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JBF Petro admitted to NCLT after settlement talks with bidders collapse

Sundaresh Bhat, Partner and Leader
Business Restructuring
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07 February 2022

KKR Jupiter Investors backed JBF Petrochemicals this week was admitted for insolvency proceedings by Ahmedabad National Company Law Tribunal after an out-of-court resolution in the works since October 2017 collapsed.

The NCLT bench appointed BDO India backed Sundaresh Bhat as interim resolution professional, according the order issued on 1 February.

Since 2017, lenders had received separate offers from Reliance Industries, KKR, Edelweiss, Indian Oil Corporation, Dubai based Citax Energy and Assets Care and Reconstruction Enterprise (ACRE) - an asset reconstruction company backed by Ares SSG Capital.

Last year, lenders invited bids for $463.38 mn (Rs 3460 crore) debt and 51% equity. Negotiations with Citex Energy which offered $190 mn and ACRE which offered $160 mn, did not progress.

JBF Petrochemicals has set up a 1.25mn tonne per annum PTA plant in Mangalore, Karnataka at an estimated cost of $ 603.8mn. It is a backward integration project set up by JBF Industries in partnership with KKR to supply PTA to JBF Industries.

The plant started a trial run in March 2017, but the company defaulted in October that year after it failed to raise additional $90mn (Rs 672 crore) long term loans needed to operate the plant.

On December 12, 2017, lenders discussed an offer made by Reliance Industries Ltd (RIL) to take over the project under the then prevailing Strategic Debt Restructuring (SDR) scheme that allowed lenders to convert their debt into equity and subsequently sell their stake to an interested buyer. RIL offered to acquire 51% stake in the company, asked for a two-year moratorium on loans and extended repayment of 12 years, among other conditions.

However, on February 12, 2018, the Reserve Bank of India withdrew the SDR guideline directing banks to seek resolutions under the Insolvency and Bankruptcy Code.

In the meanwhile, on February 21, IDBI Bank informed member banks that RIL, which was given an exclusivity period until February 18, 2018 for making a binding bid, has sought additional time till March 27, 2018 to conclude the transaction.

But in mid-March that year KKR offered a settlement proposal wherein 100% of the principal dues would be settled if the interest component is waived off by lenders. On March 23, 2018 lenders agreed to implement KKR’s plan provided dues are paid by March 31,2018. Lenders did not receive any binding offer from RIL by March-end, according to the NCLT order.

Despite agreeing to KKR's offer, the financial creditor (IDBI Bank) recalled its entire debt while IDBI Trusteeship sent notice to invoke JBF Petro shares because of non-payment of dues.

At that time, the Edelweiss group entity and Indian Oil Corporation separately offered to acquire the project, but the talks did not progress after IDBI Bank sent a second notice to recall its entire debt. KKR submitted a binding term sheet on May 5, but very next week IDBI referred the account to NCLT for insolvency proceedings.

Source: economictimes.indiatimes.com/industry/indl-goods/svs/petrochem/jbf-petro-admitted-to-nclt-after-settlement-talks-with-bidders-collapse/articleshow/89348488.cms