Zee Promoters Get An Eight-Month Breather From Mutual Funds And NBFCs

Zee promoters enter into formal consent agreement over default if share prices fall further.

From left to right: Punit Goenka, Subhash Chandra and Amit Goenka (Source: <a href="">Punit Goenka’s Twitter Handle</a>)&nbsp;
From left to right: Punit Goenka, Subhash Chandra and Amit Goenka (Source: Punit Goenka’s Twitter Handle

The Essel Group reached a formal agreement with its lenders, which gives the Subhash Chandra-led group till September-end to bring in a strategic investor and deleverage.
"As per the consent, the lenders have agreed that there will not be any event of default declared till September 30, 2019, due to the movement in the stock price of Essel Group’s mentioned listed corporate entities," the group said in a statement issued on Sunday.

This consent provides the required amount of time for the Group’s management, to complete the strategic sale process of its key assets without any compromise on the value.
Essel Group Statement

The statement did not provide any specific details of the agreement between the Essel Group and its lenders including mutual funds and non-banking finance companies.

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Second Sunday Meeting

This is Essel Group's second meeting with lenders in two weeks.
At the first meeting on Jan. 27, the lenders agreed in principle to not sell shares of the listed companies in the event of a further drop in share prices. A little over 96 percent of the lenders were party to the agreement, Punit Goenka, the managing director of Zee Entertainment Enterprises Ltd. said in a conference call with investors.
The Zee Entertainment stock has fallen 18 percent since Jan. 24, while Dish TV Ltd. shares have fallen 27 percent in the same period.
Shares of group entities tumbled on a report that the Essel Group’s name emerged in a probe linked to large deposits made after demonetisation.
Mutual funds have a total exposure of around Rs 7,500 crore to non-convertible debentures issued by nearly 13 entities of the Essel Group, according to data available with rating agencies. NBFCs have an exposure of about Rs 4,000 crore to these securities.
Today's agreement essentially allows the company to temporarily breach the covenant which specifies the equity cover that the promoters must maintain. This cover ranges from 1.5 times to 2 times the debt. With the sharp fall in the stock price, the equity cover had fallen below the required threshold.

Essel Group Agreement With Lenders May Only Buy Them A Few More Months

Debt Pressure

Even though the promoters have bought themselves time till September-end, they will face several challenges in the coming months as eight group entities have debt maturing in 2019. Of that, four large entities have outstanding debt worth Rs 2,750 crore maturing before August, according to data available on Bloomberg.

These include:

  • Cyquator Media Services: Rs 450 crore debt maturing between March and April.
  • Edison Infrapower: Rs 375 crore maturing between March and June.
  • Essel Corporate Resources: Rs 850 crore maturing between July and August.
  • Sprit Infrapower: Rs 1,075 crore due between March and July.