Steel firms plan to help lenders in insolvency

A Bhushan Steel plant in Odisha. Photo: Reuters
The four steel companies — Bhushan Steel, Bhushan Power & Steel, Electrosteel Steels, and Monnet Ispat and Energy — besides Essar Steel on the list of the 12 large non-performing accounts that the Reserve Bank of India (RBI) has recommended for insolvency proceedings are planning to cooperate with lenders, instead of trying to stall proceedings in courts.

Essar Steel moved the Gujarat High Court on July 4 against the recommendations and proceedings initiated by a consortium of 22 banks led by the State Bank of India (SBI), and the Standard Chartered Bank.

Bhushan Power & Steel Chairman and Managing Director Sanjay Singal, however, said his company would cooperate with the banks. Electrosteel Steels, too, has confirmed it would fall in line. Monnet Ispat and Energy also made it clear that it would not challenge the RBI’s recommendation, while Bhushan Steel has pleaded for corporate insolvency resolution process to be initiated.

On Friday, the Punjab National Bank and the SBI initiated insolvency proceedings against Bhushan Steel and Bhushan Power & Steel. Monnet’s lawyer  sought more time on Friday to go through the 1,400-page petition. The SBI would have to file the revised application for the company on Monday. Electrosteel Steels’ matter is listed for July 18.

N G Khaitan, partner at law firm Khaitan & Co, said once a petition was admitted in the National Company Law Tribunal (NCLT), it cannot be withdrawn. To stall the insolvency process, firms would have to move court, as Essar had done, and obtain a stay. 

The reason why the companies were not trying to stall insolvency proceedings is because any lender or creditor can at any point file such a proceeding against a company in the NCLT. So, the companies are planning to debate on the petitions in the NCLT. Also, most of these companies have arrived at a resolution with lenders before the insolvency proceedings were initiated. For instance, Bhushan Steel was negotiating a loan recast under the RBI’s Scheme for Sustainable Structuring of Stressed Assets. However, JSW Steel came up with a proposal to take over its debt and queered the pitch. 

In the case of Bhushan Power & Steel, discussions between lenders and private equity firms were underway. These would take exposure in the company while the balance debt was to be restructured. 

For Monnet, there were two rounds of bidding. In the first, Synergy Capital was the bidder; then, JSW Steel emerged as the lone bidder in the second round. 

Lenders to Electrosteel Steels were in discussion with Abhishek Dalmia of Renaissance Group for fresh equity and a loan of Rs 1,500 crore from Edelweiss. 

However, a promoter of one of the four companies said these proposals would now be null and void. 

Potential investors would have to submit fresh proposals once the bidding for the stressed accounts started.

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