India's Eros group says it is taking action to resolve loan payment delays (updated)

Eros International Media

10/06/2019 13:42

* Eros shares under pressure after rating cut, due to
payment
delays
    * CEO says co has already taken steps to remedy the delays
    * Short-seller report puts further pressure on company share
price
    * Co announces plan to buy back up to $20 mln of NY-listed
shares
    * Some employee salaries, other dues also delayed
recently-sources

 (Adds details from sources, detail on buyback & share price
move)
    By Shilpa Jamkhandikar and Euan Rocha
    MUMBAI, June 10 (Reuters) - Indian film and entertainment
group Eros International  EROS.N  has taken steps to resolve
delays in loan payments, Chief Executive Kishore Lulla said, as
he also dismissed a short seller's allegations of accounting
irregularities at the group.
    The company's New York-listed shares plunged more than 55%
last week, and those of its Indian subsidiary Eros International
Media Ltd  EROS.NS  sunk more than 30%, after an Indian rating
agency categorized debt of Eros's Indian subsidiary at "default"
levels due to delays in loan payments.  urn:newsml:reuters.com:*:nL2N23E054 
    "All the steps have been taken to rectify the issues (around
delayed loan payments)," Lulla said in a telephone interview on
Sunday, adding the company has no big bond payments either that
come due in the short term.    
    CARE Ratings said last Wednesday that it had cut its rating
"on account of ongoing delays/default in debt servicing due to
slowdown in collection from debtors, leading to cash flow
issues." 
    Eros is a film production and distribution company, which
owns a vast library of Bollywood movies and music and runs its
own video streaming service. 
    Its shares plunged despite assurances from the company that
it was working to sort out the delayed payments. Even as it
sought to calm investor concerns, Hindenburg Research - a
short-seller, published a note https://hindenburgresearch.com/eros-international-on-the-ground-research-employee-interviews-and-private-company-documents-expose-egregious-accounting-irregularities
 on Friday, alleging potential accounting irregularities at the
company.
    Lulla dismissed the allegations in the report and noted that
this wasn't the first time the company was being targeted by a
short-seller.
    "I don't understand what shorts are trying to achieve here.
It is just trying to create a smoke-screen. There is nothing in
the report that we should be worried about," Lulla said. 
    Eros on Monday announced https://www.businesswire.com/news/home/20190609005028/en/Eros-International-Plc-Announces-Share-Repurchase-Program
 its board had approved an up to $20 million buyback of shares
of its New York-listed entity, as it sees its stock as
"seriously undervalued". 
    The move failed to calm Indian investors though, and shares
in the local subsidiary fell a further 10 percent in trading on
Monday. 
    
    DELAYED PAYMENTS
    Despite Eros's assurances, several Eros employees and
industry insiders, who asked not to be named, told Reuters they
were concerned about the situation.
    Two Eros employees told Reuters that the company has been a
few days late in paying some employee salaries over the last two
months. Those two sources and three other industry sources, also
said Eros had not made payments due to makers of some movies and
shows. 
    In an emailed response to questions from Reuters, Eros said,
"The company has paid all salary dues up to May 2019." 
    Eros also said its various shows "are at different stages of
production and the company pays for these as per the production
and delivery milestones."
    Lulla told Reuters that Eros was also working to boost
revenue and explore different forms of capital raising. 
    Lulla noted Eros recently struck a deal with Apple  APPL.O 
for Eros's content to be included on the U.S. company's upcoming
Apple TV+ offering. He said this would boost revenue, along with
fees it earns from licensing titles to Amazon.com  AMZN.O  and
others.
    He said Eros had retained Barclays and Citibank to explore a
debt offering secured against its library of thousands of films.
    "We have completed that exercise and at the appropriate time
we will complete the transaction," Lulla said, adding that Eros
could use these funds to refinance debt that comes due in the
next two years. 

 (Reporting by Shilpa Jamkhandikar and Euan Rocha in Mumbai;
Editing by Susan Fenton)
 ((euan.rocha@tr.com; +91 22 6180 7257; Reuters Messaging:
euan.rocha.reuters.com@reuters.net))