Thu 08/05/2021 12:33 PM
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Relevant Documents:
Restructuring/Financial Report Update
Eros STX Q3 Press Release


Bonds of India-based entertainment company ErosSTX Global Corp. have fallen by about 40 points to be quoted in the 47-52 range after yesterday’s announcement that the group had made an appeal to extend the deadline for filing its 2021 annual report, sources told Reorg.

ErosSTX said in its announcement that it is exploring restructuring options for its £50 million 6.5% U.K. retail bond maturing Oct. 15 and $150 million JPMorgan asset-backed credit facility maturing Oct. 7.

In an update released Aug. 4, the company stated it is “considering options under various debt arrangements” including its £50 million retail bond and $150 million credit facility. The company was required to deliver audited financial statements regarding both facilities by July 31. However, it filed a form 12b-25 with the Securities and Exchange Commission regarding an extension of the filing deadline for the company’s 2021 annual report.

The company said options included “a waiver and extension of this deadline to deliver audited financial statements or paying off the debt” but warned “the company cannot provide any assurances that it will be successful in obtaining any extensions or paying off the debt.”

The group also said it has recently reached an agreement with its India Banking Consortium to refinance $63 million of outstanding debt. The agreement reduces the annual interest rate on the debts to 9% from an average of 14.5% and extends the average maturity so that less than $10 million of the debt matures in the second half of fiscal 2022, with the remainder maturing in fiscal 2023 and 2024.

The group stated in its press release for its third-quarter financial results that it had engaged JPMorgan to lead a refinancing of its global debt. The group’s expectation was “to refinance all current debt, extend maturities, and strengthen the balance sheet.”

However, investors had expressed doubts over whether the company would be successful in a refinancing effort, according to sources.

Financials

Operating profit for the nine months ended Dec. 31, 2020, excluding merger costs, was $22 million compared with an operating loss of $99 million the previous year. Revenue was $219 million in the period compared with $315 million the previous year, with the company attributing the drop to a reduction in global film releases due to the Covid-19 pandemic.

Net cash provided by operating activities for the period was $25 million and adjusted net cash provided by operating activities, excluding merger costs, was $40 million. Net debt as of Dec. 31, 2020, stood at $284 million with total cash on hand of $62 million.

India Operations

On June 22, the Indian lenders including state-owned banks of Eros International Media implemented a one-time restructuring plan to restructure the group’s onshore debt of about INR 6.01 billion ($80.7 million), under the Reserve Bank of India’s Aug. 6, 2020, circular on Covid-19 related stress, according to June 22 announcement. According to the Aug. 6, 2020, RBI circular a resolution plan is implemented without change in ownership, and personal loans, while classifying such exposures as “standard” subject to specified conditions, as reported.

Eros International derives its revenue from the Indian film entertainment industry, co-producing, acquiring and distributing Indian language films in multiple formats worldwide, according to its website. However, the nationwide lockdown since March 25, 2020, has affected the company’s business in fiscal year ended March 2021, according to the June 28 announcement.

The company is dependent on external borrowings for its working capital needs and investment in content and film rights, according to the June 28, 2021, announcement. Due to the economic uncertainty following Covid-19 coupled with significant business disruptions for the film distributors and broadcasting companies, there is likely to be an increase in events and circumstances which may cast doubt on the company’s ability as a going concern, the announcement shows.

Movie distributors are being forced to release films in OTT, or over the top, platforms such as Netflix and Hotstar, as cinema halls in India continue to remain closed in the majority of the states.

ErosSTX Global Corp. is an Indian-American multinational media company that acquires, produces, and distributes films, television shows and digital content. It is the result of a merger between Indian film and entertainment studio Eros International plc, and the American mini-major film studio STX Entertainment.

--Thomas Baker, Dipika Lalwani
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