Haldia to link up with GAIL by month-end

Haldia Petrochemicals Ltd was expected to seal its strategic alliance with gas major GAIL India Ltd by the end of this month, its chairman Tarun Das said in Kolkata.

Speaking at the sidelines of national council meeting of Confederation of Indian Industry Das said he was optimistic about the equity participation of GAIL in HPL.

"I am hopeful that issues pertaining to GAIL taking equity in HPL and debt restructuring will be sorted out soon. We have number of meetings with GAIL and IDBI and I am positive about the outcome," he said

"HPL's debt and equity restructuring would go hand in hand," he added.

GAIL has in principle agreed to invest Rs 200 crore (Rs 2 billion) in HPL subject to actual debt restructuring and favorable due diligence. The gas major has formed a core team to sort out the debt restructuring issue with IDBI.

Informed sources pointed out the critical issue before HPL was reduction of interest rate by lenders. HPL was looking at average interest rate below 10 per cent.

"The bargaining point is now reduction of rate of interest. All other issues pertaining to debt restructuring including moratorium, conversion of debt into equity and preference share, conversion of accrued term loan interest into long term debt are secondary," they added.

The consortium, led by IDBI, had set the deadline of November 30 to bring in Rs 500 crore  (Rs 5 billion) in HPL.

So far GAIL has approved a marketing and product swap deal with HPL which could result in over Rs 300 crore  (Rs 3 billion) gain for the latter over six year. The balance Rs 200 crore  (Rs 2 billion) had to be brought by March 2003.

HPL has approached couple of banks, including SBI Caps, for securitising the commercial deal.

The equity participation of GAIL would depend on the valuation to be offered by the gas major to HPL.

While promoters of HPL were expecting to issue fresh shares at par value of Rs 10, GAIL is yet to make an offer. HPL has accumulated loss of over Rs 500 crore (Rs 5 billion).

Sources close to the development claim that there are number of suitors for HPL. "Even if GAIL backs out, there are companies waiting in the wings," they added.

HPL is expecting EBDIT (earnings before depreciation, interest and tax) of Rs 500 crore  (Rs 5 billion) next financial year and it hopes to take care of the interest burden from internal accruals.