According to persons with knowledge of the situation, state-run Power Finance Corp. (PFC) has been given the go-ahead by its legal counsel to lend Rs. 15 crore to the Shapoorji Pallonji (SP) Group. They asked to remain anonymous but stated that SP Group's 18.37 percent ownership in Tata Sons Ltd. will serve as collateral for the loan. In order to refinance a portion of its Rs 20,000 crore debt, which was scheduled to mature in the last week of May, SP Group started negotiations with lenders in an effort to raise $1.2 billion. The development is significant because, in the event that SP Group defaults, Tata Trusts have informed lenders that the articles of association prohibit them from selling TataSons shares to a third party.
Furthermore, as per the aforementioned sources, PFC would feel somewhat more at ease if it proceeded with the loan transaction in light of the legal guidance it had obtained. For the SP group, which has been struggling because of its heavy debt load and exorbitant interest rates on its current loans, the PFC credit is essential. Prior to this, the SP Group asked bondholders for permission to move forward the due date of a portion of its debt from May 26 to September 30, citing challenges. To entice the debt investors, SP Group offered an additional Rs 400 crore, making the total payment to Rs 1,800 crore. This was for loans that Goswami Infratech, a subsidiary, had taken out.
However, Tata Sons has maintained that its shares are not easily transferable and that, as a private firm, the lenders would not be able to sell the collateral—the Tata Sons shares—to recoup debt if the SP group defaulted on its loan obligations. The Tata Group appears to be concerned that in the case of a default, the lenders would sell shares to a third party, which might alter Tata Sons' current control structure. PFC legal experts approve the SP loan against Tata Sons shares. According to persons with knowledge of the situation, state-run Power Finance Corp (PFC) has been given the go-ahead by its legal counsel to lend Rs 15,000 crore to the Shapoorji Pallonji (SP) Group.
With a request for anonymity, the persons stated that SP Group's 18.37 percent ownership of Tata Sons Ltd. will serve as security for the loan. In order to refinance a portion of its Rs 20,000 crore debt, which was scheduled to mature in the last week of May, SP Group started negotiations with lenders in an effort to raise $1.2 billion. The development is significant because, in the event that SP Group defaults, Tata Trusts have informed lenders that the articles of association prohibit them from selling Tata Sons shares to a third party. According to the aforementioned sources, PFC would feel somewhat more at ease if it proceeded with the loan transaction in light of the legal guidance it had obtained.
For the SP group, which has been struggling because of its heavy debt load and exorbitant interest rates on its current loans, the PFC credit is essential. Prior to this, the SP Group asked bondholders for permission to move forward the due date of a portion of its debt from May 26 to September 30, citing challenges. To entice the debt investors, SP Group offered an additional Rs 400 crore, making the total payment to Rs 1,800 crore. This was for loans that Goswami Infratech, a subsidiary, had taken out.
However, Tata Sons has maintained that its shares are not easily transferable and that, as a private firm, the lenders would not be able to sell the collateral - the Tata Sons shares - to recoup debt if the SP group defaulted on its loan obligations. The Tata Group appears to be worried that if there is a default, the lenders would sell the shares to a third party, which could alter Tata Sons' current control structure.
