ONGC, Gail in talks with JBF Lenders to buy the distressed company

Oil and gas explorer ONGC and natural gas transmission and marketing company GAIL India have separately initiated preliminary talks with lenders of KKR-backed JBF Petrochemicals to explore the possibility of acquiring the distressed company, which is on the block. 

The offers from the state-owned entities came within months of Assets Care & Reconstruction Enterprise (ACRE) and Dubai-based entity Citax Energy giving indicative offers to the lenders.

ACRE, an asset reconstruction company in which Ares SSG Capital holds a majority stake, has given a cash offer of $160 million (about Rs 1,188 crore) to lenders to acquire the company, while Citax has offered $190 million (Rs 1,411 crore), it is learnt. The state-owned companies have met lenders of JBF Petro and sought time to make a firm offer.

In July this year, BoB Capital Markets, the process advisor for lenders, invited potential bidders for lenders’ exposure of $463.38 million (Rs 3,444 crore) as of September 30, 2020. Although ACRE and Citax submitted expressions of interest, those were not followed by firm bids by either of them. ACRE had sought a 90-day exclusivity clause — implying lenders will not engage with any other bidder during that period. Lenders rejected this proposal.

Bhagirath Arya and family-promoted JBF Petro partnered with private equity firm KKR to set up a 1.25 million tonnes per annum PTA plant at Mangalore in Karnataka. A delay in the construction of the plant led to cost overrun, resulting in the delay in repayment of loans. The plant was not completed and has been shut since 2017. JBF Industries is the parent company of JBF Petro. In July, all lenders to JBF Industries, except for Tamilnad Mercantile Bank, sold their entire principal loan exposure of Rs 2,410 crore to CFM Asset Reconstruction Company at an unchallenged Swiss auction for Rs 825 crore. 

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