Bridging the divide

A case study of Wockhardt illustrates that aligning the interests of borrowers and creditors is a vital part of any restructuring exercise

Raghavendra Verma reports

In early 2009, Indian generic drug maker Wockhardt was forced to rethink its strategy as a result of difficulties posed by the global financial crisis. The company lacked resources and was struggling to pay off US$800 million in debt after buying French pharma company Negma Laboratories for US$265 million and US-based Morton Grove Pharma for US$38 million in 2007, and Irish generics maker Pinewood for US$160 million in 2006.

With a default on payment obligations imminent, the company was keen to restructure its debt. With the support of its major lenders – including big Indian banks such as ICICI Bank, State Bank of India, Indian Overseas Bank, Punjab National Bank and HDFC Bank – Wockhardt obtained approval for a corporate debt restructuring (CDR) scheme starting in April 2009.

In line with the scheme, Wockhardt issued 153 million preference shares worth US$130 million to the participating lenders. These non-convertible and optionally convertible cumulative, redeemable preference shares would be convertible in 2015 and redeemable in 2018.