CHENNAI, May 22: Maxworth Orchards Ltd, which is under a severe financial crunch, is looking for a joint venture partner to bail it out of trouble.

Meanwhile, Managing Director R Subramaniam plans to negotiate for short term funds against personal guarantee to keep the company going until fresh funds are brought in through the joint venture.

Speaking to The Financial Express, Subramaniam said an foreign partner has been identified and that an agreement for a joint venture would be signed within three months. He, however, refused to name the partner as the contract was yet to be finalised.

The modalities of the partnership like the extent of equity participation and the venture terms are being finalised, he said. Maxworth was initially exploring the possibility of opting for external commercial borrowings (loans from foreign banks/financial institutions), but had dropped the idea as the company's exports were significantly less than the required levels.

The company which was doing well initially has since fallen into bad times, Subramaniam added. The money from the unitholders, which was supposed to go into the development of the land into orchards, was instead used to buy more property and the spiralling effect led to a financial crunch say market sources and analysts. Company sources, however, claim that the tight liquidity position in the economy led banks to backtrack on commitments, thus creating a liquidity crunch for the company.

Borrowing was not really the solution as the interest on the borrowed funds would have compounded the company's woes. The joint venture route was considered to be the ideal solution to put the company back on track, the company sources added.

Meanwhile, Sterling Holiday Resorts, which is also being managed by Subramaniam, is going in for external commercial borrowings to complete its resort projects.

A term loan arrangement is being worked out with a foreign funding agency, which is expected to bring in around 80 per cent of the funds required.Sterling Resorts could avail of the loan to develop its resorts and run them along the lines of resort hotels, which are more profitable, said Subramaniam.

Alternatively, the funds could be used only for development and then the resorts would be sold on a timeshare basis. The terms are still not clear.Sterling chose to borrow from the international market because of the lower rates of interest.

Foreign funding agencies are also more open to long term lending and are better in terms of speed of processing, said Subramaniam.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.