Jindal Steel & Power Ltd (JSPL) has hired an India-based distressed asset advisory firm for the possible restructuring of loans worth $550 million and to consider sale of the cash-positive assets, said a person privy to the development.
Jindal Steel & Power (Mauritius) Limited has defaulted on the interest and part principal payment (first of the three installments) of the $150 million unsecured loan that was due in April 2016, and another larger payment of $400 million debt is coming up in the next year. Both the facilities would be taken up for a recast.
The company has hired Capital Optima, which will work with Singapore-based Avista that is hired by a consortium of 18 banks to evaluate the recast of loans. All the lenders and the management would be meeting in London next month to consider options including refinancing, recast and monetisation of cash-generating assets, the person cited above said on the condition of anonymity.
The banks with large exposure include Deutsche Bank with an exposure of $55 million to the $400 million debt. Other banks with exposure to the both foreign currency syndicated loans include Credit Agricole ($50 million), ANZ ($60 million), Standard Chartered ($60 million), and National Australia Bank ($30 million), Axis Bank Hong Kong ($20 million), BNP Paribas, Barclays, Bank of Tokyo-Mitsubishi UFJ and First Gulf, the person said.
Email queries sent to the company and Capital Optima did not elicit any response.
As per its earnings report on May 2016, the company's net debt is about Rs 46,000 crore. On a standalone basis, it is nine to 10 times the net debt to EBITDA by end of March 2016 and the company targets to bring down to about six times. The company plans to bring down the debt level to Rs 25,000 crore to Rs 30,000 crore by 2019-2020 with a debt to equity ratio of 1.6 to 1.7, Ravi Uppal , MD and Group CEO, JSPL, told The Economic Times in an interview in May.
The operational cash flows of the company had deteriorated sharply in the last quarter which coupled with high debt servicing obligations made it highly dependent on debt refinancing and monetisation of some assets, according to a March 2016 ICRA report. With the challenging environment for steel sector, refinancing has become difficult whereas asset monetisation has also witnessed slow progress, it added.
In the lenders meeting, the company would also discuss partial or full divestiture of non-core assets in Australia, Botswana and Oman, he said. A large amount of the money has been infused as a downstream investment in various geographies. The Oman plant, which is a rebar mill, was commissioned in the third week of March, said the report citing Uppal.
In February 2016, its India debt ratings were cut to junk status, even as two large fund houses—Franklin Templeton MF and ICICI Prudential MF that have exposure worth Rs 2,600 crore to the group—have been facing investors’ ire.
Debt reduction
In May 2016, Sajjan Jindal-led JSW Energy Ltd agreed to acquire a 1,000-megawatt thermal power plant in Chhattisgarh from Jindal Steel & Power Ltd, controlled by his brother Naveen Jindal, for up to Rs 6,500 crore ($975 million) including debt. JSW Energy will also pay Rs 500 crore to JSPL as an interest-bearing advance.
JSPL's consolidated net debt of Rs 46,000 crore is almost six times its current market value at the end of August 2016 compared with Rs 15,600 crore in 2011-12. Its interest payment has increased from Rs 682 crore to Rs 2670 crore in the last five years.
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