BS: Essar Steel clocks in highest ever production at 6.8 million tonnes

9 April 2019: Essar Steel, which is on the cusp of a resolution under the Insolvency and Bankruptcy Code (IBC), has recorded its best ever production at 6.8 million tonnes, an improvement of 10 per cent over the previous year and around 24 per cent in 2016-17.

At the end of March 2019, Essar’s production stood at 6.78 million tonnes compared to 6.18 million tonnes in 2017-18 and 5.47 million tonnes in 2016-17. 

The corporate insolvency resolution process (CIRP) for Essar, one of the largest Reserve Bank of India- mandated resolutions, started in August 2017. J Mehra, who stepped down as the chief executive officer of Essar Steel at the end of March, said that the steel production and the production of downstream units were at an all-time high. 

Essar recorded an 80 per cent capacity utilisation in downstream units and a substantial increase in production of value added products comprising galvanising, colour coated products and pipes. Mehra also appreciated the performance of the pellet facility which recorded a production of over 10 million tonnes and operated at rated capacity in March 2019.

Resolution professional, Satish Kumar Gupta, who is now chairman of the monitoring committee that has taken charge of Essar, confirmed the production numbers and said, the performance of Essar was possible on account of support from the financial creditors and the management. “It also establishes the plant capability,” he said.

A monitoring committee with representatives from lenders and ArcelorMittal as per an order from the National Company Law Appellate Tribunal (NCLAT) has taken charge of Essar Steel. Resolution professional, Satish Kumar Gupta, is the chairman of the monitoring committee. 

Sources said, Essar’s performance was despite withdrawal of funding lines by MSTC to the tune of Rs 700 crore. MSTC used to provide funding lines for import.

At the time of stepping down, Mehra was satisfied with the performance of the company, which provides a strong platform for further growth.

Essar has been selling more or less what it produced as it had not received any additional funding support. Favourable market conditions, therefore, helped the company.

Senior vice president ICRA, Jayanta Roy, pointed out that prices of hot rolled coil (HRC)  had touched a low of about Rs 28,000 a tonne at the end of FY16 and then moved up to around Rs 46,000 in Q1FY19. After dipping in Q3 to Rs 38,000 it is now hovering at around Rs 42,000 a tonne.

Essar Steel has a steel making capacity of close to 10 million tonnes which is supported by a 20 million tonne pellet-making capability. However, sources pointed out that the capacity could not be achieved as it required additional funding.

ArcelorMittal’s resolution plan for Essar Steel includes a capital expenditure plan of Rs 18,697 crore to take the finished steel goods capacity of the plant to 8.5 million tonnes by 2024. The long-term aspiration was to increase finished steel shipments between 12 and 15 million tonnes through the addition of new iron and steel-making assets.

The Business Standard reported

BS: NCLAT may ask Arcelor to pay Rs 42k cr in separate account

9 April 2019: The National Company Law Appellate Tribunal (NCLAT) on Tuesday said it may direct ArcelorMittal, in the next hearing on April 23, to deposit Rs 42,000 crore for acquisition of the insolvent Essar Steel in a separate account.

The two-member bench, headed by Justice S.J. Mukhopadhaya, also directed ArcelorMittal to file an affidavit detailing the steps to be undertaken in the resolution plan of Essar Steel.

Arcelor told the NCLAT that it is ready to bring in money, but can’t deposit it without the lenders executing a debt assignment agreement in the favour of the company, adding that there is some reluctance on lenders’ part to execute this agreement.

The Delhi-based appellate tribunal had approved ArcelorMittal’s bid of Rs 42,000 crore on March 18, dismissing the Essar promoters Ruias’ plea against the approval of the NCLT’s Ahmedabad bench to the bid.

ArcelorMittal’s resolution proposal for Essar Steel provides financial creditors Rs 41,987 crore out of their total dues of Rs 49,395 crore. Operational creditors, under the plan, would get Rs 214 crore against the outstanding Rs 4,976 crore. They are contesting this before the NCLAT.

Essar Steel owns a 10-million-tonne steel mill in Hazira, Gujarat. It was was among the first 12 cases selected by the Reserve Bank of India to be resolved under the Insolvency and Bankruptcy Code.

According to reports, the company has recorded its best ever production at 6.8 million tonnes, higher by 10 per cent over the previous year and around 24 per cent in 2016-17.

–IANS

The Business Standard reported

BS: NCLAT tells IL& FS to release pension/PF money first

9 April 2019: Courts have finally come to the rescue of lakhs of investors who face the prospect of losing their entire retirement savings parked in the toxic IL&FS bonds by their respective pension and provident fund (PF) trusts.

The National Company Law Appellate Tribunal (NCLAT) hearing petitions with respect to IL&FS resolution on Monday directed the new management of debt-ridden firm to submit details of investment made by pension and provident funds in its four group firms along with details of and financial liabilities of those entities.

These four ‘amber’ companies are — Hazribagh Ranchi Expressway, Jharkhand Road Project Implementation Company, Moradabad Bareily Expressway and West Gujarat Expressway.

The appellate bankruptcy court observed that the money invested by pension fund, and PFs does not belong to IL&FS companies and is related to the employees. Therefore it should be released first when loan repayments begin.

IANS was first to report on April 1 about NCLAT’s plan to come to the rescue of funds that invested pension money of employees in IL&FS bonds.

During the proceedings of the appellate tribunal on Monday, a two-member bench headed by Justice S.J. Mukhopadhaya also made clear that it has not stopped IL&FS and its group entities from going for resolution process.

The court has asked the new management of the insolvent company to provide it details of PF and pension funds investment in individual “amber” entities. There are 13 such entities and court has first taken out four for preparing the chart on investment and held that the remaining nine should also give details of PFs investment by courts during next hearing on April 16.

The move, legal experts said, should be seen as the court’s efforts to ensure that investments by pension and PF trusts is not lost in any resolution plan for IL&FS and that these get priority even when repayment start for “amber” grouped entities where firms are expected to meet only operational payment obligations.

Thousands of crores of money of more than 15 lakh employees of both public and private sector companies have exposure to IL&FS bonds. As these investments were classified as unsecured debt, funds feared that all money would be lost if all market-related risks fell on them.

Under the resolution plan, the government has categorised IL&FS group companies into green, amber and red categories based on their financial position.

Firms classified as “green” would continue to meet their payment obligations, while “amber” category firms can meet only operational payment obligations to senior secured financial creditors.

Those under the “red” category are the entities which cannot meet their payment obligations at all.

At the previous hearing on March 19, IL&FS had informed NCLAT that out of its 169 domestic companies, 50 entities (earlier 21) have been classified as green, while 13 (earlier 10) have been classified as amber and 80 as red. The total outstanding debt of the 13 amber companies is Rs 16,373 crore.

As green group companies are meeting all their payment obligations, the fear of loss of investment in these entities is negligible. But PF and Pension funds feared that all their money would be lost in “amber” entities.

The NCLAT has sought details of all financial creditors who have raised money from PF and Pension funds and have exposure in amber entities. This will ensure that once asset-liability profiling of these group of companies is complete and the government and the new IL&FS management comes up with a repayment or resolution plan, dues to retirement funds is settled in full.

More than 50 retirement funds covering over 15 lakh employees have exposure to IL&FS. PF trusts of state electricity boards, public sector undertakings (PSUs) and banks are among them. The provident and pension fund trusts have also filed intervening applications in NCLAT stating that they stand to lose all the money since the bonds are under unsecured debt.

IL&FS is currently under resolution process at the National Company Law Tribunal (NCLT). The process will decide under Section 53 of the Insolvency and Bankruptcy Code (IBC) the order of priority for distribution of proceeds of the process.

–IANS

The Business Standard reported

ET: NCLAT seeks information on exposure to IL&FS ‘amber’ companies

9 April 2019: In a move to protect the investments of pension funds and provident funds, the National Company Law Appellate Tribunal has sought the details of the investment of such funds in “amber” companies of the debt laden Infrastructure Leasing and Financial Services (IL&FS).

The tribunal may be keen to release at least those payments that are due to these funds. The IL&FS group has a total group debt of Rs 94,216 crore.

The bench also directed that no organisations including the National Highway Authority of India take any step to cancel any agreement with any company in question in response to claims by lenders that NHAI intended to cancel agreements with certain IL&FS group entities and this would harm their ability to maintain the status of a going concern.

“How many companies are there who have provident funds and pension funds. You release them. We want that that should be released first.” said a two-member bench led by justice SJ Mukhopadhaya on Monday.

The bench directed all financial and operational creditors of amber companies to hand over details of amounts payable and matured as well as the amounts generated from provident funds, pension funds, gratuity funds etc.

The tribunal was hearing appeals by senior secured lenders of “amber” companies that payments due to them be released. All group companies of IL&FS are being classified according to their ability to meet payment obligations. Group companies able to meet all payment obligations are categorised as ‘green’. Those companies able to meet only operational payments and senior secured debt obligations are categorised as “amber”. Others are categorised as “red.”

Of the 169 IL&FS group companies, 50 entities have been classified as green, while 13 have been classified as amber and 80 as red. The total outstanding debt of the 13 ‘amber’ firms is Rs 16,373 crore.

All but 50 of the 169 domestic group companies of IL&FS are currently enjoying a moratorium on all financial claims against them ordered by the NCLAT for an orderly resolution of claims against the group.

Counsel for IL&FS said that if payments were made to individual creditors of amber companies, it would have a negative impact on the resolution of other group entities.

Counsel for the government said that the government was confident of resolving many of the cases in two months by forming a committee of creditors and evaluating bids from prospective buyer of group entities.

Counsel for creditors of amber companies however said that they would not participate in the planned resolution process as “amber” companies had not defaulted. The bench also asked IL&FS and government to submit details of amber companies as well as operational and financial creditors of amber companies pursuant to an earlier order as it had not been filed in a format that the appellate tribunal wanted.

The Economic Times reported

LM: Panacea Biotec’s lenders approve one-time settlement of outstanding dues

9 April 2019: Drug firm Panacea Biotec on Tuesday said SBI-led consortium of lenders has approved a one-time settlement plan to clear outstanding dues.

“All consortium lenders have approved the bilateral one-time settlement (OTS) at 65 per cent of their outstanding debts,” Panacea Biotec said in a filing to the BSE.

The settlement has been done to resolve the current debt position of the company, it added.

On Monday, India Resurgence Fund, promoted by Piramal Enterprises and Bain Capital Credit, along with its associates had announced an investment of up to ₹992 crore in Panacea Biotec.

“The investment proceeds will be used for a one-time settlement with existing lenders, general working capital and growth requirements of the company,” India RF and Panacea Biotec had said in a joint statement.

In February 2019, Panacea Biotec in a regulatory filing had said its board had approved raising up to ₹864 crore for a OTS with its lenders and other purposes.

The company had said it would raise the funds through the issue of non-convertible debentures on a private placement basis.

The capital once raised would be utilised by the company for a OTS with the consortium of lenders and for the settlement of stretched payables, employees’ dues and for working capital requirements, among others, it had added.

In another regulatory filing on February 27, Panacea Biotec had said the lead bank of the consortium lenders, State Bank of India (SBI), has approved the OTS at about 65 per cent of their outstanding as on July 31, 2018.

It had added that the OTS with the other members of the consortium was in progress in line with the sanction from SBI.

Shares of Panacea Biotec Tuesday closed at ₹200.45 per scrip on the BSE, up 10.65 per cent from its previous close.

The LiveMint reported

BS: Opto Circuits enters into one-time settlement with Yes Bank

9 April 2019: Medical devices firm Opto Circuits India Tuesday said it has entered into a one-time settlement with Yes Bank for settling total outstanding dues worth Rs 33.51 crore.

“The company has entered into one-time settlement with Yes Bank Ltd, for settling the total outstanding amount of Rs 33.51 crore, for a consolidated agreed amount of Rs 8.5 crore…,” Opto Circuits India said in a filing to the BSE.

This amount is to be paid as per the structured installments by April 2021, it said.

Shares of Opto Circuits India closed at Rs 8.06 per scrip on the BSE, down 1.95 per cent from its previous close.

The Business Standard reported

ET: Jet Airways’ lenders offer bidders 31.2-75% in airline, get no response on day 1

9 April 2019: Jet Airways’ lenders are offering prospective bidders ownership of anywhere between 31.2% and 75% in the stricken airline even as the bidding process got off to a slow start on Monday with no investor response on the first day of call for expressions of interest. There were also no queries, two people close to the development said. The call for EoIs closes at 6 pm on April 10.

The lenders, led by the State Bank of India, have stepped up efforts to engage with Etihad Airways — Jet’s second-largest shareholder that wants an exemption from a capital markets rule to consider re-investing in it — on an urgent resolution path for the airline.

They have also reached out to PE investors including TPG, and homegrown National Infrastructure Investment Fund (NIIF) as well as US Air Lines apart from domestic conglomerates such as Tata and Adani groups. Lenders are expecting some response in the next two days and the extent of equity on offer to investors is conditional upon approval from the Reserve Bank of India (RBI) for the conversion of loans into equity in Jet. The lenders are trying their best to stave off the possibility of Insolvency and Bankruptcy Code proceedings that ominously draws closer for Jet if no solution is found quickly.

As on date, lenders can only offer about 32% of the airline’s shares that are pledged with them by founder Naresh Goyal, said a senior SBI official.

Goyal stepped down from chairmanship and board of the airline on March 25 and the lenders agreed, with a board approval from Jet, to convert loans into equity giving them about 51% in the airline. But this conversion was thrown into doubt last week when the Supreme Court set aside RBI’s circular of February 12, 2018, under which the Jet loan restructuring plan was arrived at.

OPEN OFFER

As a result, Jet’s shareholding structure remains the same now: 51% owned by Goyal, 24% with Etihad Airways and the rest with public.

Banks are now waiting for RBI approval for the loan conversion. If it doesn’t come for some reason, a prospective buyer or group of buyers can only buy 31.2% which is the extent of the pledged equity. They can then make an open offer and increase their stake to beyond 51%. Indian capital market rules trigger such an offer when shareholding level crosses 25%.

“But there is no time to wait for approvals or a new circular as Jet needs urgent cash. So the lenders and SBI Capital Markets have opened up the process and are trying to work out a solution with Goyal and Etihad on how to put more shares on the block,” said the official.

Etihad does not want to make an open offer to the public but lenders are still trying to persuade the firm to participate. The Gulf carrier is sticking to its condition of exemption from the open offer rule.

The official cited above said it’s highly unlikely that such an exemption would be made, which leaves Etihad the option of teaming up with other investors or stick to its earlier decision of exiting Jet.

An Etihad spokesperson said the airline wouldn’t comment on speculation. Emails to Jet and SBI remained unanswered till the time of going to press.

The bid document says the owner will take over between 31.2% (3.5 crore shares) to 75% (8.5 crore shares) shareholding of Jet. By that measure, the total number of shares comes to 11.4 crore, the same number that was to be issued to banks.

The document says the bidder can be a strategic investor having a minimum net worth of Rs 1,000 crore as of FY18, Rs 1,000 crore funds available for investment in an Indian company or asset, and three years of commercial aviation experience. It can also be a financial investor with Rs 2,000 crore assets under management or Rs 1,000 crore funds available for investment in an Indian company or asset. Alternatively, it can be a consortium of not more than three entities with each entity holding a minimum of 15% in the grouping and the leader holding a minimum of 26%.

There is no clause that says that a strategic investor has to be part of the consortium which means a cluster of PEs can also invest in the airline.

The bid document says that a government-promoted fund or quasi sovereign wealth funds need not meet the qualification criteria.

“Further, such funds shall not be required to respond to EoI and would be eligible to directly procure the bid document free of cost and submit their bids till the last day announced for submission of bids,” it said.

The document said lenders have initiated the bidding process because Jet failed to honour its debt obligations. The winning bidder will get ownership of the company and will settle “the obligations of the company in relation to the existing facilities”, it said.

Jet has a net debt of Rs 8,500 crore on its books.

The Economic Times reported

ET: Asian Colour Coated Ispat resolution professional seeks bid deadline extension

9 April 2019: The resolution professional (RP) of Asian Colour Coated Ispat (ACCIL) has petitioned the Delhi bench of National Company Law Tribunal (NCLT) seeking an extension of the bid deadline for the asset even as the company received a lone bid from JSW Steel last month.

The extension is being sought a month after the bid deadline expired on March 8, to accommodate the interests of TPG Capital, Kotak Mahindra Bank and Blackstone-backed International Asset Reconstruction Company (IARC). The said players have shown fresh interest in the asset and are likely to bid if NCLT allows the extension, said two people aware of the development. A hearing is scheduled to take place on April 10.

ACCIL owes Rs 5,000 crore to lenders whereas JSW Steel has offered Rs 1,200 crore for the asset that includes Rs 800 crore for secured lenders and Rs 400 crore for unsecured lenders. Accepting this bid will lead to the creditors taking a 76% haircut which is why the RP and CoC may want to apply for an extension and go for a fresh round of bidding, one of the people said. The 270-day deadline for the company’s resolution expires on April 16.

To be sure, out of the three players, only Kotak Mahindra Bank had submitted an initial expression of interest (EoI). The other two have shown fresh interest in the company; this could raise a concern as when a second round of bids were being called for Essar Steel, only the players that had submitted EoIs were allowed to bid.

A senior JSW Steel official said that the company has no information about the extension for the bid deadline “but for any asset under resolution in IBC, processes laid down need to be followed as such extensions when they take place a month after the bid deadline would be challenged on multiple levels surpassing the 270-day deadline.”

TPG Capital and the RP Kuldip Kumar Bassi declined to comment. Mails sent to Kotak Mahindra Bank and IARC did not elicit a response till the time of going to press.

ACCIL has a 3 lakh tonnes capacity in making cold rolled, galvanised and colour-coated steel products. ArcelorMittal had also shown interest in the company but has refrained from bidding until the acquisition of Essar Steel gets through, said a source.

The Economic Times reported

ET: Arcelor CoC rejects Royal Partners plan for KSS Petron

9 April 2019: Arcelor Mittal Group-led Committee of Creditors (CoC) has rejected the resolution plan of Royal Partners Investment Fund, a sole bidder for KSS Petron and has approached the dedicated bankruptcy court for liquidation of the stressed asset.

On Monday, advocate Jitendra Kumar, representing the resolution professional (RP) of KSS Petron, said, the CoC had on February 7 decided to liquidate the firm. “We are seeking court’s approval for the same,” he added.

Mauritius-based Royal Partners (also known as RPMG Investments) has submitted a bid to buy the firm.

“We are challenging the rejection of our bid and also the constitution of CoC because one single lender owns over 99% in the firm and they are also related party in the matter,” argued Royal Investment Partners’ lawyer.

In an email, Mayur Ghule, managing director at RPMG Investments told ET that it has challenged the CoC ruling in the NCLT, without divulging other details.

Arcelor Mittal India, which owns around 99.76% voting power in the CoC, is also vying for Essar Steel. Lakshmi Mittal, chairman of the steel major held a 33% personal stake in KazStroyService (KSS), the parent company of KSS Petron, which he sold off before bidding for Essar Steel as promoters of defaulting companies are barred from bidding for other companies.

This, however, was not recognised by the Supreme Court and in it’s October ruling last year, it asked it to pay dues owed by both Uttam Galva and KSS Petron, amounting to Rs 7,469 crore (including Rs 1,647 crore owed by KSS Petron) to become eligible to bid for Essar.

The Economic Times reported