Central and Eastern Europe chemicals industry call for ideas

I'm currently planning a special issue of ICIS Chemical Business magazine focussed on the central and eastern Europe and Russian chemicals industry. Please send me any good ideas for articles to explore this fascinating region.
I'm thinking about CEO interviews, Poland privatisation update, BorsodChem, Spolchemie, Russian chemical projects update and much more.

Hungary's troubled PVC maker BorsodChem may be in deeper trouble, according to portfolio.hu. It quotes a local newspaper saying the company is not even close to negotiating a E100m loan it needs to help it restructure debt and continue operating.

BorsodChem has a huge amount of potential and had been modernising aggressively to transform itself into one of Europe's leading PVC manufacturers. Let's hope it can solve its problems,

Excerpt from, story: "Hungary’s chemicals producer BorsodChem should not expect to receive the awaited EUR 100 million loan from the Hungarian Development Bank (MFB) any time soon, although it badly needs the capital to restructure its debts and ensure its operations, local daily Népszabadság reported on Friday. The issue is not even on the table at the bank, it added.

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The BorsodChem project officially does not exist at state-owned MFB, simply because the company has not put in an official request. There is nothing to talk about, Népszabadság learned.

Previously, there were talks with the Kazincbarzika-based company, but there were "not overly serious" therefore BorsodChem’s pending loan is in a "very initial phase", the paper said.

The bank remains open to negotiations and an agreement with BorsodChem if the company is to submit an official request.

The paper contacted BC, but no officials were willing to comment."

Wanhua gives up BorsodChem takeover battle

Hungary's BorsodChem has reached an agreement with China's Wanhua, allowing it a future as a minority shareholder but not to control the company.

According to portfolio.hu, it seems Wanhua has given up its intention to squeeze out owner Permira and become a majority owner of the Hungarian company.

"After three days of intensive negotiations, the management and the majority shareholders of Hungarian chemicals firm BorsodChem signed an agreement in principle with representatives of Wanhua Industrial, a China based holding, which controls Yantai Wanhua.

The parties also reached an agreement on BorsodChem’s debt restructuring plan, which enjoys a strong support by the senior lenders and the Hungarian government.

"This is a very important step for the financial restructuring of BorsodChem and the implementation of our growth plan", stated Wolfgang Büchele, CEO of BorsodChem after the negotiations.

"This result is good for BorsodChem, its customers, suppliers and the employees in particular", Büchele added. "But there is still a long way to go. Several questions remain unresolved for the time being and will be addressed only at a later stage. The delegates agreed on further negotiations in due course to discuss the open questions in a friendly and constructive manner."

The negotiations, which took place in Budapest, were attended by Wolfgang Büchele, representatives of the shareholders Permira and Vienna Capital Partners and Wanhua Industrial, including Chairman Jiansheng Ding.

Last week, in a meeting with senior lenders of BorsodChem the banks expressed their strong support of the current management of BorsodChem and their expectations that the current management continues to operate BorsodChem during the implementation of the growth plan.

The Permira Funds and Vienna Capital Partners (VCP) should remain majority shareholders and continue to exercise operational control, the banks stated."

BorsodChem lenders support independence

Hungary's PVC producer, BorsodChem, insists that its lenders want private equity owners Permira and Vienna Capital Partners to keep a majority stake in the company.

China's Wanhua Industrial Group has been building a stake in the group by purchasing large amounts of mezzanine or junior debt. A familiar battle for BorsodChem may be brewing (see earlier entries).

According to Reuters, "BorsodChem said that chemicals firm Wanhua may become a minority equity holder but any cooperation should be discussed only later and must be based on contractual agreements typical in the industry.

"In a meeting with senior lenders ... the Senior Steering Committee of the senior syndicate expressed its strong support of the current management of BorsodChem and its expectations that the current management continues to operate BorsodChem after the implementation of the debt restructuring plan," the firm said.

"Permira Funds and Vienna Capital Partners should remain majority shareholders, as was made clear by the banks," BorsodChem said.


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BorsodChem not for sale: Permira

Permira, the owners of Hungary's PVC manufacturer BorsodChem, say they will hold on to the group as it should recover strongly when the downturn tails off.

According to Reuters, Ulrich Porwollik, a head of communications at Permira in Germany, confirmed a report in Vilaggazdasag.

'Permira has long term goals with BorsodChem,' Christian Neuss, partner at Permira was cited by Vilaggazdasag as saying.

He said once an economic recovery starts in the world, the company will be able to return to growth again.

The paper also cited BorsodChem Chairman Chief Executive Wolfgang Buchele as saying that Wanhua can come in as a partner of BorsodChem but not as a majority owner.


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China's Yantai Wanhua pursues BorsodChem

View BorsodChem in Hungary in a larger map
BorsodChem's Kazincbarcika PVC plant

China's largest Methylene Diphenyl DiIsocyanate manufacturer, Yantai Wanhua, is in talks with Permira, the private equity group which owns Hungary's main PVC manufacturer, BorsodChem.

According to news service plasteurope.com, it has bought up the company's mezzanine debt to the tune of E200m.

An earlier report in portfolio.hu suggested it was not intent on a hostile takeover.

"Yantai Wanhua plans long-term in BC, aiming to become a strategic investor in the troubled Kazincbarcika-based (northeast Hungary) firm.

Yantai Wanhua is a market leader on its home turf on the MDI market and is the fifth largest in its global league behind BASF, Bayer, Hunstamn and Dwo Chemical.

It has three production bases with 2,000 employees. In 2008, it posted revenues of EUR 814 m with its profit exceeding EUR 170 m. The company's market capitalisation is around EUR 3 billion.

Napi said Yantai Wanhua's management has sat to the negotiating table with the senior leadership of Permira, BorsodChem's majority owner, discussing how they could enter BC as a strategic investor and how they could take part in the reorganisation of the company.

State bailout seen

Hungary's state-owned development bank MFB said at the end of July that it was in talks to bailout debt-ridden BorsodChem, owned by London-based buyout shop Permira that bought BC for EUR 1.6 bn in 2006.

While no details were brought to light, people familiar with the situation said the loan is in the region of EUR 100 million and is needed to complete a new chemicals plant.

The lenders include Royal Bank of Scotland PLC, Unicredit SpA and Lehman Brothers International Holdings Inc., people familiar with the matter previously told Dow Jones.

Permira has been in talks with the company's lenders and the Hungarian government for some time and is expected to inject around EUR 80-90 m of new capital into the Hungarian firm.

As part of the deal, mezzanine lenders are asked to swap EUR 200 m loans for equity, people familiar with the situation told Dow Jones at end-July.

The Hostiles

In mid-August, Büchele announced that uncertainties around BC could be traced back to an Asian investor who, according to available information, has bought a significant part of BorsodChem's mezzanine loans with the involvement of investment banks.

The Chairman-CEO noted the investor failed to inform BorsodChem in writing of its role therefore he sees “hostiles intentions" in the move, saying that “if interests were mutual, there would be no need to involve investment banks."

Büchele told local newswire MTI that BC disposes of cutting-edge technology and it has always strived to become one of the leading isocyanate producers of Europe. If this technology goes to Asia, Hungary would not only lose a production unit, but the chance of further developments, and ongoing investments would be halted. This could weaken the company's position in Europe.

The surfacing of a new investor could put in jeopardy the subsidies already agreed on, as well as the agreements about to be reached, Büchele added."

Asian takeover of BorsodChem?

An investor from Asia is reportedly eyeing Hungary's pvc maker, BorsodChem. According to realdeal.hu, an Asian investor has been buying up tranches of the East European chemical company's debt.

This is worrying for the comapny's CEO, Wolfgang Buchele, who is worried that the group's technology may be exported and his plants shut down. This all has echoes of the early 2000's, when rumours flew around about a stealthy Russian takeover of the group. It is quite near the border with Ukraine and pipelines link it to that country. It seemed at the time a natural target for Russian petrochemical companies looking for access to Europe.

From the Asian story: An Asian investor may have "bought a significant part of BorsodChem's mezzanine loans with the involvement of investment banks could be a source of uncertainty at the Hungarian chemicals company as the investor has not yet informed BorsodChem in writing of its role, chairman-CEO Wolfgang Buchele told [Hungarian news agency] MTI on Monday in Kazincbarcika.

"We see hostile intentions in the events because if interests were mutual, there would be no need to involve investment banks," Mr Buchele said. He added that BorsodChem's central strategy had always been to use its cutting edge technology to become one of Europe's leading isocyanate makers: if this technology goes to Asia, Hungary would not only lose a production unit, but the chance of further developments, and ongoing investments would be halted.

The management of BorsodChem, which is deep in debt, has been in talks with the government on a loan from the state-owned Hungarian Development Bank (MFB).

BorsodChem was profitable in both June and July because of favourable market conditions, but also because of cost-cutting measures, Mr Buchele said. Costs were reduced without making mass layoffs, he added."