Tatas get NCLT approval to acquire Bhushan Steel

Joanna Estrada
May 16, 2018

Tata will invest in Bhushan, where the lenders will also get a 12.27 per cent stake, through its wholly owned subsidiary Bamnipal Steel Ltd. "The financial creditors shall receive a total consideration of Rs 35,200 crores for the settlement of the existing financial debt of BSL".

Acquisition of BSL will be a key element in Tata Steel's domestic growth strategy under new Tata Sons chairman N Chandrasekaran. Lenders would be allotted equity shares by converting loan amount of Rs14.5cr at a face value of Rs2. 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".

In India's steel sector, six companies account for 85% of the flat steel production capacity, of which three are undergoing insolvency proceedings under the Insolvency and Bankruptcy Code. BSL had a debt of Rs 56,080 crore from 53 financial creditors and Rs 2,846 crore from 751 operational creditors, which also include workmen, employee and statutory creditors.

This announcement will bring much relief to fraud-ravaged Punjab National Bank, as it was the term loan consortium leader for BhushanSteel.

While the employees had filed an appeal against Tata Steel's bid, L&T, which has outstanding dues of ₹900 crore from Bhushan Steel, had appealed to the Tribunal to reclassify it as secured creditor so that it can recover more money from the insolvency resolution. 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. Perhaps, this step will help reduce litigation drama for bankruptcy cases going forward.

The Bench, comprising NCLT President Justice MM Kumar and SK Mohapatra, also dismissed Bhushan Energy's plea to direct Tata Steel, the new owners of Bhushan Steel, to continue with its power purchase agreement.

Under the plan, Tata Steel will pay about Rupees 352 billion ($5.21 billion) to Bhushan Steel's creditors.

Other reports by Click Lancashire

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