On Tuesday, shares of construction firm Hindustan Construction Company (HCC) went up by 20 per cent after the company took out part of its debt and arbitration claims to a special purpose vehicle (SPV). In this, it would hold a 49 per cent stake.

The company has assigned nearly Rs 2,854 crore of bank debt, along with economic interest in arbitration awards and claims of Rs 6,508 crore, to its wholly owned subsidiary Prolific Resolution Private, a

After the news, HCC shares closed at Rs 14.66 a share, up 20 per cent. According to the debt resolution plan, the SPV would include an external investor Jadeja Investment Management Private. It would be controlling 51 per cent stake, and HCC would hold the rest of the shares in the SPV.

Reportedly, the SPV debt is significantly over-collateralised and is expected to be fully serviced from its own receivables. The underlying arbitration awards would also carry interest income, which comfortably covers any accrued interest on SPV debt.

Upon repayment of SPV liabilities, HCC will have the right to receive surplus cash flows as a separate transaction from the realisation of awards and claims (expected to be of significant value).