SP Group's plans to refinance its INR 20,000 crore debt by pledging its remaining stake in Tata Sons is facing issues. Lenders have expressed concerns over technical difficulties in refinancing restricted shares and raising another round of funding through pledging. The group needs to repay debt in May but lenders say pledging shares already used as collateral once before may not be appropriate. Refinancing could also be rejected by Tata Sons as it requires board approval due to share transfer restrictions.
Shapoorji Pallonji Group's (SP Group) plans to refinance debt and infuse cash in its operating companies by pledging Tata Group shares are likely to run into trouble with the potential lenders raising concerns and technical difficulties.
The lenders, whom the group is in talks with, have expressed concerns over refinancing of the shares with "restriction" as transfer of shares can be rejected by Tata Sons and that it requires votes by promoter group as per Articles of Association. Further, sources close to the matter told FE that these shares were earlier pledged to raise funds, and raising another round of funding may not be "appropriate".
At present, Shapoorji Pallonji and Company (SPCPL), the holding company of SP Group, which holds an 18.37% stake in Tata Sons, has a debt of about INR 20,000 crore. SP Group has been in talks with lenders including state-run Power Finance Corp to raise up to INR 20,000 crore.
Further, the group was also believed to be in discussions with global alternative investment firms Davidson Kempner Capital Management and Cerberus Capital Management for the fund raise.
The group was expected to formally launch the fundraising initiative this month as the debt repayments are due in May.
In 2021, the group had pledged a part of its 18.37% stake - held through Cyrus Investments and Sterling Investment Corp - in Tata Sons with banks to raise USD 3 billion funds to service its debt obligations.
The debt, raised through issuance of bonds, had a repayment tenure of a little over three years. The funds were primarily raised from US hedge fund Farallon Capital and Ares.
In 2020, Tatas had objected to pledging of the shares and had even moved the Supreme Court seeking to restrain the Mistry group from raising capital against by direct or indirect pledging of shares. The apex court in its order had stated that the issue had to be sorted out between the parties. Later, when the SP Group pledged nearly half of its shares in Tata Sons, the Tatas did not object.
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