Gail's Rs 2101 crore for insolvent JBF approved by NCLT

15 Mar 2023 , 07:29 AM

NCLT has approved Gail Ltd’s resolution plan of Rs 2101 crore for JBF Petrochemicals, in a rare instance of a government-owned firm acquiring a company under the Insolvency and Bankruptcy Code.

A 41% recovery for financial creditors will result from the sale of JBF Petrochemicals. Sundaresh Bhat, a resolution specialist supported by BDO India, acknowledged Rs5628 worth of financial and operational creditors’ claims.

Gail has countered the creditors’ total demand of Rs 4915 crore with an offer of Rs 2015.4 crore in secured debt and Rs14.4 crore in unsecured debt.

Under the Insolvency and Bankruptcy Code, this would be the third acquisition made by a government-owned organization. Jhabua Power, a business belonging to the Avantha group, was previously bought by NTPC, while Indian Oil Corporation most recently won the bidding war for Mercator Petroleum Ltd.

When approving the resolution plan, the Mumbai bench of the National Company Law Tribunal (NCLT) under the leadership of judicial member Dr. Madan B. Gosavi and technical member Ajai Das Mehrotra made note that the successful resolution applicant (GAIL) must contact the relevant statutory authority for those concessions and those rights.

According to the ruling, JBF Petrochemicals’ fair value and liquidation value are each estimated to be worth Rs1616.6 crore and Rs2719 crore, respectively.

Seven lenders had expressed interest, including Reliance Industries, Jindal Power, MPCI, the IOC-ONGC consortium, and Gail, according to those with knowledge of the situation.

Ajai Das Mehrotra and Madan Gosavi’s decision said that just three companies—the IOC-ONGC consortium, MPCI, and Gail—finally provided a resolution plan on August 30, 2022.

Following the failure of an out-of-court work resolution in October 2017, JBF Petrochemicals was approved for corporate resolution by the Ahmedabad NCLT in February of last year. Citex Energy, a company based in Dubai, and Assets Care and Reconstruction Enterprise (ACRE), an ARC supported by Ares SSG Capital, had each made offers of USD 190 million and USD 160 million. But, disagreements over the bidders’ offers prevented the negotiations from moving forward.

At Mangalore, Karnataka, JBF Petrochemicals installed a 1.25 million tonne per year PTA plant at an estimated cost of $ 603.8 million. In order to deliver PTA to JBF Industries, KKR and JBF Industries have formed a backward integration initiative. Last year, CFM Asset Reconstruction Corporation bought the whole debt owed by all banks, totaling Rs825 crore.

The facility began operating as a test in March 2017, but the company went into default in October of that same year because it was unable to get the additional $90 million (Rs672 crore) in long-term financing required to keep the plant running.

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