25 financial creditors would be realising 41% from the Rs 19,350 cr deal on claims of Rs 47,158 cr
JSW Steel has a current capacity of 18 million tonne and Tata Steel with a 20.6 million tonne is the largest in terms of installed capacity.
Lenders to Bhushan Power & Steel (BPSL) on Friday approved a proposal to close its deal with JSW Steel, bringing it nearer to the resolution of an insolvency process that has been dragging for more than three and a half years.
They agreed to accept payment in accordance with JSW Steel’s resolution plan, with an undertaking to refund the amount in case the Supreme Court gives an adverse order.
“Lenders with a 97 per cent voting share voted in its favour. The effort is to complete the process by March 31,” a source close to the development confirmed.
Financial creditors would be realising 41.03 per cent from the Rs 19,350-crore deal on claims of Rs 47,158 crore. There are about 25 financial creditors in the consortium, including foreign banks, asset reconstruction companies, and funds. With payment to the lenders, JSW Steel would be able to take charge of the asset.
BPSL has an annual capacity of 2.79 million tonnes, and the acquisition would put JSW Steel marginally higher than Tata Steel in the league table. Currently, JSW Steel has an installed capacity of 18 million tonnes, and Tata Steel, with 20.6 million tonnes capacity, is the largest player. The acquisition would also give JSW a foothold in the eastern market.
According to the contours of the deal, the resolution amount would be kept in an escrow managed by the lead bank, Punjab National Bank. Lenders can take the money, but it would have to be returned if an adverse order comes from the apex court.
A spate of litigation delayed the resolution of BPSL, one of the first 12 cases mandated for resolution by the Reserve Bank of India (RBI) under the Insolvency and Bankruptcy Code (IBC).
Applications filed by former promoter Sanjay Singal and the Enforcement Directorate (ED) are still pending before the Supreme Court.
Singal has opposed the resolution plan on the grounds that JSW Steel being a joint venture partner and a related party of BPSL is barred under Section 29A of the IBC from submitting a plan. Section 29A bars those who have contributed to the default of the corporate debtor – in this case BPSL – or a “related party”.
JSW and BPSL are shareholders in a joint venture, called Rohne Coal Company Private Limited. The National Company Law Appellate Tribunal (NCLAT) had, however, found that the joint venture was mandated by the central government while allocating a coal block for which there were more than one applicant, and dismissed the plea.
Singal has also appealed against the NCLAT ruling that allowed JSW to keep Ebitda or profits earned during the insolvency process. Sources said BPSL had been Ebitda positive throughout the resolution process, which got boosted due to high steel prices.
Apart from Singal, the ED has also argued before the SC. It said Section 32A, which provides immunity to the corporate debtor for transgressions committed before the insolvency resolution process, was not applicable to the case.
The ED had stepped in about a month after JSW’s resolution plan was approved by the NCLT and attached assets of BPSL valued at Rs 4,025 crore under the Prevention of Money Laundering Act. The money laundering probe was based on a bank fraud case registered by the Central Bureau of Investigation in early 2019.
The point was argued before the NCLAT, too, which directed the release of the assets. The ED opposed it in the Supreme Court on the grounds that the NCLAT does not have jurisdiction under the IBC to interfere with a provisional attachment order.
Even as lenders and JSW Steel are set to close the BPSL transaction, the matters pending before the SC continue to overhang the acquisition.