China’s Wanhua takes 38% stake in Hungary's BorsodChem

30 June 2010 11:05  [Source: ICIS news]

BorsodChem headquartersPRAGUE (ICIS news)--China's Wanhua Industrial Group has become a 38% shareholder in Hungarian isocyanates and polyvinyl chloride (PVC) producer BorsodChem following the approval of the latter firm's financial restructuring by its senior and mezzanine lenders, the two companies said on Wednesday.

As well as the stake, Wanhua, the largest isocyantes producer in Asia, acquired a call option to purchase the remaining shares in the company within the next two years, they added.

The stake and call option were provided partly in return for a €140m ($171m) investment from Wanhua, which BorsodChem would put towards the completion of a 200,000 tonne/year toluene di-isocyanate (TDI) plant and a nitric acid facility at its main site at Kazincbarcika, Hungary, as well as using it for general corporate purposes, the companies said.

Wanhua gained a seat at the negotiating table on the future of indebted BorsodChem after anonymously buying up large chunks of its outstanding loans portfolio through an investment bank just under a year ago.

“The management is pleased that the lenders have signed off the consensual agreement," said Wolfgang Buchele, chairman and CEO of BorsodChem. "With this, jobs continue to be safe at BorsodChem and the company is now ready to restart the TDI and nitric acid investments, which are expected to significantly further improve the profitability of the company.”

Jason Ding, CEO of Wanhua Industrial Group, said: “By the lenders’ approval, Wanhua has now officially become a shareholder in BorsodChem. We strongly believe that we have achieved a win-win solution for all stakeholders.

“We are glad that we have a call option which allows Wanhua to obtain full control of the company... We believe that Wanhua jointly with BorsodChem can become a dominant player in the global isocyanates industry. We will continue to grow the business locally relying on the expertise of the current management and Vienna Capital Partners (VCP).”

VCP, the junior partner to UK-based private equity group Permira in the 2006 leveraged buyout of BorsodChem, had been invited to remain as a shareholder, added Ding.

Permira has backed the deal with Wanhua. “On the back of the investments by the Permira Funds and VCP done over the last three years, BorsodChem remains uniquely positioned to become one of the leading isocyanate producers in Europe,” said Christian Neuss, a partner at Permira.

The consensual financial restructuring scheme for BorsodChem was agreed upon by First Chemical (Luxembourg) (FCL), a company controlled by the Permira Funds, VCP and Wanhua.

BorsodChem last year had to secure waivers from lenders to avoid breaching banking covenants on the €1.15bn buy-out loan used by Permira and VCP to buy the specialty chemicals player in a €1.6bn deal.

($1 = €0.82)

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By: Will Conroy
+44 20 8652 3214



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