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SCI to trim Govt debt with loan from BoB

P. Manoj

NEW DELHI, Feb. 4

SHIPPING Corporation of India (SCI) has struck a 5-year loan deal worth Rs 200 crore with Bank of Baroda at an interest rate of 8.75 per cent to pre-pay part of the Rs 250-crore outstanding Government loan prior to disinvestment.

``The loan documents have been executed and the deal is expected to be inked soon'', Government sources said.

The decision to pre-pay the loan has the twin objective of reducing the Union Government's burden on paying the interest differential subsidy to SCI for acquiring new vessels, besides releasing a large number of vessels mortgaged by the company with the Government for availing of the loan, the sources said.

``This will also benefit the proposed disinvestment in SCI as the strategic buyer will have a good number of unencumbered vessels which can be mortgaged elsewhere to suit his business plan'', the source said.

The financing cost of 8.75 per cent is considered a very good rate when the board of SCI was of the view that it could not be done below 9 per cent.

SCI owes about Rs 250 crore to the Government for availing of low-cost loan, term loans from the erstwhile Shipping Development Fund Committee (SDFC).

SCI had mortgaged about 30-35 vessels with the Government over a period of 10-15 years for availing of the loan. By prepaying Rs 200 crore out of the total outstanding loan of Rs 250 crore, SCI would be able to get the mortgaged vessels released from the Government.

``SCI will only have to mortgage about eight vessels with Bank of Baroda for availing of the Rs 200-crore loan, while the remaining vessels will be unencumbered'', the sources said.

Further, by prepaying the loan to the Government, the Centre's subsidy obligation to the company on account of the 30 per cent ship building subsidy scheme will be wiped out.

As part of the shipbuilding subsidy scheme, about Rs 30-35 crore was due to SCI from the Government for the last 2-3 years, out of which, the Centre is understood to have released about Rs 10-12 crore recently.

With a diversified fleet being its main strength, the prospective strategic buyer of SCI will have a large number of unencumbered vessels at his disposal which could be mortgaged elsewhere for raising funds to expand in those areas which are more revenue earning.

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