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