Rapicut Carbides to discharge the OTS liability smoothly

Rapicut Carbides Ltd has announced that the Company has to report significant development in the matter of restructuring of debt of Rs 2 Crores being the principal amount representing Non-Convertible Debentures (NCDs) issued by the Company in 1996 to Regional Rural Banks (RRBs) sponsored by Bank of India. The said debt was raised for Company's Expansion-Cum-Diversification programme but the same did not take off as the Company fell prey to the economic downturn, which soon followed. The said NCD debt of Rs 2 Crores was at a coupon rate of 20% considering the high interest regime in 1996-97.

The Company could not repay this debt on maturity and the interest too was paid upto March 1999 only. Thereafter in or about 2002 the Company made several attempts to settle this debt by seeking interest remissions / concessions and rescheduling payment over 4 / 5 years period for repayment of the liability. This however, did not materialize for various reasons and the RRBs filed an application for recovery in the DRT in 2003.

As a result of Company's continuous efforts towards resolution of this liability, an offer for One Time Settlement (OTS) was made in November 2006 and the same has since been accepted by all the RRBs, the gist of which is -

1. The Company will make down-payment of 30% amount (Rs 60 Lacs) towards the principal amount of Rs 200 Lacs.

2. The Company will pay the balance principal amount of Rs 140 Lacs in 12 equated monthly installments.

3. The Company will pay interest @ PLR of Bank of India, on the said sum of Rs 140 Lacs on reducing balance basis.

4. The Company will pay Rs 40 Lacs as total lumpsum interest in 12 equal monthly installments, which shall not carry any interest and will be paid only after the entire repayment of total principal debenture amount of Rs 2 Crores is completed.

5. The Company will pay a sum of Rs 2 Lacs towards DRT expenses.

Considering the fact that the Company's contingent liability of Rs 8.5 / 9 Crores approximately comprising of principal plus unpaid interest has now crystallized and settled for Rs 2.4 Crores, the Company's bankers, State Bank of India, have taken a very positive and supportive view of the settlement and have sanctioned a Corporate Loan of Rs 92 Lacs so that the burden of OTS outgo in the year 2007 is substantially eased. This Corporate Loan of Rs 92 lacs enjoys a moratorium of 13 months and repayment in 21 months thereafter.

The Company has since commenced implementation of the OTS by paying Rs 60 Lacs as down payment to the RRBs on February 09, 2007. Company has posted good performance in the past two years and its turnover and profits are on the rise. It has good liquidity and will therefore be able to discharge the OTS liability with the support of its Bankers very smoothly.

Source : Equity Bulls

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