Realty cos rejig debt to overcome slowdown blues
Economic Times, February 27, 2009, Page 5
Rajesh Unnikrishnan & Supriya Verma Mishra
MUMBAI
REALTY companies and developers have undertaken ambitious debt restructuring exercises to improve their financial situation as the tight liquidity situation crimps housebuying decisions and debt-equity ratio of companies crosses the prudent level of 0.5. The debt-equity ratio of many property firms currently ranges from 1 and 1.5.
The domestic real estate market has already seen private equity firms buying strategic stakes in holding companies, sale of land banks and non-core businesses, pledging of promoters’ equity for long-term debt and securitising of future receivables for their working capital requirements.
“Developers are quick to accept their over-leveraged position and are taking all possible measures to correct this financial mess,” said Anshuman Magazine, MD (South Asia) of CB Richard Ellis. “Currently, they are focusing only on reducing debt. This can be done either by bringing in a strategic partner or selling land assets,” he added. CB Richard Ellis is working with more than six developers to cut debt exposures.
The Reserve Bank of India’s recent move to allow real estate companies to restructure their outstanding debt may be the last saving grace for these developers. Unitech’s outstanding debt was Rs 10,000 crore, going by the December 2008 quarter results.
Unitech had to repay Rs 2,500 crore by March 2009. It was able to restructure Rs 1,000 crore and this will be due for repayment after 12-18 months, depending on the restructuring terms. Another Rs 1,000 crore was raised through mutual funds and Rs 500 crore was restructured for three months and will be due by the end of March this year. The company is raising funds by part-selling its stake and non-core businesses.
Similarly, HDIL, Omaxe, Unitech and DLF have restructured their debts due for repayment by March 2009.
The Bangalore-based Sobha Developers is restructuring 45% of its Rs 1,900-crore debt. The company, which has a land bank of 3,000 acres, primarily in southern India, is in talks with over ten banks and financial institutions to restructure its debt of about Rs 850 crore.
Economic Times, February 27, 2009, Page 5
Rajesh Unnikrishnan & Supriya Verma Mishra
MUMBAI
REALTY companies and developers have undertaken ambitious debt restructuring exercises to improve their financial situation as the tight liquidity situation crimps housebuying decisions and debt-equity ratio of companies crosses the prudent level of 0.5. The debt-equity ratio of many property firms currently ranges from 1 and 1.5.
The domestic real estate market has already seen private equity firms buying strategic stakes in holding companies, sale of land banks and non-core businesses, pledging of promoters’ equity for long-term debt and securitising of future receivables for their working capital requirements.
“Developers are quick to accept their over-leveraged position and are taking all possible measures to correct this financial mess,” said Anshuman Magazine, MD (South Asia) of CB Richard Ellis. “Currently, they are focusing only on reducing debt. This can be done either by bringing in a strategic partner or selling land assets,” he added. CB Richard Ellis is working with more than six developers to cut debt exposures.
The Reserve Bank of India’s recent move to allow real estate companies to restructure their outstanding debt may be the last saving grace for these developers. Unitech’s outstanding debt was Rs 10,000 crore, going by the December 2008 quarter results.
Unitech had to repay Rs 2,500 crore by March 2009. It was able to restructure Rs 1,000 crore and this will be due for repayment after 12-18 months, depending on the restructuring terms. Another Rs 1,000 crore was raised through mutual funds and Rs 500 crore was restructured for three months and will be due by the end of March this year. The company is raising funds by part-selling its stake and non-core businesses.
Similarly, HDIL, Omaxe, Unitech and DLF have restructured their debts due for repayment by March 2009.
The Bangalore-based Sobha Developers is restructuring 45% of its Rs 1,900-crore debt. The company, which has a land bank of 3,000 acres, primarily in southern India, is in talks with over ten banks and financial institutions to restructure its debt of about Rs 850 crore.
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