IOB offloads Bhushan Steel bad loans

02 January 2018

SSG Capital has acquired the Rs 620-crore debt of Bhushan Steel from Indian Overseas Bank for Rs 376 crore in a deal that implies a haircut of 40%, likely setting a benchmark for other bad loan sales in the industry. Indian Overseas Bank had invited bids from asset reconstruction companies for its Rs 620-crore term loan to Bhushan Steel, owned by Neeraj Singhal.

“Four ARCs participated in the bidding and SSG Capital emerged as the highest bidder offering Rs 376 crore,” a senior bank official said, asking not to be identified. Other bidders were Edelweiss ARC, JM Financial ARC and Pegasus ARC, the official said.

Under the deal, the bank will receive 15% of the consideration in cash from SSG Capital and the remainder in the form of security receipts to be paid over five to seven years.

Bhushan Steel has been referred to bankruptcy court by the State Bank of India and the committee of creditors will soon call for binding bids for the company’s resolution plan. The resolution professional has received claims of Rs 55,886 crore from financial creditors and Rs 1,436 crore from operational creditors.

The sale of Bhushan Steel’s loan at a 40% discount would mean that other lenders in the consortium will have to be prepared for at least a similar reduction. However, some experts said Indian Overseas Bank received a very favourable deal considering that lenders of Monnet Ispat will have to settle for a 75% haircut. Monnet Ispat, too, has been referred to bankruptcy court and lenders are finalising the resolution package.

Last week, a joint venture between Aion and JSW Steel had proposed a one-time settlement of Rs 2,500 crore for Rs 10,000-crore loan, implying a 75% haircut for lenders. Since Aion-JSW Steel were the sole bidders, lenders will have to take a call on the whether to accept their offer or go for fresh bids.

Source: THE ECONOMIC TIMES