Tatas allowed to pledge 25% VSNL equity

By SiliconIndia   |   Tuesday, 25 February 2003, 08:00 Hrs
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The Tata group has been allowed by the Department of Telecommunications to pledge 25% of its equity stake in VSNL with CBI to make fresh issues of secured redeemable non-convertible debentures aggregating Rs 1,300 crore.

MUMBAI: According to a leading business daily, the department had received a request to this effect from Panatone Finvest Ltd (PFL), the special purpose vehicle of the group which bagged 7,12,50,000 shares in VSNL from the Government following its disinvestment a year ago.

It also said that the matter was referred to the Ministry of Disinvestment and after being assured that the move would conform to the shareholders agreement, permission had now been granted.

It may be recalled that in February last year, the company was permitted to pledge the shares with IL&FS Trust company Ltd. The pledge was created as per the terms approved by the Ministry of Disinvestment and PFL issued secured non-convertible debentures to Deutsche Bank and a total of Rs 1,420 crore was raised in two tranches. Since the debentures are due for redemption, a fresh issue of debenture is now required to refinance the maturing debenture raised earlier.

"To refinance the debt, PFL now proposes to make one or more fresh issue of secured, redeemable non-convertible debentures (NCD) aggregating up to Rs 1,300 crore which need to be secured by a pledge of VSNL shares in favour of debenture trustee Central Bank of India," DoT has been told, the paper said.

The request by Panatone was accompanied by a fresh guarantee from Central Bank indicating that it will abide by the restriction on transfer of shares and other provisions in the shareholders agreement.

Quoting sources, the paper said, on receipt of the request, DoT referred it to the Disinvestment Ministry once again, which noted that "the procedure to be followed should be exactly the same as decided earlier in the line of IL&FS Trust Company Ltd/Deutsche Bank and as advised by legal adviser, DoT".

Under the terms of the shareholders agreement, "the strategic partner can with prior approval of the Government, which shall not be unreasonably withheld, pledge the shares in favour of a recognised lender as security for any loans or advances made by such recognised lender. The only two conditions required are that the identity of the proposed pledgee is disclosed and such pledges shall be bound by the restriction on transfer of shares and the contractual obligations and covenants as provided in the shareholders agreement", the report concluded.

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