SBI Caps readies Gujarat State Petroleum Corp's loan reduction proposal

At a time when private companies are staring at insolvency, SBI Caps has worked out a bailout package for state-owned Gujarat State Petroleum Corporation (GSPC), where the State Bank of India is one of the lead bankers. In a presentation outlining the mechanism for loan resolution, it has proposed that the SBI offer a debt of Rs 21 billion to refinance Gujarat State Financial Services (GSFS) Ltd’s loan to GSPC.

Prior to this refinancing, GSPC will draw an incremental Rs 6 billion from GSFS as general corporate purpose loan. As a third step, a fresh facility of Rs 15 billion will be availed from GSFS to refinance an outstanding line of credit and short-term loans that amount to Rs 21 billion.

SBI Caps, which was hired by GSPC to suggest a loan reduction plan, has also identified certain requirements, such as a fresh cash credit limit of Rs 7.5 billion, and non-fund-based limits of Rs 20 billion, translating to Rs 5 billion incremental limit. It has also suggested that GSPC Pipavav give Oil and Natural Gas Corporation Rs 4 billion standby letter of credit (SBLC) for supply of 5 mmscmd gas.

SBI has also been requested to extend conversion of Compulsorily Convertible Debentures amounting to Rs 5.5 billion that are due for conversion this financial year.

GSPC is looking for approval of lenders for a scheme of arrangement under which non-convertible debentures worth about Rs 6 billion would be transferred to GSIL. This takeover of NCDs has been approved by the Gujarat cabinet.

The Gujarat government company, which was once one of the major players in the petroleum and gas sector, had to sell off its Deendayal Upadhyaya block in the Krishna Godavari basin as part of its effort to reduce debt. The accumulation of debt on its books led to the Congress calling it a scam of the Gujarat government when Prime Minister Narendra Modi was the state chief minister.

State Bank of India