A group of foreign banks to which Jindal Steel and Power (JSPL) owes $550 million has appointed Singapore-based Avista Advisory to evaluate a recast of the loans as suggested by the company, senior bankers told FE. They added JSPL’s proposal to restructure the debt, submitted to banks in April, included a revised pricing and an extended tenure. The promoters have indicated to lenders they will provide additional security in the form of shares in some overseas arms.
“Several lenders have pushed for the appointment of the independent advisor who is expected to act as an intermediary between the banks and JSPL,” one source said.
A banker at one of the foreign lenders involved in the negotiations confirmed that banks are evaluating the recast proposal and have appointed Avista Advisory. “Such negotiations take time and all options need to be evaluated by us,” he added.
JSPL’s consolidated gross debt stood at Rs 43,806 crore at the end of March 2016. The firm reported a loss of Rs 1,902 crore in 2015-16, on the back of a loss of Rs 1,278 crore in 2014-15. Revenues in 2015-16 fell by 8 % to Rs 17,812 crore while interest expenses were Rs 3,280 crore.
The consortium in question has 18 banks and includes Standard Chartered, Barclays and Bank of America, among others. Domestic lenders to JSPL include State Bank of India, Punjab National Bank, ICICI Bank, IDBI Bank, Axis Bank, HDFC Bank and Canara Bank, among others.
A JSPL spokesperson said that as a company policy it does not respond to speculations. “However, given the global recession in the steel industry, JSPL Group is continually working with all its lenders to elongate the maturity profile of its debt,” the spokesperson said, adding that JSPL continues to evaluate various options to monetise assets and improve cash flows to be in a much stronger position to meet all its liabilities and emerge financially stronger in FY16-17.
An email query sent to Avista Advisory remained unanswered till the time of going to press.
Founded by former Tata Group executive Rajiv Kochhar, Avista has undertaken similar restructuring exercises in the past including restructuring of Suzlon Energy’s foreign currency convertible bonds in 2014. Led by Naveen Jindal as its chairman, JSPL is promoted by OPJ Trading (20.51%), Opelina Finance and Investment (9.82%), Virtuous Tradecorp (7.04%), Danta Enterprises (6.8%) and the Jindal family (2.03%), among others.
The banker said that the loans were given in two tranches of $150 million and $400 million around 2012-13 and needed to be repaid beginning 2016.
The Indian steel industry has been reeling under multi-year-low global prices and a sluggish demand environment, accompanied by the onslaught of Chinese imports. Analysts point out that CY15 was among the worst years for the Indian steel industry as both local and global problems converged resulting in most steelmakers reporting operating losses.
Meanwhile, in a attempt to bailout JSPL, the Sajjan Jindal-led JSW Energy last week said it will acquire JSPL’s 1,000MW power plant in Raigarh, Chhattisgarh, for Rs 6,500 crore if JSPL manages to secure 100% fuel supply for the plant and enters into long-term power purchase agreements. The deal is expected to be completed by June 30, 2018.
JSPL’s domestic lenders have also been looking to refinance project loans given to the steelmaker’s subsidiaries — Wollongong coal mine (Australia) and Angul steel plant — under the Reserve Bank of India’s 5/25 scheme.
The company holds an 82.04% stake in Wollongong Coal, comprising two underground coking coal mines, with 125 million tonnes JORC reserves (Australia’s professional code to reports mineral reserves) and 652 mt resources.