The Business India group, faced with a severe cash crunch, is expected to undergo a major re-organisation, to tide over the crisis. The proposed revamp, formulated with the assistance of Infrastructure Leasing & Financial Services (IL&FS), envisages the formation of a new company to “domicile its publishing business and redistribute group liabilities”, sale of non-core assets and an initial public offering (IPO) by the NC, among others.
A major part of the group’s woes are attributable to BiTV, a satellite television venture, which “was unsuccessful” and has been suspended since September 1999.
The promoters of the Business India group, at a meeting in early May, indicated that they were prepared to “make a sacrifice” and divest their non-core assets as well as their ownership interest in the publishing business to 26 per cent from the current 100 per cent. It is, however, unclear to what extent BI’s institutional lenders have approved the proposed revamp, though they are believed to have “indicated their positive disposition” towards the restructuring scheme, at a meeting held on June 4.
The proposed revamp envisages the transfer of the Business India firm’s business (along with the brand and printing assets) and part of its debt liabilities to the NC as an “aggregate business sale”. To facilitate this, BI would terminate the conducting agreement with Business India Publications (BIPL) for use of the BI brand and the printing assets.
In return, the NC will issue equity to the BI firm as sale consideration and the latter will transfer its equity in the NC to BIPL. BIPL, on the other hand, will transfer real estate assets, financial investments and net working capital related to the business, to the NC. An alternative option may be to retain the real estate assets in BIPL.
The proposal suggests that BIPL and the BI firm be consolidated to form a holding company, with aggregate liabilities pegged at around Rs 135 crores.
With the formation of the NC, the publishing business of the holding company is proposed to transfer its equity to BIPL. The transfer would include the Business India brand, the printing assets and outstanding liabilities of the holding company. Step four will involve the issue of zero coupon bonds (relating to the remaining liability within the holding company) to all the lenders.
Finally, post formation of the NC, the IPO process would be initiated. Part of the funds raised would be used to retire outstanding debt on a pro-rata basis to all lenders. The remaining part of the debt is proposed to be retained in the new company and serviced thereafter.