Structured Debt Refinancing – Paper Manufacturer

Structured Debt Refinancing – Paper Manufacturer

The Challenge

The stress did not arise because of poor business intent or repayment indiscipline. In fact, the company had remained regular in servicing its credit facilities, including finance cost obligations.

However, several pressures converged at the same time.           

Capex overrun beyond plan

The expansion and modernization project exceeded the planned cost. As a result, a substantial portion of the additional funding requirement had to be met through internal resources, straining liquidity.

7-month production disruption

During the implementation phase, the plant remained non-operational or operated at very low levels for around 7 months, impacting production and sales. Even while operations were disrupted, fixed outflows such as wages, administration and selling expenses continued.

Revenue moderation and realization pressure

The business had already experienced a revenue decline of around 5.7% in one year, followed by a sharper drop of about 27% in the next. Over two years, this translated into a cumulative moderation of roughly 31%. Lower sales volume, weak realizations and correction in wastepaper-linked pricing affected revenue performance.

Debt servicing pressure despite discipline

Although the company had continued servicing term obligations and finance costs, the combination of lower utilization, weaker turnover and project-related strain created increasing pressure on debt repayment capacity.

Promoter resources stretched

The promoters had already committed significant support to the business for project completion, finance cost servicing and working capital continuity. The business needed a more sustainable financial structure.

Highlights

• Capacity Expansion
• 7 months of non/low operations
• 31% revenue decline over two years
• Structured refinancing with a 42-month tenor
• Moratorium-like recovery window for operational ramp-up

The Solution

At a critical juncture, when conventional financing structures were no longer aligned with the business reality, Embee Financials stepped in with a structured, recovery-oriented approach.

After a detailed assessment of both internal factors (capex overrun, shutdown impact, cash flow mismatch) and external pressures (commodity cycles, realization decline, market volatility), the Embee team implemented a two-way corrective action plan.

Two-way Corrective Action Plan.

Stakeholder Alignment & Lender Engagement

As the first step, Embee initiated structured discussions with all key stakeholders, focusing on stabilizing confidence across the ecosystem rather than introducing temporary fixes.

• • Proactive lender engagement
    Embee led detailed conversations with existing lenders, presenting a clear and transparent view of the situation — covering operational disruption, capex impact, and expected recovery trajectory.
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  • Partial debt takeover through structured discussions
    Through these engagements, Embee was able to secure a term sheet for takeover of a portion of the existing debt, easing immediate pressure on the company’s repayment obligations.
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  • Unified communication across stakeholders
    Continuous coordination was maintained between lenders, investors, and promoters to ensure alignment on the recovery path, avoiding fragmented decision-making.
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  • Showcasing promoter intent and business capability
    A key part of the process was highlighting the promoters’ strong intent to revive the business, their past discipline in servicing obligations, and the underlying strength of the asset and operations.
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  • Building confidence for recovery
    By clearly demonstrating both intent (commitment) and capability (enhanced capacity and improved product mix post-expansion), Embee helped rebuild lender and investor confidence in the company’s turnaround potential.

Structured Refinancing

Once immediate stability was secured, the Embee team moved towards designing a sustainable capital restructuring strategy, carefully aligned with the company’s recovery cycle rather than its past obligations.

• Choice of Instrument – Listed Secured NCDs
  Instead of continuing with conventional bank debt, a capital market instrument was introduced. This allowed greater flexibility in structuring, while also bringing in institutional investors comfortable with transitional business phases.
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• Purpose – Strategic Debt Swap
  The objective was not to add more debt, but to replace the majority of existing obligations with a more efficient and manageable structure. This helped declutter the balance sheet and reduce immediate repayment pressure.
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• Tenor – Aligned with Recovery Horizon
  The tenure was designed to span the expected operational stabilization period, ensuring that repayments were not front-loaded during a phase when the business was still ramping up.
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• Servicing Profile – Cash Flow Sensitive Design
  A lower coupon in the initial phase provided immediate liquidity relief when the company needed it the most.
  This was followed by a step-up in coupon, aligned with improving capacity utilization and cash flow visibility — ensuring both sustainability for the company and fair returns for investors.
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• Strategic Intent – Breathing Space + Stability
  The entire structure was built to create breathing room, stabilize cash flows, and allow the management to shift focus back to operations, capacity utilization, and market recovery — instead of being constrained by rigid repayment schedules.

This was not just refinancing — it was restructuring with intent, designed to bridge the gap between temporary stress and long-term business strength.