DCM goes for Restructuring

DCM LIMITED (DCM) is a public Company is engaged in the business of manufacturing/ sale of castings to the automotive industry and real estate development. The equity shares of the Company are listed on the Stock Exchanges.

DCM ENGINEERING LIMITED (DEL) is a public company, previously known as DCM Tools & Dies Ltd. Effective from October 2019. Currently, the company does not engage in any business, however, the memorandum of association of the Company inter alia permit the Company to undertake the engineering business including manufacturing and supply of grey iron casting. The Company is a wholly owned subsidiary of the DCM.

The Transaction:

The scheme is covered the arrangement of transfer of the “Engineering Division” of DCM into DEL and covers restructuring of debts to be transferred as a part of the Engineering Division.

Step 1: Transfer of Engineering division of DCM by way of slump sale to DEL.

Step 2: Restructuring of transferred debts (This deals with DEL and Term Lenders)

1. DEL shall issue Optionally Convertible Debentures (OCD) to Term lender for an amount equivalent to 50% of Term Loan and remaining Term Loan shall be paid to the Term lender over period of 5 years from the effective date with 8% Interest on quarterly basis.
2. Working capital outstanding shall be converted into Term Loan and paid by transferee company over a period of 5 years from the effective date.
3. Arrangement with Sundry Creditors.

Appointed date for the transaction is October 1, 2019.

LOAN Details and Conversion Terms

Following loans shall be transferred from DCM Ltd. to DCM Engineering.

• From the expiry of 1 (One) year from the Effective Date and until the expiry of 4 (Four) years from the Effective Date (“Conversion Period”), each of the Term Lenders shall have a right to convert the outstanding OCDs held by such Term Lender into the equity shares of the Transferee Company at par value.
• 33.33% within 1 year from the commencement of conversion period.
• 33.33% immediately after the expiry of 1 year from the commencement of the Conversion Period until the expiry of 2 years from the commencement of the Conversion Period.
• 33.34% immediately after the expiry of 2 years from the commencement of the Conversion Period until the expiry of the Conversion Period.
• After the expiry of 5th year from the effective date each of the Term Lenders shall, have a right to require the Transferee Company to redeem the outstanding OCDs held by such Term Lender, at a price that provides a return to such Term Lender at the rate of 8% compounded quarterly for the period from the Effective Date until the date of redemption of such OCDs.

The restructuring of debts covers in this scheme because Transferor company having charge on Immovable property gets transfer to DEL as part of the arrangement.

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