Wockhardt's efforts to restructure its operations have received a boost with the Bombay high court declining to grant an injunction sought by a section of its investors to stall the divestment of its nutrition business to Abbott Laboratories of the US.
The Rs 625-crore (Rs 6.25 billion) deal, announced last July, was a part of Wockhardt's efforts to get out of non-core activities and focus on pharmaceuticals.
The court's stand is expected to help Wockhardt conclude the deal within a month's time, said sources associated with the transaction. A Wockhardt spokesperson declined comment as the matter was sub-judice.
The Bombay high court, which on Friday heard a petition from New York-based QVT Financial for admitting a winding up petition against Wockhardt for defaulting payment of foreign currency convertible bonds, did not grant the demand for stalling the deal with Abbot, said the sources.
A group of investors led by QVT Financial had approached the Bombay High Court a few weeks ago, demanding winding up of the company for paying its bondholders only 35 per cent of the FCCB dues. The company had to repay FCCBs worth $110 million, which were due for redemption in October 2009, and external commercial borrowings of $250 million. Investors led by QVT own 40 per cent of these bonds.
The single bench of Justice SJ Kathawalla declined to grant an injunction on the sale of any of its assets, including the nutrition business during the pendency of the petition, as demanded by the counsel of QVT, a lawyer said.
The court had earlier directed Wockhardt to inform it at least three days prior to signing any deal to sell its assets. Wockhardt's counsel also assured the court that it would inform the investors and the court of any deal in advance.
Wockhardt had earlier reached an out-of-court settlement on a similar winding up petition with another lender, Singapore-based DBS Bank, which had approached the Bombay high court three months ago over non-payment of the Rs 44-crore (Rs 440 million) working capital loan given to Wockhardt in 2007. The court did not admit the petition and directed the parties to settle the issue. Wockhardt settled the dues at a 19 per cent discount, and paid Rs 37 crore (Rs 370 million) to DBS.
In July 2009, Wockhardt signed an agreement to divest its non-core nutritional business to Abbott for about Rs 625 crore. Earlier, the company had sold off its loss making German subsidiary Esparma to Mova GmbH and animal health division to Vetoquinol of France to mobilise about Rs 300 crore (Rs 3 billion).
Wockhardt, which undertook a debt restructuring scheme, is required to sell its non-core assets worth Rs 790 crore (Rs 7.90 billion) within the next six years. Wockhardt promoter Habil Khorakiwala had also sold off 10 hospitals of Wockhardt Hospitals, owned by his family, to Fortis Healthcare for over Rs 900 crore (Rs 9 billion). As of December 2008, the company had net liabilities worth Rs 3,400 crore (Rs 34 billion).
