BS: SAIL seeks takers from across globe for 3 loss-making units, invites EOI

4 July 2019: State-owned Steel Authority of India (SAIL) has made a global invitation for expression of interest for proposed strategic disinvestment of three of its special steel producing units.

The three units of SAIL are Visveswaraya Iron and Steel Plant in Bhadravati, Karnataka, Salem Steel Plant in Tamil Nadu, and Alloy Steel Plant in Durgapur, West Bengal.

Transaction advisor SBI Capital Markets Limited, via its preliminary information memorandum clarified that no debt taken for any of the units is proposed to be transferred to any of the divested units. For all the three entities, the debt has been raised by SAIL at the corporate level and the interest costs are allocated to the unit, it said.

A mail sent to SAIL remained unanswered till the time of going to press.

Of the three units, Visvesvaraya Iron and Steel produces alloy steel and pig iron, while Salem Steel makes high grade stainless steel. At full capacity, the three plants produce 1,400-1,500 tonne steel per day.

On financial performance, since the last five years between FY15-FY19, all the three units have been loss making.

In 2017, employees of the three units went on a day-long strike demanding the government give them one more year to show profitability.

The last date for invitation of queries through email or physical copy is scheduled July 18 with last date for submission of expression of interest physically on 1 August, 2019.

Intimation to the shortlisted bidders will take place on 8, August 2019, stated the memorandum.

Since the last few years, domestic steel industry has been in a consolidation phase with major acquisition taking place under Insolvency and Bankruptcy Code (IBC).

Large domestic primary steel producers such as JSW Steel and Tata Steel have been scouting for steel businesses in the country to increase its market share in a bid to be part of the steel production growth story where production target has been set at 300 million tonne by 2030.

The Business Standard reported

MC: Jet Airways saga: RP rejects JetLite employee claims, raises question on IBC

4 July 2019: The Jet Airways insolvency has brought to fore an issue that the Insolvency and Bankruptcy Code may not have addressed till now.

As a part of the insolvency process, the Jet Airways resolution professional called for claims to be filed. Those being called to file also included Jet Airways employees.

The HR department of the airline is said to be collating information, of the present and former employees, and will submit the claims by July 4.

The airline did not pay salaries to its employees since March. And, since it had suspended its operations on April 17, about half of Jet Airways’ employee strength of 20,000, left the airline. The total unpaid wage bill is said to be about Rs 3,000 crore.

But, it has emerged that claims filed by employees of JetLite, the low-cost unit of Jet Airways, have been rejected by the resolution professional, Ashish Chhawchharia.

“When our colleagues approached the RP (resolution professional), their claims were not accepted. JetLite had 14 aircraft, where are they? What will its 2,000 employees do?” asked an executive from the company.

JetLite was formerly Air Sahara, which was bought by Jet Airways in 2007. Consequently, it operated as a budget carrier. JetLite remained a separate entity, and its brand was Jet Konnect. It was a part of the Jet Airways “group”.

And, that is probably the reason why claims of JetLite employees have not been entertained.

“JetLite is a separate entity. And, thus, it is outside the jurisdiction. If both the companies were part of the process, the claims could be accepted. But, the insolvency proceeding is only against Jet Airways,” resolution professional Ashish Chhawchharia told Moneycontrol.

Curiously though, this did not prevent JetLite aircraft and slots to be taken away. According to the website of industry regulator DGCA, at least four of JetLite aircraft have been de-registered. Once de-registered, the planes can be taken out of the country and leased to other airlines.

JetLite employees are said to be looking into the matter, and may meet the RP on July 4. “We should get some clarity on the matter. Legal advice is needed in the matter. IBC is a new regulation, and not too many understand the provisions,” said a senior executive.

All may not be lost for the employees of JetLite. Their claims may be accepted if agreed to by the lenders. The employees could also move the NCLT, which could admit their submission.

A better clarity will emerge on July 5 when the next hearing is slated.

The Moneycontrol reported

BS: Essar Steel: NCLAT approves ArcelorMittal’s bid with modifications

4 July 2019: The National Company Law Appellate Tribunal (NCLAT) on Thursday approved Lakshmi Mittal-led ArcelorMittal’s plan for Essar Steel India Limited. The appellate tribunal had on May 21 heard the contentions of all the parties and reserved its judgment in the case. The distribution of amount for all operational and financial creditors will be reflected in ArcelorMittal’s resolution plan. The Committee of Creditors (CoC) will have no role in this distribution.

The NCLAT allowed the claims of Dakshin Gujarat, Gujarat Energy, BPCL, IOCL, GAIL, ONGC and NTPC.

ArcelorMittal had told NCLAT that it would pay Rs 42,000 crore, including a minimum of guarantee of Rs 2,500 crore as working capital, for acquiring debt-laden Essar Steel under the insolvency process.

In April, the Supreme Court had halted distribution of funds among operational and financial creditors from the Luxembourg-based firm’s Rs 42,000-crore resolution plan for Essar Steel India. This was after the lenders to Essar Steel had challenged a direction of the NCLAT asking the resolution professional (RP) to call a fresh meeting of the committee to consider the redistribution of funds among the creditors.

ArcelorMittal’s Rs 42,000 crore resolution plan for Essar Steel was approved by the NCLT on March 8. In its judgment, the NCLT had observed that though it did not want to change the resolution plan approved by the CoC, it would suggest the lender to reconsider distribution of dues and give 15 per cent of the total offer to operational creditors.

The Lakshmi Mittal-led company has been fighting for the control of Essar Steel for well over 600 days now. The case has seen many twists and turns, including a settlement plan of Rs 54,389 crore made by the promoters of Essar Steel, who offered to pay off the entire debt. The plan was, however, rejected by the NCLT.

ArcelorMittal’s bid, on the other hand, includes an upfront payment of Rs 42,000 crore towards the debt resolution of Essar Steel, with an additional Rs 8,000 crore of capital infusion into the company to support operational improvement, increase production levels, and deliver enhanced levels of profitability. In October 2018, the CoC of Essar Steel had voted to approve ArcelorMittal’s plan and a letter of intent was issued.

The Business Standard reported

ET: ARCs able to recover only 10% of bad loans sold to them: RBI

4 July 2019: The asset reconstruction model to help banks recover bad loans appears to be floundering. Central bank data showed that bad loan recoveries from Asset Reconstruction Companies (ARC) are just about a tenth of what was sold to them by banks.

ARCs recovered a maximum of 9.5 per cent of the security receipts (SRs) they held at the end of FY18. This number halved from a maximum recovery of 18.7 per cent made at the end of FY17. Since inception in 2004, ARCs had made maximum recovery of about 72 per cent in FY12. Data published by the Reserve bank of India (RBI) include only recovery percentages.

“The recovery rate specifically shows a precipitous decline for assets that originated after 2014,” the RBI noted. “The general recovery of low double digits across years possibly points to the inadequacies of the resolution model based on collateral disposal.”

Only in the past three-four months, banks have put non-performing loans worth Rs 1.3 lakh crore on the block, but sales have been few and far between. Bank of India recently announced that it will put Rs 30,000 crore of bad loans on the block. While the number may seem big, the bank had put up a similar amount on sale last fiscal and the recovery levels were quite poor. In FY19, the bank had identified NPAs of Rs 17,000 crore. However, it sold Rs 4,000 crore and recovered Rs 1,774 crore from ARCs.

“Most of the assets put up by lenders are past their recovery date. These are ageing NPAs, and banks should be more pro-active in selling assets early so that ARCs are able to make a healthy recovery,” said the CEO of an ARC, who did not wish to be named. “Now, most banks are working on the total cash model of buying loans and that is a better way to clean up their books.”

RBI data support the point made by ARCs. The data showed that recovery as a percentage of total dues kept on declining with ageing of bad loans. The recovery rate stood at over 2 per cent in the first year of issuance of SRs. The recovery was zero if ARCs continued to hold the SR for ten years.

“One of the reasons for the lower value is that the assets are not of a very good quality and when banks assign those assets to ARCs for monetising, they come with added costs since they manage such assets/properties until they get sold,” said Mona Bhide, managing partner of banking and finance specialized law firm Dave Girish & Co.

“Even when ARCs acquire such assets, the acquisitions do not come with clean titles,” said Bhide. “There may be some litigation or dispute attached to the assets and hence only a handful of buyers come forward, which is another factor against selling properties at right valuations.”

Another aspect is that the securities provided by lenders are often inflated in value. Hence, actual monetisation always yields significantly lesser than the loan amounts, Bhide added.

The Economic Times reported

BS: SC stays high court ruling, clears deck for NCLT order on Bhushan Power

3 July 2019: The Supreme Court on Wednesday stayed an order of the Punjab and Haryana High Court in which it had asked the Committee of Creditors (CoC) of Bhushan Power and Steel Limited and the National Company Law Tribunal (NCLT) to consider the objections raised by the former directors of the company before finalising any resolution plan. The directions by the high court were issued despite the Principal Bench of NCLT at New Delhi having already reserved its judgment on a resolution plan for Bhushan Power, submitted by JSW Steel.

On April 18, a former director of Bhushan Power Ravi Parkash Goyal approached the high court with a plea that he had neither been heard by the CoC of Bhushan Power nor been heard appropriately by the lender or the NCLT. The high court, after hearing Goyal’s petition, had directed that Bhushan Power CoC give him a fresh hearing and that the NCLT first decide on the issue of why he was not provided with the resolution plan despite clear orders in this regard from the Supreme Court in other cases. A two judge bench of the high court had also said that any decision taken by the NCLT would be “kept inoperative for two weeks” so as to enable Goyal to challenge it in accordance with law.

Bhushan Power lenders had later challenged the high court’s order in the National Company Law Appellate Tribunal (NCLAT), arguing that the high court did not have jurisdiction to adjudicate on the issue since the NCLT was already hearing the same. While passing its order in the issue, though the NCLAT had refrained from making any comments on the high courts’ order, it had said that the NCLT should pass its judgment in the issue “uninfluenced by any order except the decision of this appellate tribunal and the Supreme Court”.

“The adjudicating authority (NCLT) is supposed to decide the case on merit in accordance with law uninfluenced by any order except the decision of this appellate tribunal and the Supreme Court. While observing so, we are not expressing any opinion with regard to the intervention, which is sought to be made by the ex-directors and promoters of Bhushan Power and Steel Limited,” the appellate tribunal had then said. The NCLAT had, however, expressed its reservation as to how a vacation bench of the high court had passed an ex-parte order and that too without issuing notice to the respondents.

Bhushan Power owes close to Rs 37,248 crore to a consortium of lenders led by Punjab National Bank. It is the sixth out of the 12 large stressed accounts identified by the Reserve Bank of India.

The Business Standard reported