More problems rock JCT-Polysindo deal

NEW DELHI, April 12: JCT has walked out of its agreement with Polysindo for an independent valuation of its synthetic fibre division by KPMG...

NEW DELHI, April 12: JCT has walked out of its agreement with Polysindo for an independent valuation of its synthetic fibre division by KPMG Peat Marwick. This virtually seals the fate of what was billed as the biggest takeover deal in the Indian corporate history.

Confirming the decision to drop the independent valuation of the division, top JCT sources attributed it to the failure of Polysindo to bring in any money in the country since the deal was signed over six months ago coupled with differences between the two sides on the valuation of assets.

Sources said that JCT will not sell the synthetic fibre business for less than Rs 504 crore, the original valuation. However, Polysindo is not willing to shell out more than Rs 406 crore.

JCT has also been uncomfortable with the deal due to Polysindo8217;s reluctance to bring in Rs 100 crore in an Escrow account. The financial institutions and banks had advised JCT to bring in this money from Polysindo in an Escrow account to confirm Polysindo8217;s commitment tothe deal. Polysindo however, clarified its position stating that the company would bring in the money as soon as JCT received the no-objection-certificate NoC for the proposed takeover.

Even though the FIs were believed to be willing to issue the NoC, the consortium of banks decided otherwise. This decision on part of the banks followed the revision of the sell-out deal in which Polysindo reduced the liability it proposed to take with the banks by Rs 32 crore.

This amount along with Rs 18 crore, which was to go in JCT8217;s books as per the original deal, was adjusted to increase the amount of term loans, the Indonesia-based company was to take with the FIs, from Rs 126 crore to Rs 176 crore.

JCT sources further said that JCT has also been wary of the situation since Polysindo has been virtually running the former8217;s synthetics division from October last year without bringing in any money.

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On Polysindo8217;s claim of an investment of approximately Rs 35 crore in JCT8217;s synthetics division, JCT sources statedthat so far the former has had a conversion agreement and so far just held a letter of credit for 8.5 million guaranteed by Hong Kong Bank.