Court Allows Debt Recast At JSPL’s Australian Coal Mining Unit

Jindal Steel & Power Ltd.’s plan to restructure debt at its Australian coal mining unit won approval from the local court.

Wollongong Coal Ltd.’s proposed scheme to recast external debt has been approved by the New South Wales Supreme Court, JSPL’s step-down subsidiary said in a press statement. The court ordered secured lenders to vote on the proposal on Jan. 30 before the second round of hearing scheduled on Feb. 11.

Of the total external debt of $380 million at JSPL’s Australian operations, about $370 million is being proposed to be restructured, according to a Morgan Stanley note. Jindal Steel & Power (Mauritius) has to make a bullet repayment of $153 million before March 2020 and the company is estimated to fall short of its cash flow to meet its obligation in second half of FY20, the brokerage said, adding that debt recast would make refinancing easier.

According to Amit Dixit, assistant vice president (research) at Edelweiss Securities, the restructuring exercise would not only improve the timing of cash flow but may also lead to lower interest costs, assuming that the company would have borrowed money externally to honour obligations.

JSPL bought 45 percent stake in Wollongong Coal—the operator of two underground mines with total reserves of more than 125 million tonnes— from Gujarat NRE Coking Coal Ltd. in 2014. It went on to increase its holding to the current 82 percent. But all mining activities were suspended following prohibition notices from the natural resources and mining regulators over pending health and safety risk assessment.

The company said it put in place adequate control measures, but in the earnings call for the quarter ended September said that it has consciously shut down the mine because of expenses involved. It formally started the debt restructuring process in November when it began negotiations with creditors, according to its statement.