11 September 2019: Lenders to Bhushan Power and Steel Ltd (BPSL) have held talks with JSW Steel Ltd, which had won the stressed steel mill bid under the insolvency code, as the acquirer is not entirely happy with the takeover terms cleared by the bankruptcy court.
Banks are trying to improve the final terms for JSW Steel, which had made two key demands, but were not entertained by the Delhi bench of the National Company Law Tribunal (NCLT).
BPSL’s committee of creditors (CoC) met top company executives this week to arrive at the final terms of the takeover, two people aware of the development said, requesting anonymity.
On 5 September, Mint reported that JSW Steel, India’s second-largest private steelmaker, had sought concessions, including protection from the consequences of a fraud investigation into BPSL and discharging statutory liabilities.
JSW can challenge the NCLT decision in higher courts, but that would delay the resolution process further. A member of the CoC, one of the two cited above, said that banks were keen to receive the upfront payment of ₹19,700 crore within 30 days of the NCLT order.
“We’re holding meetings with the company to see what can be worked out,” he said. “JSW primarily wants its assets protected from the CBI investigation, and that is something the CoC cannot offer. But we want the resolution process to close at the earliest.”
JSW Steel has offered ₹19,700 crore in upfront cash to BPSL’s lenders and has agreed to infuse ₹350 crore in the steelmaker to revive it. While the offer was accepted by the NCLT, Sajjan Jindal-led JSW Steel also wanted protection from litigation after the change in control.
JSW had sought protection after a forensic audit revealed potential fraud and diversion of money by its erstwhile promoters. The allegations are being investigated by the Central Bureau of Investigation.
The NCLT also ruled that the operating profits that BPSL earned during its two-year-long resolution period be distributed among the company’s financial and operational creditors. JSW believes, instead, that these profits were part of the company’s assets and should stay with BPSL.
Financial creditors of BPSL, led by the State Bank of India, Punjab National Bank and Bank of India, prefer to finalize the terms that are agreeable to all parties rather than run the risk of more litigation, the second person said.
When contacted, a JSW Steel official said: “We are going through the judgment and, as per our legal input, we will take a call after reviewing the order.”
BPSL operates a 3.5 million tonne (mt) steel plant in Odisha. Under its earlier promoter, Sanjay Singal, the company had accumulated debt of over ₹47,000 crore, including a principal amount of ₹42,100 crore. BPSL was among the Reserve Bank of India’s first list of 12 non-performing accounts referred to the bankruptcy courts under the Insolvency and Bankruptcy Code (IBC) in June 2017. The resolution process has taken over 800 days. On 5 April, the CBI had pegged the BPSL fraud at ₹2,348 crore. After the details of the CBI investigation emerged, PNB informed stock exchanges that the bank’s loans had been misappropriated and the company’s books of accounts manipulated.