ET: NCLT clears decks for Tatas’ acquisition of Bhushan Steel

16 May 2020: The National Company Law Tribunal (NCLT) on Tuesday approved Tata Steel’s bid for Bhushan Steel Limited (BSL), clearing the deck for the bankrupt mill’s acquisition by India’s oldest maker of the primary infrastructure alloy.

The NCLT also dismissed a plea filed by the employees of Bhushan Steel opposing Tata Steel’s bid. It also rejected another petition by engineering and construction major L&T, an operational creditor to Bhushan Steel: L&T had sought priority in repayment of debt in the resolution process.

In a late evening statement Tata Steel said as per the terms of approved Resolution Plan, Bamnipal Steel Limited (`BNPL’), a wholly-owned subsidiary of Tata Steel, will initially subscribe to 72.65% equity share capital of BSL at face value i.e. at Rs 2 per share, for an aggregate amount of Rs.158.89 crore.

“The financial creditors shall receive a total consideration of Rs 35,200 crores for the settlement of the existing financial debt of BSL,” Tata Steel said. It will be funded through a combination of equity and inter-corporate loans, of which upto Rs 9,000 crore loans have an option of conversion into equity shares of BSL. The Resolution Plan also requires financial creditors to invoke pledge on existing equity shares of BSL.

“As per the approved Resolution Plan, BNPL shall be classified as the ‘promoter’ of BSL, and the existing promoters shall be de-classified as ‘promoters’ of BSL for the purposes of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,” the statement added. The NCLT nod will be a shot in the arm for Tata Steel which has been allegedly facing challenges on the ground in its efforts to assert control over BSL’s main plant at Dhenkanal in Odisha.

On March 23, Tata Steel said it had accepted the letter of intent for Bhushan Steel under the corporate insolvency resolution process of the IBC after the Committee of Creditors (CoC) for BSL accepted its bid. Earlier, it had emerged as the highest bidder for Bhushan Steel with a Rs 35,200-crore offer, paving the way for the acquisition of a five million tonne plant in Odisha with a product basket catering to high-value auto and consumer durable makers.

In the race for BSL, Tata Steel had edged past JSW Steel and a private equity backed group of 400-odd Bhushan Steel employees. On March 7, Tata Steel said it had received a formal communication from the resolution professional of Bhushan Steel that it had been identified as the highest evaluated compliant resolution applicant to acquire a controlling stake in Bhushan Steel.

Following NCLT approval the only other nod that is awaited is from the Competition Commission of India (CCI). Bhushan Steel owes nearly Rs 56,000 crore to its lenders.

Acquisition of BSL will be a key element in Tata Steel’s domestic growth strategy under new Tata Sons chairman N Chandrasekaran. With Tata Steel tipped to enter into a joint venture with ThyssenKrupp of Germany for its European steel business, the focus is clearly back on growth in India.

Tata Steel’s domestic steel capacity, now at 13 million tonnes, is poised to be augmented by 5.6 million tonnes with the Bhushan Steel acquisition. Bhushan Steel makes flat products like hot- and cold-rolled coil (HR/CR coils) and galvanised sheets.

The resolution process for BSL, which was referred to NCLT in July 2017, has had its share of challenges. At the end of January, BSL promoter and vice chairman Neeraj Singhal had sought to halt the process by writing to lenders and asking them to consider restructuring the company’s debt under the sustainable structuring of stressed assets (S4A) mechanism by dividing the debt into sustainable and unsustainable parts, with no haircut.

Source: The Economic Times

BS: NCLT approves Tata Steel’s bid for Bhushan Energy; rejects objections

30 May 2019: The principal bench of the National Company Law Tribunal (NCLT) on Thursday approved Tata Steel’s nearly Rs 800-crore bid to acquire Bhushan Energy. The NCLT, while approving this bid, also rejected Bhushan Energy’s former promoter Neeraj Singhal’s objections to Tata Steel’s bid for the debt-laden company.

As part of the plan, Tata Steel will offer an upfront payment of Rs 730 crore, while it will pay an additional Rs 50 crore to operational creditors of the company. A further sum of Rs 367 crore will be infused by Tata Steel in the company as a part of equity infusion, depending on the prevalent market conditions. Till the time Tata Steel takes over the company and starts running it, the Committee of Creditors and the resolution professional of the company will act as monitoring agency to oversee the day to day functioning of the company, the NCLT said. A detailed copy of the order is awaited.

Bhushan Energy was taken to the NCLT by State Bank of India (SBI) for not paying its dues worth Rs 500 crore. On June 6, the NCLT allowed an extension of 90 days for the company to find a resolution plan when it failed to find any within the 180-day moratorium. Incorporated in 2005, Bhushan Energy is based in Dhenkanal, Odisha. It is an arm of Bhushan Steel. Bhushan Energy had reported a gross debt of Rs 2,336 crore in 2015-16 (April-March). 

The NCLT had in June last year extended the insolvency resolution period for Bhushan Energy by 90 days beyond the initial period of 180 days after the lenders to the company had failed to zero in on one bidder for the company.

The Business Standard reported

FE: Bhushan Power insolvency: NCLT to conclude BPSL hearing by April 15

13 April 2019: The National Company Law Tribunal (NCLT) will conclude hearing on Bhushan Power and Steel (BPSL) insolvency case by April 15. Insolvency resolution process for the company was admitted by the principal bench of the NCLT on July 26, 2017 on a plea of Punjab National Bank.

“We want to conclude hearing on the BPSL matter on Monday. There will be no further argument beyond Monday,” NCLT’s principal bench, headed by president justice MM Kumar, said on Friday.

The tribunal is expected to reserve its order on April 15 after hearing the counsel of JSW Steel, the highest bidder for BPSL, and is expected to ask all parties to submit a two-page note if they want to provide any further information. It has been more than 600 days since BPSL was admitted by the NCLT. The Insolvency and Bankruptcy Code permits a maximum of 270 days for the resolution of a company admitted by the insolvency court.

JSW Steel has offered to pay Rs 19,350 crore to the financial creditors of the debt-ridden BPSL, implying a near 60% haircut for lenders. Apart from this, the Sajan-Jindal promoted company has offered to pay operational creditors a sum of Rs 350 crore against their admitted claims of Rs 733 crore. Tata Steel’s total bid is for an amount of Rs 17,000 crore.

A clutch of 34 financial creditors have claimed Rs 47,303 crore from the company as on January 3, 2019, of which, the resolution professional (RP) has admitted claims worth Rs 47,150 crore. Operational creditors, numbering 1,778, have claimed Rs 2,320 crore from BPSL though the admitted amount is Rs 733 crore.

BPSL’s 3.1 million tonne per annum (mtpa) steel making capacity will catapult JSW Steel as India’s largest steel company, outpacing Tata Steel, with a capacity of over 22 mtpa.

The Financial Express reported

BS: Tata Steel BSL to allot shares worth Rs 2,300 cr to Tata Steel

25 March 2019: Tata Steel BSL Monday said its committee of directors has approved allotment of shares worth Rs 2,300 crore to Tata Steel on private placement basis.

“We wish to inform you that the committee of directors has today approved allotment of 230,00,00,000 – 8.89 per cent optionally convertible redeemable preference shares having face value of Rs 10 each for cash aggregating to Rs 2,300 crore to Tata Steel Limited (OCRPS Series II) on private placement basis,” Tata Steel BSL said in a BSE filing.

Tata Steel had won the bid to acquire debt-laden Bhushan Steel in an insolvency auction and later renamed the company as Tata Steel BSL.

Shares of Tata Steel BSL ended 4.27 per cent down at Rs 28.05 apiece on BSE Monday.

The Business Standard reported

BS: Tata Steel BSL prepays Rs 3,000 crore loan riding on massive turnaround

13 March 2019: Tata Steel’s acquisition of a heavily indebted Bhushan Steel (BSL) mill has changed the fortunes of the beleaguered facility and helped it prepay a Rs 3,000-crore loan.

The development comes after the plant witnessed a significant improvement in its financial and physical performance in the last 10 months under Tata Steel management, sources said. 
Bamnipal Steel (BNPL), a wholly-owned subsidiary of Tata Steel, had acquired BSL in May 2018 at a cost of Rs 35,200 crore under the Insolvency and Bankruptcy Code. 
To finance the acquisition, Tata Steel through BNPL had insured Rs 16,500 crore loan, in addition to extending another Rs 18,500 crore of inter-corporate loan totalling Rs 35,000 crore, of which the company has now prepaid Rs 3,000 crore, sources said.
Besides, Tata Steel BSL, the new name of the acquired entity, has refinanced a short-term acquisition financing, with around Rs 15,500 crore of long-term loans, which has improved the risk profile of the company and set in place the long-term balance sheet of the entity. This Rs 15,500-crore is part of the refinancing of the bridge loan. The balance Rs 35,000-crore loan is now being converted into preference shares for which shareholders’ approval was obtained this week. 

The credit rating of the unit has been upgraded to AA for the long term and A1+ for the short term by CARE Ratings, which is expected to reduce the finance cost, leading to better capital creditworthiness.

Among other signs of financial improvement, the earnings before interest, tax, depreciation and amortisation (Ebitda) of the company increased from Rs 1,442 crore in the nine months of 2017-18 to Rs 3,013 crore in the same period this year, while the Ebitda margin has gone up by 8 per cent year-to-date of 2018-19 (FY19), compared to a similar period last year. 

The turnover of the company has jumped to Rs 15,374 crore in the first nine months of the current financial year, from Rs 12,908 crore in the previous year — an improvement of 19 per cent. 

Tata Steel BSL is currently focused on reaching full capacity through decoupling and debottlenecking of existing facilities. The estimated time for the ramp-up would be 24 months. “We are also focusing on improving maintenance and safety practices at the plants, which will help in ramp-up volumes,” said a senior officer of the company.

With hot metal production at 3.1 mt in the first nine months of FY19, the company is on its way to cross 4 mt hot metal output for the first time since its inception this year. Similarly, crude steel (3.1 mt) and hot-rolled coil (2.9 mt) have shown 14 per cent and 16 per cent rise in production, respectively, in the same period this financial year.   

“We have adopted three-tier integration plans i.e., excellence, elevate, and expand. In Phase 1, we are working towards stabilisation of the plant, debottlenecking of existing facilities, raise it to the best demonstrated performance, and realise synergies. In Phase 2, we plan to achieve benchmark performance in all areas to achieve rated capacity and generate strong cash flows. In Phase 3, we plan to initiate strategic capital investments to ensure sustainable returns for the stakeholders,” said a company official.

The Business Standard reported

LM: Key stakeholders point to chinks in Insolvency and Bankruptcy Code

12 March 2019: Now that two years have passed since the first major acquisitions under Insolvency and Bankruptcy Code (IBC), several players—buyers, investment bankers and dissatisfied creditors—are slowly opening up about what they see as chinks in India’s bankruptcy law.

These include repeated litigation—both during and after the process—missing physical assets in plants, the lack of judges and questions over the integrity of promoters of distressed businesses and resolution professionals.

The cracks in the resolution process are evident from the following developments:

    After acquisition of Monnet Ispat by JSW Steel Ltd in September 2018, operational creditor Bharat Heavy Electricals Ltd (BHEL) and unsecured creditor IFCI Ltd have challenged the resolution plan.
    The bidders for Amtek Auto and its unit Metalyst Forgings—London-based Liberty House and US-based hedge fund Deccan Value Investors, respectively—are challenging the information provided to them by the resolution professional during the bidding process. While Deccan Value Investors has asked NCLT to cancel its resolution plan, Liberty house has alleged in court that the contents of a forensic audit conducted by EY into Amtek Auto were not revealed to it.

“Often, resolution professionals are ill-equipped to fully oversee operations at companies. In other cases, there are serious integrity issues among resolution professionals and promoters,” an investment banker said on condition of anonymity. “We know of cases where equipment has been stolen from plants during the resolution process. In some cases, promoters litigate to draw out the resolution process while we hear of money being siphoned away from the company during this period.” 

Mahesh Singh, founder and managing director, Singhi Advisors, said sometimes assets do go missing at the time of closure of the deal. “Buyers should get a chance to do the closing due diligence. Even so, there are legal remedies for when assets are missing because there is always a lag between selling a business and finally getting possession.”

Godrej Group chairman Adi Godrej said: “The bankruptcy code has been very poorly implemented because there have been so many cases of bankruptcy which have not been finalized. We allow them to go from one court to another and then we give them stay order. Our judicial process is very slow. “It (IBC) is not being implemented as well as it could have been. That is not perhaps for lack of trying but it is also our legal system and legislation.”

JSW Steel’s joint managing director, M.V.S. Seshagiri Rao said in a recent interview: “Under IBC, once a case in admitted, whatever cases are pending against a company, there is a moratorium on them. But once the resolution plan is approved, all of these spring up again. We are seeing this in several forums, in all companies that have been acquired, not just ours. I think some clarity is required here so winning bidders feel more comfortable that once the settlement is paid, everything else is extinguished.”

The major acquisitions under IBC were those of Bhushan Steel by Tata Steel Ltd; Binani Cement Ltd by UltraTech Cement Ltd; and Monnet Ispat by JSW Steel-AION Capital.

Kalpesh Kikani, managing director and senior partner, AION Capital, said at the Mint Investment Summit in Mumbai on 1 March: “First, the challenge is getting to know what the true price for the asset is. Step 2 is who gets how much among various financial creditors, be it secured, unsecured, secured with guarantee, unsecured with guarantee, and then you have some operational creditors who believe they are equal to financial creditors and others who believe they are better than financial creditors in terms of supplying (goods to a company even during distress). This Stage 2 of who gets how much is an integral part of IBC and will be the subject matter of litigation—and as a bidder this is something we always factor into our bids.”

The Livemint reported

ET: HC to hear petition alleging Odisha government’s move to favour Tata Steel

6 March 2019:  A petition in the High Court of Orissa requires the state government to explain why it seeks to grant Tata Steel further iron ore mines when the steelmaker already has captive mines well above the prescribed cap. 

The HC is hearing a petition challenging the Odisha government’s recommendation to increase the prescribed area cap allowed to an individual player, from 10 sq km to 75 sq km. The matter will be heard again on 25 March 2019. 

The move will allow Tata Steel to participate in auctions. The PIL argument is that this would grant Tata Steel, already the beneficiary of a “disproportionate allocation of natural resources in the state”, an unfair advantage over other steelmakers in the state. Tata Steel already hold rights to area nearing 50 sq km, “which is 89 per cent of the total mining lease (area) ever allocated to steel companies,” claims the petition.

The Mines and Minerals (Development and Regulation) Act 1957, amended in 2015, sets 10 sq km as the limit for mining rights granted to an individual in a state. This may be relaxed for an individual, as has been done for Tata Steel and state-owned Odisha Mining Corporation and as long as the state justifies the grant. This time however, Naveen Patnaik’s government chose to ask the Centre for a sevenfold increase in the area limit itself.

The current PIL in the High Court of Orissa has been filed by journalist Bijaya Kumar Misra but this isn’t the first time that Tata Steel’s efforts to secure future raw material in the state has been challenged. Rival steelmaker JSW had moved the High Court of Delhi last year against Tata Steel’s participation in two tendered iron ore blocks that have since been withdrawn.

According to state officials, the Mineral Auction Rules 2015 is silent on the subject of total area, covered under Section 6 of the MMDR Act.

It has been almost a year since the Odisha government wrote to the Centre to increase this limit. The Centre, which has expanded the cap for bauxite allowing state-owned Nalco to operate a second mine and expanded similarly the cap for limestone mines in Maharashtra, has been unmoved by Odisha’s request. A senior official at the state’s directorate of mines, who asked not to be named, said the ball was still in the Centre’s court.

Tata Steel, which has captive rights to chrome, iron ore, and manganese in the state going back almost a hundred years, only commissioned its first steel plant in the state in November of 2015. It is currently ramping up the 3 mt plant at Kalinganagar to 8 mt per annum and has similar expansion plans for Bhushan Steel’s 5 mt plant in Angul which it acquired under the Insolvency and Bankruptcy Code. It currently about half a dozen iron ore mines in the state that also serve its Jamshedpur plant’s needs. Some of these will lapse in 2030.

While the HC of Delhi was still hearing the matter, the Odisha government decided to withdraw it notice inviting tender for Chandiposhi (of 33.7 million tonnes reserve) and Purheibahal (38.3 mt) iron ore deposits, rendering JSW’s petition infructuous. According to officials at the state directorate, at least 17 deposits ready to be auctioned have been withheld for now. But for a combined prospecting and mining lease, the state is yet to actually grant a lease for any of the five deposits auctioned since 2015.

Defending the state government’s right to lobby for the steelproducer, he said “Here’s a plant that has been put up, and is visible before our eyes. Is its wrong for the state to encourage value addition within the state? Unfortunately the state government could not grant Posco the Khandadhar deposit, before the act was amended.”.

Odisha, the country’s biggest producer, is also home to several sick steelmakers that it failed to supply captive raw material to. In 2012 the Supreme Court had ruled that Odisha had been “highly unreasonable and arbitrary” in denying Bhushan Power and Steel a promised iron ore deposit the huge sums the firm had invested in a steel plant. BPSL,recently acquired by Sajjan Jindal’s JSW under insolvency proceedings, and Bhushan Steel emerged successful bidders, for two iron ore mines auctioned in Odisha, only a month before being declared insolvent. This has also been challenged in the court.

The Economic Times reported

ET: NCLT rejects insolvency plea against Bhushan Steel

2 March 2019: The National Company Law Tribunal (NCLT) has dismissed a petition seeking to once again drag Bhushan Steel, which Tata Steel took over last year, to the insolvency court to recover unpaid dues of about Rs 18 crore. 

The NCLT principal bench said the petition filed by Vistrat Real Estate, an entity operated by Neeraj Singal, was non-maintainable. Vistrat is a related party of Bhushan Steel and its former promoters Brijbhushan Singal and Neeraj Singal, who were also “time and again authorised to act on behalf of the company” even though they were not on the board of directors, it said. 

“It can be safely concluded that the corporate debtor has substantive control in the petitioner’s company,” the bench observed in the order reviewed by ET. “Such transactions are liable to be gone into during the resolution process and deemed to be a preferential transaction.” 

The bench said that in any case, the petitioner’s claim of a default is the subject matter of serious dispute. 

Bhushan Steel was represented by senior counsel Gopal Jain and VP Singh, partner and head of litigation at AZB & Partners. Bhushan Steel was led to insolvency resolution by State Bank of India in 2017 for owing Rs 44,000 crore to lenders and was acquired by Tata Steel in May last year. 

Vistrat claimed the default on Rs 17.97 crore took place in June last year, arising out of a property leased to Bhushan Steel in 2015 for Rs 6 crore every month. 

The rental was subsequently found to be higher than the market value by the Bhushan Steel resolution professional, who paid Vistrat Rs 5.6 crore and terminated the agreement after Tata Steel took over the company in May. The premises were vacated in September last year. 

This was not disclose petition. 

The Economic Times reported

FE: Bhushan Power : Lenders urge NCLT not to give operational creditors further hearing

27 February 2019: BPSL’s operational creditors have moved a series of applications to NCLT seeking to attract its attention on a range of issues including alleged trimming of the operational creditors’ list by the resolution professional and not getting copies of the resolution plan, among others.
Apprehending further delay in the resolution process, lenders to Bhushan Power and Steel (BPSL) on Tuesday urged National Company law Tribunal (NCLT) not to give operational creditors any further hearing as the adjudicating authority proceeds to approve the resolution plan for the debt-ridden steelmaker.
Senior counsel Ramji Srinivasan, appearing on behalf of the Committee of Creditors (CoC), said that more than 570 days have gone past since NCLT’s principal bench admitted insolvency proceedings against BPSL and each day, lenders are incurring a Rs 12 crore loss for their exposure to the insolvent firm.
“BPSL has 1,778 operational creditors. It will take a hell lot of time to hear out their applications. They should also not have any grudge since they will have to take only 50% haircut compared with 60% by the financial creditors,” Srinivasan said.
BPSL’s operational creditors have moved a series of applications to NCLT seeking to attract its attention on a range of issues including alleged trimming of the operational creditors’ list by the resolution professional and not getting copies of the resolution plan, among others.
NCLT’s principal bench admitted on July 26, 2017, Punjab National Bank’s plea for initiation of the corporate insolvency resolution process (CIRP) against BPSL. In July last year, lenders voted in favour of JSW Steel’s resolution plan for BPSL, rejecting Tata Steel’s offer.
JSW Steel has offered to pay Rs 19,350 crore to the financial creditors of the debt-ridden BPSL, implying a near 60% haircut for lenders. Apart from this, the Sajan-Jindal promoted company has offered to pay operational creditors a sum of Rs 350 crore against their admitted claims of Rs 733 crore.
The NCLT on Tuesday said it would hear the matter on March 5 and decide whether notices are to be issued to the operational creditors or not, and also on whether other parties would be served notice on their applications.
Paving the way for JSW Steel to take over BPSL, National Company Law Appellate Tribunal (NCLAT) on February 4 had dismissed Tata Steel’s objections that lenders had given the Sajjan Jindal-led firm undue chances to revise its bid even after declaring Tata Steel as the preferred bidder.
In its order, NCLAT also asked the resolution professional to submit the best plan to the NCLT and asked the adjudicating authority to pass an order after evaluating the bid and keeping in mind the interests of operational creditors.
A clutch of 34 financial creditors have claimed Rs 47,303 crore from the company as on January 3, 2019, of which, the RP has admitted claims worth Rs 47,150 crore. Operational creditors, numbering 1,778, have claimed Rs 2,320 crore from BPSL though the admitted amount is Rs 733 crore.
The Financial Expresses reported

DNA: Tata Steel lends further support to ailing equipment maker TRF

22 February 2019: Tata Steel has decided to continue supporting its ailing group outfit, TRF Ltd, maker of earthmoving vehicles and construction equipment.

With infrastructure and construction sector reeling under sustained slowdown, listed entity TRF’s losses continue to pile up. This has forced Tata Steel to infuse an additional Rs 250 crore in the form of preference shares into its arm.

This is over and above the assistance in the form of related party transactions worth around Rs 255 crore committed for the ongoing financial year as the company continues to explore ways to increase business and assistance from the promoter entity. TRF’s losses widened from Rs 18.54 crore in the September quarter to Rs 24.50 crore in the October-December period.

With accumulated losses touching Rs 406 crore, the company’s net worth has been fully eroded. Its receivables have been impacted as some of the major over-leveraged companies in the infrastructure, power generation and steel sector have been referred to the National Company Law Tribunal under Insolvency and Bankruptcy Code.

TRF, in which Tata Steel holds a 34.11% stake, has been selling off some of its overseas ventures that were set up when the market conditions were favouarble.

During the December quarter, it sold off its step down subsidiary Dutch Lanka Trailers LLC, based in Oman, at book value that resulted in a loss of Rs 63 lakh.

Earlier this year, TRF Singapore Pte sold the shares of its arm York Transport Equipment Pte and its subsidiaries for a total consideration of Rs 291 crore to SAF Holland. As a result, TRF Singapore took a hit of Rs 83 crore in the value of the investments as its capital base was subsequently reduced.

“The company expects to generate cash flow from improvements in operations, increased business and assistance from the promoter entity currently under discussion, proceeds from restructuring of its subsidiaries,” TRF disclosed in its December earnings details.

It is not just TRF, Tata Steel had earlier extended financial support to another group outfit, listed packaging container maker Tinplate Company of India through related party transactions in the form of sourcing hot rolled coils worth up to Rs 1,800 crore.

DNA reported