1. Lenders threaten to invoke Jindal Steel and Power guarantees over payment crisis

Lenders threaten to invoke Jindal Steel and Power guarantees over payment crisis

Else bring additional collateral, they say

By: | Mumbai | Published: July 21, 2016 6:25 AM
JSPL shareholders on Monday approved the sale of a 1,000 MW power plant in Raigarh, Chhattisgarh, for Rs 6,500 crore to JSW Energy. JSPL shareholders on Monday approved the sale of a 1,000 MW power plant in Raigarh, Chhattisgarh, for Rs 6,500 crore to JSW Energy.

Foreign lenders to a Mauritius entity of Jindal Steel and Power (JSPL) are believed to have indicated to the steelmaker that they may be compelled to invoke corporate guarantees given by it unless it comes up with additional collateral, senior bankers told FE.

The lenders are understood have asked for the shares of Jindal Power to be “charged in favour” of all lenders — onshore and offshore — pari passu as these are unencumbered.

Bankers said such a move was being considered after JSPL intimated to them at a meeting earlier this month that it may not be able to pay the next instalment of interest due next month.

JSPL’s arm in Mauritius owes lenders an estimated $550 million. The meeting is understood to have been attended by several of JSPL’s lenders including Standard Chartered Bank, Deutsche Bank and ICICI Bank.

“JSPL indicated it may not be in a position to pay the next instalment as its cash flows were under pressure. The company also indicated it would find it hard to meet some operational expenses,” a senior banker, who did not wish to be named, told FE. He added lenders believe invoking the guarantee could be a way out.

A detailed questionnaire emailed to JSPL by FE remained unanswered till the time of going to press.

In April, JSPL had sought a recast of the debt with a revision in the interest rate and an extension of the tenure.

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Subsequently, lenders appointed Singapore-based Avista Advisory to evaluate the company’s proposal. They also asked JSPL to pledge with them the shares of its Oman subsidiary Shadeed Iron and Steel, which had been acquired for $500 million in 2010.

However, JSPL is understood to have told lenders that would not be possible due to some legal complications.
Later, however, Avista informed lenders these shares were pledged elsewhere, in lieu of a loan. “We learnt recently Shadeed’s shares have been pledged elsewhere and we are consulting with our lawyers,” a banker said.

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.

Meanwhile, JSPL shareholders on Monday approved the sale of a 1,000 MW power plant in Raigarh, Chhattisgarh, for Rs 6,500 crore to JSW Energy.

The proceeds will be used to repay debt. 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.

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