MUMBAI, Nov 7: The Nusli Wadia-owned Bombay Dyeing, which has embarked on an international borrowing programme, is in the syndicated loan market with a three-tranche $38-million offering. The offer is being lead-managed by SBI International Merchant banking group.

The Bombay Dyeing mop-up is a term-loan facility with a negative pledge of security. Investment banking sources said the first tranche, for $3 million, has a three-year maturity. This portion, whose repayment will be in the bullet mode, is priced at 65 basis points over six-month Libor.

The second tranche, for $15 million, is priced at 64 basis points over Libor and has an average life of 3.75 years. Its repayment will be in two equal, semi-annual instalments. The third tranche of $20 million, spread over eight years (average life of seven years), is priced at 82.9 basis points over Libor. Its repayment will be in five equal, semi-annual instalments with a six-year moratorium.

Proceeds from the $38-million cumulative borrowing, sources say, will go towards funding new plants.

Bombay Dyeing has been under severe pressure since its product, di-methyl terepthalate (DMT), is facing stiff resistance from purified terepthalic acid (PTA). DMT is now being widely replaced by PTA in yarn production.

Faced with this challenge, Bombay Dyeing has decided to re-focus its business activities. It has also decided to go in for an elaborate restructuring programme, which will renew its commitment to growth, and recover lost ground in terms of brand value. The move is expected to spur growth in the finished garments segment, where Bombay Dyeing was an undisputed market leader till a decade ago.

The firm has appointed Warwick University, a specialist in recast of textile companies, to re-shape its textile division. The aim: fewer products, with sharper focus on the brand name, so that higher returns are generated at reduced costs. Low-value products like polyester cotton bedsheets will be jettisoned, and high-value products like made-ups will be focused upon.

In the process, an age-old composite mills structure, battered in profitability by competition from cheaper-cost powerloom producers, will probably be split. Laws do not allow summary shutting-down of mills and shifting production to other centres. The company has, therefore, decided to shift production of some items like terry towels and shirts to other locations in its bid to cut costs.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.