KKR subscribes to structured credit deal with Sanmar Group
The Sanmar Group, the conglomerate based out of Chennai, would be raising nearly INR250 crore from private equity fund KKR for the reduction of promoter's debt and the expansion of its chemical business. This was confirmed by a person familiar with the deal.
The private equity fund would be subscribed to convertible debentures issued through Sanmar Engineering Technologies, the holdings firm for the chemicals to engineering business of the company.
For its part, KKR would be investing through its alternative investment platform. KKR India's CEO Sanjay Nayar had declined to provide a comment on the reported transaction while BN Natraj, Sanmar Engineering's Vice Chairman did not reply to an emailed questionnaire on the matter.
The said deal encompasses the options of conversion of debentures into equity shares as well as settlement by means of cash at a future date. The convertible instruments have assured returns set at reasonable rates until they are converted into equity shares.
Should the deal push through, it would be the second round of fund raising conducted by Sanmar Group from KKR in the past year. The buyout firm had already given INR400 crore to the firm in November last year.
According to the source, "The idea is to provide long-term capital in a flexible manner so that the promoters do not face any immediate pressure in their day to day operations, The promoters will get enough capital to grow the business for three to five years without actually diluting their stakes." The person added it is always wise strategy to keep investing in the same set of people.
The deal is set up as a structured sponsored financing which combines fixed income payments, equity and cash. This is formally called as a structured credit deal. The payouts would begin in about four years according to the investment bankers.