Home Urban Infrastructure News Steel & Metal Building News Tata Steel seen edging out JSW in race for Bhushan Steel

    Tata Steel seen edging out JSW in race for Bhushan Steel

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    JSW

    It has offered an upfront cash payment of Rs 35,200 crore and 12.2% equity to the lenders. JSW has offered an upfront cash payment of Rs 28,000 crore and no equity, said the persons cited above. A third bid came from Bhushan Steel employees who said they will pay Rs 50 crore cash upfront and another Rs 28,600 crore over 13 years while offering 98% equity to the lenders.

    The promoters of Bhushan owe Rs 56,000 crore to financial creditors. The bids were opened in a hotel in New Delhi on Friday at a meeting of Bhushan Steel’s committee of creditors. The Tata offer came as a relief to banks as lenders face the prospect of more substantial haircuts in bankruptcy proceedings at the National Company Law Tribunal (NCLT). That should allow banks to write back some of their provisions since they provided for bigger losses on the debt previously.

    Separately, banking sources told ET that Tata Steel was the frontrunner for Bhushan Steel with a bid that translated into a 27% haircut for lenders. Tata has also offered to pay close to Rs 1,200 crore to operational creditors, they said. Arpwood Capital acted as the adviser to Tata Steel for this transaction.

    Final Round of Negotiations

    The resolution professional will now enter into a final round of negotiations with the top bidders to sort out any last-minute clarifications before reverting to the committee of creditors with a final decision. No dates have been fixed for that meeting as yet, said the sources. Bankers don’t expect any hiccups to the process given the stature of the two leading contenders.

    “There is no question of the credibility of either Tata or JSW. So, unless there are some unforeseen circumstances, I do not see a rebid,” said one of the bankers with significant exposure to Bhushan. The bidders are said to have attached conditions to their offers. JSW wants all existing contracts to be nullified, said the people cited above. For example, Bhushan Steel draws power from a captive group company at an inflated price, the people said, citing one of the conditions.

    Read: UK-based Liberty House wants to bid for Bhushan Power & Steel

    The two leading bidders have also sought exemption from open-offer requirements as stipulated in the takeover rules. Both said their offers are subject to approval by the competition watchdog and if they are forced to divest or hive off any assets, the valuation will get lowered accordingly. The bankers cited above said they will only negotiate with the highest bidder for all cases referred to the bankruptcy court.

    Among Bhushan Steel’s lenders, State Bank of India has the highest exposure of over Rs 12,000 crore. The proposal for payment involves upfront cash payment. But in all likelihood, Tata Steel will get the loan refinanced from large lenders, they said. The promoters own 57.82% of the company. Of this holding, 71% is pledged with banks and other financial institutions. The current market cap of Bhushan Steel is about Rs 1,017.03 crore. With Tata Steel staying away from bids for bankrupt Essar Steel, most observers expected an aggressive pitch for Bhushan.

    The bidding process had seen some drama last month. In a bid to retain control of his company, Neeraj Singal, promoter of Bhushan Steel, had written to all lenders to consider restructuring debt under the sustainable structuring of stressed assets (S4A) mechanism by dividing it into sustainable and unsustainable parts with no haircut.

    The January 29 letter alleged that the company was wrongly pushed into the bankruptcy process despite its debt restructuring mechanism under S4A having been in the last lap. ET has reviewed the letter. The Reserve Bank of India scrapped all such debt recast schemes earlier this week as the Insolvency and Bankruptcy Code (IBC) has become the main tool to deal with defaults.

    Source- realty.economictimes.

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