Singapore's Jurong Aromatics said in debt talks after oil plunge

[SINGAPORE] Jurong Aromatics Corp, operator of one of the world's largest petrochemical plants, can't service its interest payments and is negotiating a debt restructuring with bankers amid a plunge in oil prices, people familiar said.

Operations at the US$2.4 billion plant have been stalled since December as the Singapore-based group remains locked in talks with lenders including BNP Paribas SA and Standard Chartered Plc, as well as suppliers Glencore Plc, BP Plc and SK Energy Co, the people said, asking not to be identified because the details are private. Production began in September last year, according to Jurong Aromatics's website, and the plant was targeting to produce 1.5 million tonnes of aromatics and 2.5 million tonnes of transportation fuels per annum.

Singapore's national plan to leverage upon its geographical position and become a regional refining hub has been dented by the recent falls in commodity prices. From the establishment in 2001 of tax breaks for trading companies to the hollowing of part of the island to store oil, the country has worked to become one of the world's biggest energy hubs.

A Singapore-based spokeswoman for Jurong Aromatics, who asked not to be identified, said company officials weren't immediately able to comment.

Jurong Aromatics had US$1.53 billion in liabilities and US$68.7 million of accumulated losses as at the end of 2013, according to the company's latest available financial records. BP, Glencore, SK Energy have secured claims against the firm, while BNP Paribas led a US$1.73 billion loan facility in 2011 that has yet to be repaid, the records show.

Jurong Aromatics ran out of working capital in December, the people familiar with the matter said. With interest payments delayed and a grace period coming to an end, some lenders have threatened to tip the company into receivership, they said. Shareholders and suppliers, however, are trying to extend the grace period while an agreement is negotiated, the people said.

The need for fresh capital has prompted BP, SK Energy and Glencore - which combined are owed about US$500 million - to suggest converting some debt into equity, some of the people said. That would dilute current shareholders and result in the trio holding a 75 per cent stake themselves, the people said.

Jurong Aromatics is currently owned 30 per cent by SK International Investment, 25 per cent by China's Jiangsu Sanfanxiang Group Co and 10 per cent by Glencore. Other shareholders include Arovin Ltd, Shefford Investments Holding, UVM Investment Corp, EDB Investments Pte and Essar Ltd, company records filed with Singapore's Accounting and Corporate Regulatory Authority show. EDB Investments is a unit of Singapore's Economic Development Board.

Arovin and Shefford Investments, representing about 20 per cent of the company, are understood to have resisted that proposal and had earlier sought to reach an agreement with Dutch commodity trader Trafigura Beheer BV, other people said. Trafigura Beheer would then pay a fee to use the plant itself.

Economic Development Board Executive Director for energy and chemicals, Damian Chan, said because Jurong Aromatics isn't "integrated with other plants on Jurong Island, the impact to the rest of the energy and chemicals cluster is expected to be limited." "Nevertheless, in view of the people employed and the assets invested, EDB continues to encourage and be facilitative of discussions among the stakeholders to start up Jurong Aromatics's operations," Mr Chan said. "Singapore has developed an extensive chemicals portfolio, of which aromatics is one of them. Unfortunately the aromatics market is currently in a down cycle and aromatics producers are finding it more difficult to deliver returns." Spokespeople for BNP Paribas, BP and Glencore declined to comment. E-mails and telephone calls to media relations officers at SK Energy parent SK Innovation Co and Standard Chartered went unanswered.

BLOOMBERG