Private equity firm KKR will acquire the petrochemicals subsidiary of JBF Industries Ltd in a deal that will help the Mumbai-based polyester maker avoid bankruptcy.
JBF Industries said in a stock-exchange filing on Monday that KKR Jupiter Advisors, part of the PE firm’s credit arm, will buy 100% of JBF Petrochemicals Ltd as per a term sheet signed on 14 August.
The polyester company, in which KKR already holds a 20% stake, didn’t specify the overall deal value. But it said that, after the deal is completed by 30 September, it will no longer consolidate the unit’s debt of $464 million (Rs 3,022 crore) in its own accounts. Separately, JBF Petrochemicals will pay Rs 450 crore to its parent to settle inter-corporate deposits.
KKR had invested $150 million for a 20% stake in JBF Industries and to buy zero-coupon compulsorily convertible preference shares with 14.5% voting rights in its Singapore-based subsidiary JBF Global Pte Ltd, which fully owned JBF Petrochemicals.
KKR had invested in the Mumbai-listed company at Rs 290 a share. The company's shares have slumped since then, though they jumped 5% on Monday to close at Rs 39.10 apiece.
JBF Industries will use the funds raised through the latest transaction to partly repay its debt. It will keep some amount for working capital requirements. The company said the infusion of working capital will help bolster its operations to full capacity over the next two quarters and will improve profitability.
The deal is part of a debt restructuring scheme that JBF Industries had proposed to its lenders. JBF has total debt of about Rs 11,000 crore, according to media reports.
In fact, the company had in May agreed to keep a 49% stake in the petrochemical unit while selling 51% to KKR. At the time, the company had also said that the PE firm was to arrange last-mile funding to complete the unit’s Purified Terephthalic Acid (PTA) facility at Mangalore in Karnataka. The facility has a capacity of 1.2 million metric tonnes per annum.
Prime Securities Ltd and Valueline Advisors were the investment bankers to JBF Industries for this deal.
JBF Industries was founded in 1982 as a yarn texturing company and went public in 1986. It makes polyester products ranging from chips, yarn and films which are used in fast-moving consumer goods, textile and packaging industries.