CDR cell admits JSL's debt restructuring proposal

Stainless steel major JSL Ltd’s application for restructuring Rs 6,500 crore of debt was admitted in the Corporate Debt Restructuring (CDR) cell, at a lenders’ meet on August 11, the company informed the stock exchanges today after the lenders cleared the minutes of the meeting.

The Ratan Jindal-controlled company had approached the CDR cell after it posted losses of Rs 580 crore in the year ended March 2009, due to inventory and foreign exchange losses. JSL had taken a debt of Rs 4,500 crore for Phase-II of the Rs 6,000-crore Orissa integrated stainless steel project, which has now been deferred by two years.

Besides, JSL had old loans of around Rs 2,000 crore in existing operations. Arvind Parekh, director, business development, JSL, said that because of losses last year, there’s a liquidity mismatch.

“The problem has been precipitated, as we were doing Phase-II of our Orissa project, which needs internal accruals of Rs 1,500 crore.”

In other words, the company needs Rs 1,500 crore of equity to complete the project. Besides, it has to repay Rs 1,780 crore of old loans in the next three years. As a result, the repayments were getting bunched, and hence the company went for a debt recast.

“As on June 30, the cut-off date, we have not defaulted. It is voluntary (debt recast), as we foresee a mismatch in cash flows and debt repayments. It is more of a liquidity issue than a solvency issue,” said Parekh.

Next, the scheme proposed by the company will be circulated amongst the lenders, led by the State Bank of India, for their approval.

Simultaneously, JSL is also trying to raise $150 million (around Rs 750 crore) in equity. With improvement in profits — JSL reported an Ebitda (earnings before interest, taxes, depreciation and amortisation) of nearly Rs 211 crore — the company hopes its cash flows will get aligned with its repayments in two to three quarters.

JSL, part of the Delhi-based O P Jindal Group, makes stainless steel at its mother plant in Hisar, with a capacity of 720,000 tonnes per annum. The company has undertaken a two-phase expansion to set up an integrated stainless steel facility in Orissa, which will have a capacity of 800,000 tonnes per annum.

In the Rs 2,500-crore first phase, JSL has built a 250-Mw power plant, a 400,000-tonnes per annum coke oven plant and a 200,000-tonnes per annum ferro alloys plant, which largely goes for captive use.

Construction of the Rs 6,500-crore Phase-II has been deferred by 24 months and the project is being rejigged to include new equipment.