31 August 2012

Tulip Telecom: Tulip misses deadline for FCCB redemption: Nomura research,


As per a release to the stock exchange, Tulip has been unable to meet
its 26 August maturity deadline for redeeming its FCCB and has stated
that it now endeavours to complete this exercise by 10 September.
Based on our initial discussion with the company, we understand there is
no official approval on this new timeline; rather, this is the extension
Tulip seeks from investors to complete the refinancing. Investors,
however, could choose not to wait and take legal recourse. Overall, this
is a disappointing development, in our view, especially as FCCB
redemptions have been an investor concern for the past several quarters
and the conversion option was well out of money. Tulip shares are down
10% in the last couple of days (note, the stock currently has a (+/-) 5%
daily trading band) and we believe there could be further downside
potential on the back of this uncertainty. Hence we would remain on the
sidelines until we get better clarity

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Of the total USD140mn required to redeem its existing FCCBs, there is a
funding shortfall of USD20mn. Management notes that “while the
company has partial resources towards the redemption, it is awaiting
sanction and disbursements from some of the lenders to raise the
balance amount, besides the funds from the issuance of new FCCBs of
approximately US$ 50million.” Recall, Tulip had recently announced that
it had tied up for USD80mn in debt and USD50mn through the issue of
fresh FCCB’s. Tulip also received ~USD40mn in proceeds from the sale
of its stake in a JV with Qualcomm in the recent quarter; however, this
appears to have been deployed, likely for working capital. At this stage,
Tulip is not in discussion with existing FCCB holders for a restructuring
or rollover, we understand.
Please see stock exchange filing here:
http://www.bseindia.com/xmldata/
corpfiling/AttachHis/Tulip_Telecom_Ltd_270812.pdf

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