MTD Walkers gets investor consent to delay debenture redemption

• Debenture redemption delayed by one year
• Agrees to pay additional 2% interest as compensation

MTD Walkers PLC last Friday said it had obtained consent from the majority debenture holders to delay the redemption of their debentures by a year, with a promise to offer an additional 2 percent interest.

The construction firm, which mainly undertakes government projects, is mired in a debt and liquidity crisis due to delays in certain ongoing projects and a large amount of pending monies for completed projects.  

The company raised Rs.3 billion in a debenture issue in 2015. The instrument carried two types based on tenors and rates. Last week Mirror Business disclosed that the company was facing challenges in retiring its Rs.2.1 billion Type A debentures, which fell due yesterday—Sept.30.

The company in a statement sent to the Colombo Stock Exchange through Bank of Ceylon— the Trustee to its 2015 debenture issue said, they had obtained the consent of the debenture holders who hold more than three forth (3/4) of the par value of the debentures to delay the redemption date of the Type A debentures until September 30, 2019. 

Further, the company has agreed to offer 11.75 percent interest on the Type A debentures from October 1, 2018. 

The negotiation has also resulted in the company having to offer 2 percent additional interest on its Type B debentures from 10.25 percent to 12.25 percent, which are to be redeemed on September 30, 2020. 

The debenture trust deed has been amended accordingly, Bank of Ceylon said in the disclosure. 

MTD Walkers, the civil engineering behemoth has been losing money and piling debt due to borrowings made to fund its significant working capital needs, stoking concerns over its ability to meet its near-term obligations. 

MTD Walkers is a leading contractor of State-funded infrastructure projects such as roads, highways and housing projects but the payment delays have caused the group to borrow for its working capital. 

The company has already handed over three UDA housing development projects, which were financed on a deferred contractor financing model and the total receivables from these three projects stand at Rs.6 billion.  

These receivables were due to be settled in six months after the project completion. 

According to sources, the Friday’s announcement to delay the debenture redemption came after the company received assurance from the Finance Ministry to release the moneys it owed in installments. 

MTD Walkers offers a fine example of a private sector entity, which mirrors the cash strapped nature of the national exchequer, upon which such entities’ fortunes depend to a larger extent.   

The total receivables of the MTD Walkers group as of June 30, 2018 were Rs.23 billion and the company has Rs.29 billion in total outstanding borrowings. 

ICRA Lanka on September 21 cut MTD Walker’s and its debenture’s rating to ‘B-‘ from ‘BB-‘ with a Negative outlook—the second downgrade in four months due to rising losses and debt levels.