificates (PTCs) to P5 from P4 and has placed the company on 'rating watch with negative implications' based on its expectation of shortfalls and delays by Wockhardt in meeting its obligation on the loans.
"The downgrade follows a default by Wockhardt on the interest payment on the loan supporting pass through certification (PTC)," Crisil said. The downgrade follows a default by Wockhardt on the interest payment on the loan supporting the PTCs.
Axis Bank, the trustee to the transaction, has confirmed the default. ''Crisil believes that Wockhardt has chosen not to pay the debt obligation'', the rating agency said.
The scheduled board meeting to consider results for financial year ending December 2008 on 31 March was postponed last week citing ''restructuring of its businesses.''