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JBF promoters pledge more equity with lenders as shares slump
August 11, 2017 / 7:15 AM / in 3 months

JBF promoters pledge more equity with lenders as shares slump

MUMBAI, Aug 11 (Reuters) - India’s JBF Industries said its promoters, the Arya family, have pledged almost all their equity in the company to its lenders, in a sign of growing unease around the embattled polyester maker’s financial situation.

JBF said in a securities filing late on Thursday that Chinar Arya Mittal and Cheerag Bhagirath Arya, who together own 4.49 percent, have pledged their direct holdings to IDBI Bank and ECL Finance Ltd, respectively, as collateral for loans taken by the company.

The move comes after the company’s shares more than halved in value over the last three weeks on growing concerns over JBF’s finances.

The promoters have now pledged 99.75 percent of their equity to lenders, up from 85.98 percent as of end-June. They directly and indirectly control 35.35 million shares, or 43.2 percent in JBF. The additional pledges were made over the last 10 days, the company disclosed.

In a statement earlier on Thursday, JBF said it was working with its lenders to resolve cash flow issues, following which the company’s shares staged a partial recovery.

Shares in the company, which is expected to announce results later on Friday, were up 5.9 percent in midday trade.

JBF also counts private equity giant KKR & Co as one of its major investors. KKR bought a 20 percent stake in the company back in 2015 and it also acquired convertible preference shares in a Singapore-registered subsidiary that controls all of JBF’s overseas holdings.

JBF RAK, the United Arab Emirates-based subsidiary of JBF, is currently in talks with banks to renegotiate about 2 billion dirhams ($544.6 million) of debt, banking sources told Reuters earlier this week.

“Restructuring talks with banks are ongoing and the outcome will be for the benefit of all stakeholders,” JBF RAK’s Chief Operating Officer Rohit Maindwal told Reuters by telephone on Thursday.

Maindwal said JBF RAK hopes to resume production of PET, or polyethylene terephthalate resin - a raw material widely used for making packaging materials such as bottles and containers, by next month. The company stopped PET production at its plant in the emirate of Ras Al Khaimah at the end of June after it experienced a shortage of working capital, he said. (Reporting by Euan Rocha and Promit Mukherjee; Editing by Vyas Mohan)

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