Investment Banking-

Wockhardt FCCB issue & related

winding up petition
Acad Group : 13
Anchal Agrawal PGP-18-007
Gourish Agrawal PGP-18-189
Rajul Lakhotia PGP-18 -216
Rishabh Popat PGP-18 -217
Rohit Purwar PGP-18 -218
Company Overview
• Wockhardt Limited is an Indian pharmaceutical and 1960 INR 40 bn+
biotechnology company. Founded Market Capitalization
• Presence in the fields of Pharmaceuticals,
Biotechnology, Active Pharmaceutical Ingredients
(APIs) and Super Specialty Hospitals.
• Full-fledged operations in India, USA, UK,
Mumbai 7900
Headquarters employees on rolls
Ireland and France.
• Marketing presence across 15+ countries
• Listed on the Stock Exchange, Mumbai (BSE),
National Stock Exchange (NSE) and Luxemburg INR 46.14 bn 68%
Stock Exchange in the form of GDR. Annual Revenue International Sales

Share Price 365.2

INR 1.4 bn 14
Market cap 4012 Crore Manufacturing
Total Equity
Debt to equity 0.92 facilities
Industry P/E 27.14
4th 3
P/E Position in Pain
R&D Centres
Promotor’s holding 73.54 mgmt & Vaccines
2008-2009 Crisis
Envisioned to be the This debt was raised as a mix Financial health started
most admired health of secured loans and unsecured deteriorating post 2008 on
care company from India loans including FCCBs (foreign account of foreign exchange
with a mission of USD 1 currency convertible bonds). It derivative losses, mounting
billion by 2009. entered into complex currency debt and interest costs
option contracts to hedge loss.

It suffered a loss of 1.39 bn

Organic and inorganic Its debt had ballooned 14 in 2008 that jumped to over
growth and went on with times from Rs 3 bn to Rs 42 bn 10 bn loss in 2009 because of
aggressive acquisitions. in that duration. interest costs and
exceptional items

Between 2003 and 2008, Wockhardt needed funds to Sitting on pile of debt, the
Wockhardt acquired expand and as the cash flow company couldnt redeem the
seven companies from operations were not due FCCB of USD 110
internationally spending enough, they had to resort to million. Investors wanted
about Rs 22 bn. borrowings repayment and not
conversion.
Capital Debt Restructuring
To avert the possibility of
default, entering a
corporate debt
restructuring arrangement
with its bankers was
probably the only option.
Restructuring package
approved by CDR - the loan
would continue at a 800 million as part of the
concessional rate of 10% p.a
in two parts.
8% p.a. shall be paid on
monthly basis while 2% p.a.
shall be converted into
preference share capital
redeemable in 2018.
Wockhardt has also recently
closed a Rs 1,600-crore deal
selling its nutrition business to
Danone. These funds too,
would go towards repayment of
debt.
The promoters brought in their
share of contribution of INR.
package.
In August 2009, the company
sold 10 out of its 17 hospitals
to Fortis chain of hospitals for
INR 9,190 million
Wockhardt has over the last
few years exited non-core
businesses as part of the
process to regain its
financial health.
ICICI and SBI, domestic
banks came together to rejig
the loans and gave a priority
loan of 500 crore to pay back
It allotted 1.31 bn Non-
Convertible Cum Redeemable
Pref Shares and 22 mn
Optionally Convertible
Cumulative Redeemable Pref
Shares in terms approved
CDR package
Winding up Petition
A group of bondholders led
by the bond trustee of the
Bank of New York Mellon,
Sun Pharma Global and
hedge fund QVT besides
some creditors had taken
Wockhardt to court
They filed a wind-up
petition, after the company
defaulted on repayment of
its USD 110-million
FCCBs, in 2009
Under the CDR scheme, the
banks proposed paying back
bondholders a mere 25% of
their dues
Sun was joined by QVT and
some other bondholders. The
court ruled in favour of the
bondholders and directed
Wockhardt to repay them in
full, giving the company a few
years to repay.
Or the bonds should be
converted into equity as
mandated under the FCCB
rules
Private equity firm QVT,
which held Wockhardt’s
FCCBs, argued that it should
be repaid in full if there was
money to repay other lenders,
Wockhardt had to
recompense the banks for
the low interest charged
during the restructuring.
The recompense fee of Rs
220 crore was paid in full
FCCB were issued at a time
when the shares of the
company were trading at
INR 355 per share. The
FCCB were convertible at
the option of the holder at
INR 486.075 per share
However as the share price of
the company fell to around
INR 180, the investors were
looking for repayment rather
than conversion.
Turnaround
The company divested its non-core businesses and used the cash so generated to
pay off debts. Renewed focus on improving operational efficiencies, cost reduction
01 and research and development did result in improved performance.

The company turned around and reported a net profit of INR 905 million in 2011
which increased to INR 3.4 billion the next year.
02
The company further wrote off INR 5.8 billion and INR 5.3 billion respectively in

03 the year 2011 and 2012 towards exceptional items.

The borrowed funds declined from INR 42 billion in 2008 to less than INR 30
billion in 2012 resulting in the interest costs coming down to INR 2.1 billion in the
04 year 2012 from its peak of INR 3.4 billion in 2010..

Debt Equity ratio looked much healthy at around 2:1 compared to 6:1 in 2010
and The launch of its generic drug Toprol raked in profits of over $200 million.
05
Good decisions
Appointed
consultants
To understand the CDR, and the
push-and-pull between banks
that want companies to curtail
expenditure and promoters who
want to grow the business,
Wockhardt hired Hari Mundra
as consultant. Mundra, an ex-
Wockhardt hand, headed Essar
Oil when the company went
through something similar. He
understood Khorakiwala and
the CDR bankers’ mindset, and
was soon handling banker
meetings on his own.
Appointed Nomura
In a step that was to prove
crucial, the Wockhardt
board appointed investment
banking firm Nomura in
early 2009 as an external
consultant to decode the
derivatives trades and
calculate the extent of
damage
Rise in overnight CBLO
AUM after IL&FS default
The final CDR scheme for
Wockhardt covered the following:
secured and unsecured long- and
short-term borrowings of Rs 4,017
crore; $110 million of FCCBs;
$250 million of foreign currency
term loans taken by Swiss
subsidiary Wockhardt (EU), but
guaranteed by Wockhardt India;
and crystallised foreign exchange
losses of around Rs 650 crore (the
crystallised or actual losses were
about 25% of total—including
notional—losses).
Thank You