Lenders to Jindal Steel and Power (JSPL) are likely to refinance project loans to the steel maker’s loss-making subsidiaries Wollongong Coal mine (Australia) and Angul steel plant, sources told FE.
They added the refinancing would be done in line with the 5/25 scheme outlined by Reserve Bank of India (RBI), which essentially eases the repayment schedule for the borrower. How much debt will be refinanced is not clear but JSPL’s gross debt stood at Rs 45,500 crore at the end of March 2015, up 25% over March 2014.
Crisil Ratings downgraded (JSPL) to below investment grade after the firm reported a consolidated net loss of Rs 573 crore for the three months to December.
According to two people familiar with the development, lenders have already approved a refinancing for Jindal Power’s (JPL) loans of Rs 3,319 crore as per the 5/25 guidelines. Further, they are looking to reschedule repayments for two JSPL’s subsidiaries. In doing so banks must ensure the net present value of the asset is protected.
An email sent to the company seeking comments remained unanswered.
Lenders to JSPL include State Bank of India, Punjab National Bank, ICICI Bank, IDBI Bank, Axis Bank, HDFC Bank and Canara Bank.
JSPL, promoted by Naveen Jindal, owns an 82.04% stake in Wollongong Coal that runs two underground coking coal mines with estimated reserves of 125 million tonnes (mt) and 652 mt under Joint Ore Reserves Committee classifications.
In FY15, Wollongong Coal incurred a loss of Rs 761.8 crore on the back of Rs 46.31 crore in revenue. In September last year, JSPL had decided to shut down one of the mines citing significant financial loses and operational difficulties.
Meanwhile, JSPL Angul — a wholly-owned subsidiary — operates a 1.5 million tonnes per annum (mtpa) steel melting shop, a 1.2 mtpa plate mill and an 810 MW captive power plant. It reported a net loss of Rs 1 lakh in FY15, according to JSPL’s annual report.
Since December 2014, the RBI has allowed banks to refinance existing infrastructure projects under the 5/25 model provided the projects have commenced commercial operations. The central bank said in a notification: “Banks may fix a fresh loan amortisation schedule for the existing project loans once during the lifetime of the project, after the date of commencement of commercial operations without this being treated as restructuring.”