BS: JSW Steel gets the letter of intent for Bhushan Power & Steel

12 February 2019: Bhushan Power & Steel, one of the 12 cases mandated by the Reserve Bank of India to be resolved under the Insolvency and Bankrutcy Code (IBC) has got a leg-up with the letter of intent (LOI) of being issued in JSW Steel’s favour.

Sources close to the development said the next step was to file the resolution plan with the National Company Law Tribunal (NCLT) for approval. 

JSW Steel’s upfront offer for Bhushan Power was Rs 19,300 crore and another Rs 350 crore had been offered for operational creditors. Bhushan Power’s total admitted financial claims amount to Rs 47,148 crore as on February 7, 2019.

The government had set a target of resolving the cases on the RBI’s first list by March. However, sources indicated that past cases resolved on the first list had taken significant time. 

Most of the cases resolved on RBI’s first list had breached the stipulated 270-day period for resolution under the IBC. For instance, Monnet Ispat & Energy was resolved in 371 days, Bhushan Steel in 293 days; Electrosteel, however, was wrapped up in 270 days. The Bhushan Power and Steel case has been dragging for more than 560 days now.

Earlier in the month, the National Company Law Appellate Tribunal (NCLAT) had cleared the decks for Bhushan Power by upholding the decision of the committee of creditors to approve JSW Steel’s resolution plan. 

The NCLAT judgment was in the wake of a plea moved by Tata Steel opposing National Company Law Tribunal (NCLT)’s decision asking the CoC to consider the resolution plan submitted by Liberty House, submitted after the deadline. Tata Steel had also opposed the revision of bids by JSW Steel. 
Initially, there were two bidders for Bhushan Power: Tata Steel and JSW Steel. Liberty House joined in later after NCLT asked the CoC to consider it.

For JSW Steel, bagging Bhushan Power would mean getting a foothold in the east. Bhushan Power has a capacity of 3.5 million tonnes with facilities across Odisha, Bengal and Chandigarh.

Bhushan Power has a significant land bank and according to some sources, a ramp-up to five million tonnes wouldn’t take much time.

The Business Standard reporter

ET: NCLAT extends deadline for NCLT Ahmedabad to decide on Essar Steel insolvency case by February 19

12 February 2019: The National Company Law Appellate Tribunal (NCLAT) Tuesday granted NCLT Ahmedabad a week more to decide over the Rs 42,000 crore resolution plan submitted by ArcelorMittal for the debt ridden Essar Steel.

A two member bench headed by Justice S J Mukhopadhaya has directed the Ahmedabad bench of the National Company Law Tribunal(NCLT) to decide over the matter by February 19.

During the hearing, NCLAT was informed that Ahmedabad bench has completed hearing on operational creditors plea and is scheduled to hear suspended Essar directors later in the day Tuesday.

Earlier on February 4, the NCLAT has asked NCLT Ahmedabad to decide by February 11, failing to which it would call records and pass order.

The NCLAT direction came while hearing an application filed by ArcelorMittal, whose Rs 42,000 crore takeover proposal of the indebted steel-maker has been approved by the committee of creditors (CoC) and is pending before the NCLT for approval.

Earlier, on January 29, NCLT Ahemedabad had rejected the debt settlement proposal put forth by the shareholders of Essar Steel saying the offer violates Section 12A of the Insolvency and Bankruptcy Code.

The NCLT had said that Rs 54,389-crore offer by Essar Steel Asia Holding, which is much higher than the ArcelorMittal’s Rs 42,000 crore bid, is not maintainable as the only way to make a proposal is through Section 12A.

Essar Steel owns a 10-million-tonne steel mill in Gujarat.

The Economic Times reported

IE: Essar Steel resolution: Ruias move NCLAT

12 February 2019: Even as the Supreme Court on Monday dismissed the petitions of operational creditors of bankrupt Essar Steel, the company’s promoters — the Ruias — moved the National Company Law Appellate Tribunal (NCLAT) against the January order of the Ahmedabad bench of the National Company Law Tribunal (NCLT) which had rejected its plea for placing an offer for resolution of the company.

Meanwhile, the NCLT Ahmedabad bench — which was hearing the petition of the operational creditors who complained that the plan of ArcelorMittal approved by the committee of creditors (CoC) gives them a ‘raw deal’ — has reserved its order.

On January 29, the two-member Ahmedabad bench of the NCLT had ruled that the plea by Essar Steel Asia Holdings’ to consider the Ruias’ settlement plan for Essar Steel was not maintainable. The NCLT had said the Essar plea was not maintainable under Section 60 (5) of the Insolvency and Bankruptcy Code (IBC), which empowers it to have jurisdiction to entertain or dispose of any application or proceeding by or against the debtor or corporate person.

As many as 31 operational creditors of Essar Steel had moved the NCLT in five separate petitions urging that it direct the CoC to ensure full payment to them and take necessary steps to modify ArcelorMittal’s resolution plan for that. Alternatively, they had urged the tribunal to direct the CoC to also consider the last-minute offer of the Essar Steel promoters which promises to pay all creditors in full.

Earlier, in January, the lenders of Essar Steel had moved the NCLAT urging that it direct NCLT to expeditiously hear the matter. The appellate tribunal had directed that only one operational creditor will argue the case and not all 31. It was against this order that three of the operational creditors had moved the SC.

Dismissing their appeal, an apex court bench led by Justice R F Nariman said that some of the operational creditors are “put up by the promoters”.

The appeals were filed by three operational creditors, namely Indian Oil Corporation, State tax officer of Gujarat, and Kamlaljeet Singh Ahluwalia. —FE

The Indian Express reported

BQ: State Bank of India Finds Only One Taker For Essar Steel Loans

11 February 2019: State Bank of India’s attempts to sell Rs 15,431 crore in loans given to Essar Steel Ltd. have not seen much success so far. Only one interested bidder has come forward for a small portion of the loans on offer, two people in the know told BloombergQuint.

According to the people quoted above, Bank of America Merrill Lynch was the sole bidder to submit a bid for Rs 1,900 crore worth of Essar Steel loans. The American bank is said to have offered a little over Rs 1,400 crore, or about 70 percent of the book value, in cash as part of its bid, the people said.

Bank of America Merrill Lynch and SBI did not immediately respond to queries mailed to them.

The limited interest from bidders is discouraging for banks who are keen to sell loans to distressed firms where a resolution plan is taking time to materialise. According to the first person quoted above, the stressed asset market does not have a huge appetite for these loans at this point. As such, SBI may need to keep trying to sell smaller tranches over a longer period of time.

SBI had first put these loans on sale on Jan. 16, seeking bidders from the asset reconstruction industry, banks, non-banking finance companies and other financial institutions. Since then, SBI changed the deadline for sale twice, finally settling on February 11 as the final date for inviting bids. The deadline for the sale was changed after receiving requests from interested bidders, SBI had said earlier.

SBI has received special dispensation from the Reserve Bank of India (RBI) to maintain 50 percent provisioning in the Essar Steel account, the bank’s management had said on the sidelines of its earning release on Feb.1. If SBI is not able to sell all these loans by March 31, it may have to set aside more provisions for the account, as per the asset classification norms set by the regulator.

This was also the first sale to have introduced a ‘claw-back’ option, where the buyer of the loans would have to pay more to SBI if the asset gets resolved in less than a year from the date of loan purchase. The sale document by SBI showed that the lender had split the entire loan amount into seven parts, depending on the type of loan. The document allowed SBI to sell the loan as a whole or in parts.

Essar Steel is currently being resolved under the Insolvency and Bankruptcy Code (IBC). While the committee of creditors has approved a resolution plan submitted by ArcelorMittal, a final approval from the Ahmedabad bench of the National Company Law Tribunal (NCLT) is awaited. The case has been facing considerable delays due to repeated litigation from promoters and operational creditors.

Under ArcelorMittal’s resolution plan, SBI was set to receive Rs 11,313 crore. However, India’s largest lender had offered to sell the entire loan at a reserve price of Rs 9,587 crore in order to receive money sooner. This works out to about an 18 percent discount to the amount of money that the bank would have received under ArcelorMittal’s plan.

Bloomberg Quint reported