India's Haldia Petchem may be forced to shut operations by end-Oct

02 October 2012 09:20  [Source: ICIS news]

KOLKATA (ICIS)--India’s Haldia Petrochemicals Ltd (HPL) may be forced to suspend operations at its West Bengal production site before the end of the month as commercial banks refused to loan out $200m (€156m) in additional working capital to the cash-strapped firm, company officials said on Tuesday.

The company operates a 670,000 tonne/year cracker; a 370,000 tonne/year high density polyethylene (HDPE)/linear low density PE (LLDPE) swing plant and a stand-alone 330,000 tonne/year HDPE facility, and; a 340,000 tonne/year polypropylene plant at Haldia in eastern India.

A consortium of four creditors led by IDBI Bank is insisting on a debt-for-equity swap arrangement under an approved restructuring plan for HPL, before approving new loans to the company. The other creditors comprising the consortium are ICICI Bank, State Bank of India (SBI), Allahabad Bank and Union Bank of India (UBI).

“We are aware of the demand of the banks. Some loans have been converted into equity to banks,” said Partha Chatterjee, the West Bengal minister of industries and concurrent chairman of HPL.

“We are in discussion on the next step. Our focus was to get out of bankruptcy,” Chatterjee said.

The West Bengal government is the second biggest shareholder of HPL with a 43.29% stake, after The Chatterjee Group, which has a 44.21% stake in the company. Agreeing to the debt-to-equity deal would mean a dilution of interests for all the existing shareholders of the petrochemical firm.

Under its creditor-approved corporate debt restructuring (CDR), HPL will have to convert $24m worth of debts into equity at face value, which will give the consortium of banks an 8% stake in the petrochemical firm. The company has about $700m in outstanding debt.

“IDBI Bank had issued a notice to HPL in August demanding conversion of $11m debt extended to the company to equity at face value by September 25 which was not complied [with],” said another company official who declined to be named.

“The West Bengal government, which has majority stake in HPL, has not conceded to the demand, prompting the banks to turn off the working capital tap,” the official said.

HPL had initially planned to get some cash flow through hiring out spare naphtha cracking capacity for contract manufacture of polymers, but there were no takers, leaving the company with no other option but to shut down operations before October ends, the company official said.

The company, which is currently running its petrochemical complex at 40% of capacity, is not generating sufficient funds to cover fixed costs of production, the official said.

HPL creditors would welcome an entry of a strategic investor into the financially troubled company but none was forthcoming, according to the official.

Among the minority shareholders of HPL are Indian Oil Corp (IOC), which has a 9.62% and the Tata Group, which holds the remaining 2.88%.

($1 = €0.78)

By: Ajoy K Das
+65 6780 4359

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