Lenders to Jindal Steel and Power’s (JSPL) Mauritius subsidiary are weighing their options after the company missed an interest payment of close to $5 million due early August. According to senior bankers, lenders may choose to invoke corporate guarantees. The subsidiary has borrowed close to $550 million from a consortium of 18 foreign lenders, including Standard Chartered, Barclays and Deutsche Bank.
Senior bankers told FE JSPL had already indicated to them in July its subsidiary might skip interest payments on the loan for the April-June quarter due to stressed cash flows.
Responding to an emailed query from FE on the missed interest payment, a spokesperson for JSPL wrote: “As already advised JSPL continues to work on various initiatives including re-scheduling payments, re-financing, debt reduction and appropriate monetisation plans to further strengthen our balance sheets.
We are working towards efficient capacity utilisation and enhancing operational efficiencies of our world class productive assets and are confident of emerging financially stronger in FY17. It is pertinent to note that JSPL Financials were adversely impacted due to enhanced finance cost incurred due to additional borrowings, to pay the additional coal levy of over R3,300 crore, arising out of the cancellation of coal blocks by the Hon’ble Supreme Court of India.”
FE had reported on the negotiations between JSPL and its foreign lenders on July 21 to restructure the debt. The banks are understood to have sought additional guarantees — in particular they had asked that shares of JSPL’s Oman subsidiary Shadeed Iron and Steel be pledged with them. However, JSPL is understood to have told lenders at the time this would not be possible due to some legal complications.
Banks told FE they learnt later from Avista Advisory — an independent investment banking advisory company — that these shares had been pledged elsewhere, in lieu of a loan. JSPL is understood to have assured lenders there was no intent to deprive lenders of their rights and that the pledge which had been created was an “imperfect” one with no legal binding. The $550 million worth of loans had been disbursed in two tranches in 2011 and 2012, lenders said.
In April lenders had appointed Avista Advisory to evaluate a recast of the loans that included a revised pricing and an extended tenure. “The promoters had then indicated to lenders they were willing to provide additional security in the form of shares in some overseas arms,” a senior banker who did not wish to be named told FE.
JSPL’s consolidated gross debt stood at R46,816 crore at the end of March 2016. The firm reported a loss of R1,902 crore in 2015-16 on top of a loss of R1,278 crore in 2014-15. Revenues in 2015-16 fell 8% to R18,104.9 crore while interest expenses were R3,280 crore