Monday, 20 August, 2018

Resolution of Bhushan Steel bankruptcy is credit positive, says Moody's

The tribunal has listed L&T's plea in Bhushan Steel case on March 23 The tribunal has listed L&T's plea in Bhushan Steel case on March 23
Melissa Porter | 09 March, 2018, 17:28

Larsen & Toubro Ltd (L&T) on Thursday moved the National Company Law Tribunal (NCLT) seeking "higher priority" in repayment of dues owed by Bhushan Steel Ltd.

Although Tata Steel did not disclose the financial details of the acquisition bid, two people close to the bidding process told Mint that the company has offered close to Rs 34,800 crore as upfront payment to banks and an additional Rs 1,200 crore to the operational creditors.

There will be further discussions with Tata Steel on their resolution plan before it will be considered for final approval by the CoC, it added.

The advisors to the Committee of Creditors (CoC) and the RP of BSL are now in discussions with Tata Steel on the resolution plan, the statement said.

Though the news of Tata Steel becoming the highest bidder came after market hours, the Bhushan Steel stock plummeted 9.17 per cent, or Rs 4.10, to close near its 52-week low of Rs 40.60 on the Bombay Stock Exchange on Wednesday.

Bhushan Steel has an annual production capacity of 5.6 million tons and would significantly boost Tata Steel's annual output, now 13 million tons. The liquidation value of Electrosteel Steels is Rs 2,900 crore.

The sale of Bhushan Steel under Insolvency and Bankruptcy Code (IBC) in which Tata Steel has emerged as the highest bidder to acquire a controlling stake, is credit positive because it will help improve banks' asset quality, according to Moody's.

"We expect most rated Indian banks to have some exposure to Bhushan Steel and the resolution will particularly benefit State Bank of India the leader of the consortium of lenders to Bhushan Steel", Moody's said.

Meanwhile, Tata Steel has also submitted a bid for Bhushan Power and Steel Ltd.