As per the market reports, NCLT (National Company Law Tribunal) has finally given its approval for Tata Steel’s resolution plan of acquiring debt-ridden Bhushan Steel under the Insolvency and Bankruptcy Code (IBC).
Bhushan Steel was identified as one of the 12 NPAs (non-performing assets) by RBI (Reserve Bank of India) in June last year and was referred to NCLT for non-payment of loans worth INR 481 billion as on 31 Mar’17. According to the recent updates, the company’s financial debt as on 1 Feb’18 stood at INR 56,051.16 crore.
The bidding process
In order to acquire stressed assets of Bhushan Steel, Tata Steel, JSW Steel and five hundred employees of Bhushan Steel in partnership with a Singapore –based fund had also placed their bids. However, only Tata and JSW Steel were shortlisted as two bidders with high bids of above INR 30,000 crore.
Yet, the bidding for Bhushan Steel was quite fierce as the CoC (Committee of Creditors) had decided to negotiate only with the highest bidder.
However, in Mar’18, Tata Steel was identified as the highest bidder to acquire controlling stake of BSL (Bhushan Steel Limited) by the CoC (Committee of Creditors).
The hindrances involved
After this announcement, the employees of Bhushan Steel moved to NCLT against Tata Steel’s bid claiming that Tata Steel is an ‘undischarged insolvent’ (a person/company who cannot pay their debts) and is not entitled to bid under section 29A of IBC Code. In response to this, the Delhi-bench of NCLT then asked the CoC to consider the objections raised by the employees of Bhushan Steel and communicate them to the tribunal within a certain time frame.
On Tuesday 15 May, NCLT dismissed the plea by Bhushan Steel Employees Union against Tata Steel’s resolution plan for being in violation of Section 29A of IBC and penalized it with INR 1 lakh.
It also threw out a petition by Lasen & Toubro Ltd (L&T), which is one of the operational creditors of Bhushan Steel, to be accorded higher priority while the loan was being paid off by Tata Steel as it was secured credit. The tribunal has fined L&T also with INR 1 lakh.
The NCLT has also rejected Bhushan Energy’s plea for continuance of its power purchase agreement (PPA) with Bhushan Steel. In its resolution plan, Tata Steel has proposed the termination of the PPA with the energy company clearing all the hurdles in acquisition process of Bhushan Steel.
Tatat Steel’s offer for BSL
Tata Steel Ltd has offered to make an upfront payment of INR 35,200 crore to creditors of Bhushan Steel and has offered a 12.27% stake in the acquired company. Tata Steel’s resolution plan was reportedly approved by the Bhushan Steel’s committee of creditors (CoC) with a 99.8% majority vote.
According to the reports, it would take another 60-90 days to close this entire transaction. The whole process would require Tata Steel to make the proposed payment to the lenders and get necessary approvals from various authorities like the Securities and Exchange Board of India (Sebi) and others.
Bhushan Steel that has integrated steelmaking capacity of 5.6 MnT was declared as an NPA (Non-performing asset) in Jun’17 by RBI (Reserve Bank of India).
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