Financial Daily from THE HINDU group of publications
Wednesday, Feb 13, 2002
Corporate - Corporate Bonds
KRCL asked to issue deep discount bonds
Vipin V. Nair
MARGAO, Feb. 12
THE Infrastructure Development Finance Corporation (IDFC), appointed by the Finance Ministry to work out a debt-recast plan for Konkan Railway Corporation Ltd (KRCL), has suggested issuance of deep discount bonds by the Corporation, according to official sources.
In its interim report, the IDFC has mooted the issuance of these bonds with a 15-year tenure carrying a coupon rate of nine per cent.
The funds raised from this source will be used to redeem bonds worth over Rs 300 crore which will mature in the next fiscal.
The objective of this exercise is to replace the high-cost debt with cheaper loans.
"KRCL is banking on financial institutions to subscribe to the deep discount bonds. It will also seek a sovereign guarantee for the issue,'' sources said.
They added that the timing of the bond issue, which is subject to approval from the Ministries of Railways and Finance, is likely to be around June-July this year.
KRCL has raised funds from the market through the issuance of tax-free bonds offering a coupon rate of 10.5 per cent backed by a guarantee from the Indian Railways. The burden of servicing, in the event of any default, therefore falls on the Railways.
The Railways had to fork out around Rs 744 crore in the current fiscal towards KRC as against the budgetary allocation of Rs 230 crore. The burden for the next fiscal is estimated to be of the order of Rs 550 crore.
IDFC was mandated to work out a package for swapping the high cost debt with cheaper loans to reduce the servicing burden on the Indian Railways.
KRCL had raised Rs 2,070 crore through the issue of 10.5 per cent tax-free bonds in 1993 and in 1996. Most of these bonds are due for redemption by 2009.
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