Shapoorji Pallonji Group Set To Receive Rs 5,000-Cr Lifeline
The promoters of Shapoorji Pallonji (SP) Group, the Mistry family, are all set to receive a Rs 4500-Rs 5000 crore lifeline from Ares SSG and US hedge fund Farallon Capital, two top special situations financiers that will help them meet their immediate liquidity concerns. Term sheet between both sides have already been signed and an announcement is expected within the next 7-10 days. This financing round is independent of the one-time restructuring (OTR) proposal of the real estate, construction and engineering conglomerate that was approved by the lenders and the Kamath committee. The structured funding by Ares-SSG and Farallon in the form of 3-5 year non-convertible debentures (NCDs) will be against the “value of Tata Sons holding.” As part of the structuring, a separate SPV is getting created where the funds will come in. The two Mistry family holding companies – Sterling Investments and Cyrus Investments – that each hold 9.18% of Tata Sons shares will in turn give corporate guarantees, lock in covenants to this entities against the Tata Sons shares. This structure, has been created to any avoid future litigation risks from the Tata Group over share pledges that had earlier went to court to oppose the Mistry family from pledging their Tata Sons shares and raise funds from third party sources like Brookfield. Moreover, both the 2 Mistry family entities are core investment companies (CICs), governed under RBI guidelines. They can borrow money but have to maintain prescribed debt: equity ratios. Ares SSG, which is acting as the lead in the funding round has an existing relationship with the Mistry family. They have a significant minority stake in a 4 year NBFC venture Shapoorji Pallonji Finance Pvt Ltd. For Farallon, this is a first time engagement with the group. Shapoorji Pallonji and Company’s (SPCPL’s) — the holding company of the 150-year-old SP Group — debt repayment obligations in 2020-21 are Rs 5,320 crore at a standalone level and Rs 10,000 crore at a consolidated level. The total group borrowings amount to more than Rs 25,000 crore, while the flagship firm has Rs 23,500-crore debt on its books. The SP Group recently lost its 5 year old legal battle with the Tatas in the Supreme Court. Even though the apex court left it to the concerned parties to come to a consensus on valuation and shareholder exit, experts believe it will be tough for the Mistry famiy to directly pledge its 18.4-per cent stake in Tata Sons.