MOSCOW (MRC) -- JBF Group has entered into an arrangement with KKR, an existing financial investor with 20% stake in the company, for restructuring of the equity holding and management structure of JBF Global Pte Limited (Singapore), a subsidiary of JBF Industries Limited. Until now, JBF Global Pte Limited held 100% of JBF Petrochemicals Ltd (under which Mangalore purified terephthalic acid (PTA) plant is established) and JBF RAK LLC, as per Indiainfoline.
Following are the highlights of the new arrangement
KKR will hold 51% economic interest whereas JBF Industries Limited will have 49% economic interest, in the PTA business.
KKR will arrange for last mile funding to complete the PTA plant, expected to be completed in 4-5 months’ time.
This arrangement will effectively reduce around USD500mn of debt, on a consolidated basis.
The PTA business is expected to produce a sizeable EBITDA in the first full year of operations.
The above is subject to approval of the lenders to JBF Petrochemicals.
In addition, JBF Industries has entered into discussions with its consortium of lenders for a restructuring of its debt of around Rs2,600cr.
The restructuring process is expected to be completed by August 2018.
The above measures are aimed at deleveraging its balance sheet which is currently burdened with a consolidated debt of ~Rs11,000cr.
JBF has spent over US$700-750mn for its Mangalore PTA plant with a capacity of 1.25 million metric tons. Private equity firm KKR had invested US$150-160mn (~Rs490cr) in December 2015 at Rs300per share, to support the completion of the plant. In addition, JBF had raised external commercial borrowings (ECBs) of USD464mn. However, recommissioning of the plant was delayed due to financial constraint. The plant was expected to produce US$85-90EBITDA/ton and likely to contribute Rs500-600cr to the consolidated EBITDA at 100% capacity utilization.
However, minority shareholders may have little to gain as the company has ceded control of the plant to KKR. Also, cash flows generated from the PTA plant will be used to pay off the debt. Nevertheless, if KKR is able to arrange for the funding and commission the PTA plant, it may lead to an up-move in the stock which can be used as an exit point by the investors.
MRC