SPIC could be cornered to sell assets

08-Feb-08

AC Muthiah-controlled Southern Petrochemical Industries Corporation's (SPIC) had planned to set up a purified terephthalic acid (PTA) and polyester filament yarn (PFY) facility at Manali in Chennai. When the Madras High Court passed an injunction in October 1997, funds worth Rs 946 crore were locked up in the project. Of this, SPIC's contribution was Rs 252 crore. At that stage, the PFY plant was more than 80% complete, or about 12 months from going on stream. The PTA plant had progressed to the extent of 11% and was nearly two years away from completion. Now SPIC's problems seem to continue. After entering CDR and shutting down production, the Asset Reconstruction Company of India (ARCIL) is to start debt-aggregation process, which could possibly mean sale of assets as well. ARCIL has mandated YES Bank to start the debt aggregation process. SPIC has 37 lenders and total debt is in excess of Rs 2800 crore. Under the SARFAESI Act, the lender needs 75% of the debt to proceed towards the sale of assets without going through the DRT route. Assuming that ARCIL may not sell the assets, it arms the re-construction company to negotiate better with the Spic management for a possible bail-out package.