MUMBAI: US-based private equity fund Kohlberg Kravis Roberts and Co (KKR) is close to providing Rs 400 crore to Chennai-based Sanmar Group, which is battling to cut debt and resurrect its fortunes after delisting its main company from the bourses.

The legendary buyout firm will give a Rs 400-crore loan to help ease the chemical maker’s cash position, a person close to the development said. “The group’s engineering business is doing well. The fund infusion will put the struggling chemical business back on the rails and help achieve long-term growth,” he added.

K Rajendran, executive vice-president (corporate affairs), Sanmar Group, did not answer a set of questions on the subject, saying the group cannot comment due to confidentiality issues. KKR India CEO Sanjay Nayar declined comment.

The deal is in the form of structured sponsored finance – a combination of fixed-income payments, some equity and cash. This kind of financing is usually referred to as ‘structured credit deal’. The repayments will begin after 3-4 years from now, investment bankers said.

The overseas buyout firm, which offers structured finance in India through its non-banking finance company, has completed some credit transactions in India, including loans to a privately-held Sajjan Jindal group firm some years ago.

Structured financing has emerged as a fund-raising option as the ongoing slowdown has slammed the brakes on the IPO market and banks are choosy about providing funds due to the rise in NPAs.

“Funds are scarce in a slowing economy. Structured credit deals are the best option for unlisted companies to fuel growth. It is equity-linked and comes with stringent performance standards. Though it ensures instant liquidity, companies should be prepared to achieve maximum growth,” said Harish Damodaran, fund manager and analyst at Mumbai-based SVS Securities.

Sanmar Group, owned by N Shankar, who transformed the family business into a more than Rs 5,000-crore entity, is talking to banks to restructure the debt taken to fund its Egyptian acquisition.

The group acquired Trust Chemical Industries (now TCI Sanmar Chemicals) in South Port, Egypt, in March 2007. TCI is the biggest caustic soda producer in Egypt.

(with inputs from MV Ramsurya)