KKR Takes Control of PTA Plant Under Construction for JBF in India

The JBF Group has entered into an arrangement with private equity firm KKR, an existing financial investor with 20% stake in the company, for restructuring of the equity holding and management structure of JBF Global Pte Limited (Singapore), a subsidiary of JBF Industries Ltd. Until now, JBF Global Pte Limited held 100% of JBF Petrochemicals Ltd., under which the Mangalore purified terephthalic acid (PTA) plant is established, and JBF RAK LLC.

As per the new arrangement, KKR will hold 51% economic interest whereas JBF Industries Ltd. will have 49% economic interest, in the PTA business. KKR will also arrange for last mile funding to complete the PTA plant, which is expected to take another 4-5 months. This arrangement will effectively reduce around US$500-mn of debt, on a consolidated basis, and enable the PTA business to produce a sizeable EBITDA in the first full year of operations.

The arrangement is, however, subject to approval of the lenders to JBF Petrochemicals.

In addition, JBF Industries has entered into discussions with its consortium of lenders for a restructuring of its debt of around Rs. 2,600-crore. The restructuring process is expected to be completed by August 2018. The above measures are aimed at deleveraging its balance sheet, which is currently burdened with a consolidated debt of about Rs. 11,000-crore.

JBF has spent about US$750-mn for its Mangalore PTA plant with a capacity of 1.25-mtpa. KKR had invested US$150-160-mn (about Rs. 490-crore) in December 2015 at Rs. 300 per share, to support the completion of the plant. In addition, JBF had raised external commercial borrowings (ECBs) of US$464-mn. However, commissioning of the plant has delayed due to financial constraints.