Wockhardt Ltd is planning for a debt restructuring after it found it hard to deal with the angry lenders and bond holders. They were hostile because the company failed to meet to debt payment requirements mainly due to losses from foreign currency fluctuations.

A US based hedge fund QVT has now proposed an alternative debt restructuring plan for Wockhardt wherein they will buy a significant minority stake in the Indian company. QVT and a group of investors have filed a winding-up petition in the Bombay High Court as the company did not play its debt payments.

The proposed plans states that the foreign currency convertible bonds for which the company did not pay would be replaced by fresh FCCBs that will mandatorily get converted into the company's shares on maturity five years later.

A group of banks have taken over about half of the $140 million FCCB burden of the company and agreed to convert them into convertible preference instruments after 8 to 10 years. The banks are led by the Stake Bank of India. The rest of the FCCB's are held by investors which includes QVT.

Wockhardt worked out its own restructuring plan and it was accepted by the group of banks but, QVT rejected it.

The Khorakiwala family holds the promoter stock in the company with total stake at 73%. According to the plan proposed by QVT, the company would see the promoter's stake going down to 62 per cent while investors would get 14 per cent stake at a premium of 10 per cent.

Wockhardt did not comment on the development. Under the proposed plan, QVT wants Wockhardt to issue 1.295 new FCCBs for each bond it did not pay for. The issue is to be at a premium and semi-annual interest of 5 per cent.

Wockhardt decided to not discuss an earlier restructuring plan which would have reduced the promoter's stake to 54 per cent. QVT has issued a warning that if it does not consider its proposal then it may try to block the sale of a company unit.