Budapest -- Hungarian isocyanates producer BorsodChem Zrt said 25 Feb that that, after months of negotiations, Permira Funds and VCP Capital Partners, the company's owners, and Wanhua Industrial Group (Wanhua), a strategic investor, have agreed on a consensual restructuring of the capital structure of BorsodChem.
The deal means BorsodChem can complete its 200-kilotonnes-per-annum toluene diisocyanate (TDI) plant, which it deferred last year following the economic downturn.
This agreement will "stabilise the operations of BorsodChem and provide the company with significant further financial flexibility and a solid platform for long term growth," said a 25 Feb BorsodChem statement.
As a part of the agreement, Wanhua will initially supply about Euro 30 million ($41 million) to BorsodChem.
On completion of the restructuring, Wanhua -- itself a major isocyanates producer in China -- will provide BorsodChem with additional financing of Euro 110 million. The company will use the cash to complete construction of its new TDI 2 (toluene diisocyanate) plant and a new nitric acid plant as well as for general corporate purposes.
When the restructuring is completed, Wanhua may exercise an option to acquire Permira Funds/VCP's entire stake in BorsodChem, within the next 24 months. All parties have agreed that the details of the transaction will not be disclosed.
The agreement and funding need approval from BorsodChem's lenders.
"The new funds come at the right time when the company is preparing to restart the halted investment program. I am grateful for Wanhua's contribution," said Wolfgang Büchele, chairman and ceo of BorsodChem, in the company statement.
"BorsodChem is dedicated to completing the TDI 2 and the nitric acid investment as quickly as possible. We expect the returns from the new plants to significantly further improve the profitability of the company," Büchele added.
"Wanhua is pleased to be an integral part of the restructuring solution for BorsodChem, and believes that the current agreement represents a win-win solution for all parties, including the company's customers, suppliers, employees and stakeholders. Once Wanhua has acquired full control of the company, we plan to work with the current management and continue relying on VCP's local expertise," commented Jason Ding, chief executive officer of Wanhua Industrial Group, also in BorsodChem's statement.
Ding also noted that with Wanhua's operational and technological expertise and additional capital investment, "we are committed to playing a key role in growing the business locally, and improving employment opportunities in Hungary."
BorsodChem makes the polyurethane raw materials MDI (methylene diphenyl diisocyanate) and TDI and vinyls (PVC resins and compounds, caustic soda). It sells more than half of its output in Western Europe, with a significant amount sold to Central/Eastern Europe. BorsodChem is also establishing an increasingly relevant position outside Europe, said the statement.
Meanwhile, Wanhua is the largest isocyanate producer in the Asia Pacific region, and claims to be a global technology leader in the industry. It has the world's largest and most integrated isocynate manufacturing complex coming into production in 2010 in China, and sells into 40 countries across North America, Western and Eastern Europe, Japan, the Middle East and South-east Asia.
See more on this story in the current issue of Urethanes Technology International (Volume 27, Feb Mar, p 6).