JBF Petro lenders get two offers for $463.38 million of outstanding loans

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Lenders led by IDBI Bank received offers from Asset Care & Reconstruction Enterprise and Dubai-based trading company Citax Energy for loan facilities to distressed JBF Petrochemicals, two people with knowledge of the matter said.

KKR-backed JBF Petrochemicals’ lenders received a $160 million offer from Ares SSG Capital-backed ACRE, while Citax Energy offered $190 million, one person said. Both offers are indicative and a decision on firm bids will be taken only after due diligence, the people said.

ACRE’s offer equates to 35 paise on the rupee, while Citax’s bid equates to 41 paise.

BoB Capital Markets, the process advisor appointed by the lenders, had invited expressions of interest for $463.38 million of outstanding loans to JBF Petrochemicals in mid-July. The deadline for submitting bids was extended several times after potential applicants sought more time, the people said.

The lenders will hold a Swiss challenge auction if they get only one binding offer. They may hold an open auction if they receive more than one offer, the first person said. The last date for binding offers and any subsequent auction will be announced soon, the person said.

Citax attempt

Although Citax Energy’s indicative offer is higher than ACRE’s bid, the lenders are not confident if the company is serious, the first person said.

A year ago, Citax, which is backed by an Indian promoter, made an unsolicited and conditional offer of 50 paise on the rupee for JBF Petrochemicals’ loans but did not follow it up with a firm offer even after repeated reminders, the second person said.

Citax’s offer made a year ago had stipulated that the lenders should sell the loan without holding a Swiss challenge auction and must sell the 51 percent stake pledged to them.

The Citax Group had offered in December 2019 to infuse $500 million in Yes Bank, which was in need of capital to stay afloat at the time. However, promoter Bhagwan Gawai failed to honour the bid for the Rana Kapoor-promoted bank, resulting in the regulator superseding the board of the bank in March 2020.

Citax Ventures said on its website that it aims to “invest in stressed assets that have the potential to turnaround and create handsome gains for our investors.”

ACRE and Citax did not immediately respond to emails seeking comment on the matter.

Troubled lenders

The loans by IDBI Bank and Bank of Baroda were made to JBF Petrochemicals through external commercial borrowings of $251.53 million and $55.77 million, respectively, as of 30 September 2020, according to the sale document on the BoBCaps website. Exim Bank has $66.82 million in foreign currency term loans to the company.

Indian Overseas Bank and Union Bank of India had onshore loan facilities equivalent to $55.77 million and $33.49 million, respectively. Both banks had converted their ECB loans into rupee-denominated loans following approval from the Reserve Bank of India, according to the offer for sale document.

JBF Petrochemicals, promoted by Bhagirath C Arya, is a subsidiary of JBF Industries Ltd. and was incorporated to set up a 1.25 million tonne per annum PTA plant at Mangalore in Karnataka. It is a backward integration project set up by JBF Industries in partnership with US-based private equity fund KKR to supply PTA to JBF Industries, a raw material needed to make polyester chips and yarn.

After JBF Petrochemicals missed loan payments due to construction delays, the lenders invoked the shares pledged to them and acquired a 51 percent stake in the company in June 2018.

In August 2018, KKR offered to settle the loans of JBF Petrochemicals provided the lenders quenched a corporate guarantee provided by JBF Industries. However, KKR’s proposal lapsed because it was not unanimously approved by all lenders.

In May this year, CFM Asset Reconstruction acquired Rs 2,515 crore of JBF Industries’ principal loans for Rs 825 crore under a Swiss Challenge auction. The offer equated to 33 paise on the rupee.

CFM issued a demand notice to JBF Industries for the recovery of outstanding dues under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, according to a stock exchange notice on 9 September.