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SP Group Secures Lender Approval for Debt Covenant Ease
6 Apr
Summary
- Shapoorji Pallonji's financing arm secured lender approval to temporarily raise its LTV limit.
- A decline in Tata Sons shares, pledged as collateral, caused the debt pressure.
- The group needed relief to refinance $2.5 billion in debt due April 30.
A unit of India's Shapoorji Pallonji Group has obtained approval from its principal lenders to temporarily relax a critical debt covenant. This development comes as falling collateral values pushed the company closer to its borrowing limits. The financing arm, Porteast Investment, will see its loan-to-value limit increase to 40% from 34% for a four-month period concluding on July 15.
The financial strain originated from a decrease in the value of Tata Sons Pvt. shares, which are pledged as collateral for a $3.4 billion loan secured last May at a high 19.75% yield. Shares of Tata Consultancy Services, a key asset of Tata Sons, have fallen over 22% this year, impacting the valuation of Tata Sons and consequently, the SP Group's debt position.
This lender flexibility is vital for the SP Group as it faces the imminent refinancing of approximately $2.5 billion in rupee-denominated debt for its unit, Goswami Infratech Pvt., due on April 30. The unit aims to raise up to $1 billion via its inaugural dollar-bond sale, with the remainder to be settled through simultaneous local debt issuance.
The situation underscores the sensitivity of the construction conglomerate's financing to equity valuations linked to Tata Sons. It also highlights broader credit market volatility, potentially exacerbated by geopolitical events. The Shapoorji Pallonji Group, operating across multiple sectors for over 160 years, is controlled by the Mistry family.
