BorsodChem shareholders fund long term growth plan

BorsodChem’s majority owners, the British private equity fund Permira and Vienna Capital Partners (VCP), reached agreement with Chinese polyurethanes group Yantai Wanhua, a minority group shareholder, to provide the funds following lengthy negotiations.

After buying a large chunk of BorsodChem’s mezzanine loans, Yantai Wanhua, the biggest isocyanate producer in the Asia-Pacific Region, expressed an interest last autumn in acquiring the Hungarian group, which also manufactures isocyanates.

But the group’s majority shareholders and creditor banks resisted a Wanhua takeover, with the banks strongly backing the current management to continue operating after debt restructuring.

Detailed talks, which have involved the chemical group’s creditors, Yantai Wanhua parent Wanhua Industrial and the Hungarian government, continued on the future role of the Chinese group and on specific outstanding questions over BorsodChem’s financial restructuring.

“We are close to finding a consensus with regard to BorsodChem’s long-term future,” Wolfgang Buechele, the Hungarian firm’s ceo reported at the start of February. “Under the current agreement, Permira and Vienna Capital Partners (VCP) will remain majority owners in BorsodChem for another three years,” he added.

The shareholders agreed in principle in the talks to underwrite an injection of new funds to BorsodChem of around €140m.

Last year, BorsodChem, which has debts amounting to €1.1bn, saw the sales volume of its key products rise quarter on quarter with the best results achieved in the final three months of 2009. Its sales of TDI (toluene diisocyanate) were up by 15% in the period January-June while MDI (methylene diphenyl diisocyanate) rose by 6.5%.

“As demand for isocyanates keeps rising on the market, we expect further increase(s) both in sales and profits this year,” said Buechele.

In 2009, his company confirmed its intention to find a buyer for its PVC manufacturing business to allow the group to focus its future efforts on what it considers is the more profitable and promising isocyanates business.

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