FCCB sword over Cranes Software, faces liquidation

The list of Indian companies facing liquidation proceedings by foreign investors in the US is going to get longer.Bank of New York Mellon (BNYM) is pushing ahead with a winding up petition againstCranes Software, a Bangalore-based services and product company.

After Wockhardt and Karur KCP Packagings, Cranes Software is the third Indian firm which is facing the wrath of its Foreign Currency Convertible Bonds (FCCB) investors. But in a first here, an underwriter or coordinator for an FCCB issue has filed a winding up petition against an Indian issuer.

[caption id="attachment_42342" align="alignleft" width="380" caption="Bank of New York Mellon (BNYM) is pushing ahead with a winding up petition againstCranes Software. Screen grab from Crane Softwares website"][/caption]

The move is believed to have the backing of Barclays Bank, one of the largest holders of FCCBs. The winding-up notice pertains to a 42-million FCCB issue from Cranes Software in 2006 where Barclays Bank has a substantial exposure. The company defaulted on its redemption in March this year.

Firstpost had, in an earlier article, mentioned that a number of companies are likely to face liquidation proceedings or will have to either raise money for redemption or sit with the investors and renegotiate their investment deals. Cranes Software falls in the first category of companies, and it has already got a legal notice in this regard.

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There is little business left in the fold for Cranes Software. The company's business shrank from Rs 358 crore in 2008-09 to Rs 28 crore in 2010-11. Its Rs 115 crore profit turned into a loss of Rs 124 crore in the same period.

The notice comes at a time when more and more Indian companies are showing their willingness to renegotiate their FCCBs with their investors. A threat of liquidation will now add pressure on Indian companies to settle their deals at a higher price.