1. Bhushan Steel snubbed by bankers, all fresh loans stopped; firm saddled by Rs 44,500 cr debt

Bhushan Steel snubbed by bankers, all fresh loans stopped; firm saddled by Rs 44,500 cr debt

The committee of creditors to Bhushan Steel is reluctant to sanction fresh interim funding of around Rs 500 crore as part of the corporate insolvency process, senior bankers told FE.

By: | Mumbai | Updated: September 25, 2017 7:04 AM
Bhushan Steel,  NCLT, Reserve Bank of India, Insolvency and Bankruptcy Code, SBI, Punjab National Bank, Singhal family, State Bank of India Bhushan Steel, which owes banks a whopping Rs 44,447 crore, had initially objected to the insolvency proceedings alleging SBI had inflated the dues by around Rs 100 crore.

The committee of creditors to Bhushan Steel is reluctant to sanction fresh interim funding of around Rs 500 crore as part of the corporate insolvency process, senior bankers told FE. The company already owes banks a whopping Rs 44,500 crore. Bankers said that they conveyed their decision to the resolution professional (RP) Vijaykumar V Iyer, after he presented the plan at a recent meeting.“We have pointed out we already have a large exposure to Bhushan Steel and any additional loans will be difficult to recover,” the bankers mentioned above said. They added that the RP may look at other institutions such as asset reconstruction companies which are keen to offer loans at higher interest rates.

Bhushan Steel, which owes banks a whopping Rs 44,447 crore, had initially objected to the insolvency proceedings alleging SBI had inflated the dues by around Rs 100 crore.  The company’s counsel had said that SBI classified both term loans and working capital as default debt but the company had not received a recall notice for the entire amount. The counsel claimed 65% of the debt referred to as default was in the form of working capital. However, the NCLT had admitted insolvency proceedings against the company in July.

Lenders, sources said, have explained to the RP that Bhushan Steel would not be able to increase its production substantially even with fresh loans. “Therefore, the company can easily manage without the interim finance,” lenders explained. While State Bank of India (SBI) heads the consortium for working capital, Punjab National Bank (PNB) is the leader of the term loan consortium. Banks have been unwilling to commit fresh credit to companies against whom insolvency petitions have been admitted. For instance, it was recently reported that lenders to Essar Steel were not keen to sanction working capital loans of Rs 1,000 crore. The company is promoted by the Singhal family who collectively hold 43.74% in it; the firm reported a net loss of Rs 3,501 crore in 2016-17 on revenues of Rs 15,027 crore. The company claimed in the annual report for 2015-16, it has been facing severe stress in its debt servicing from past few years.

Bhushan Steel is among the 12 companies referred to NCLT benches across the country following a Reserve Bank of India (RBI) press release. In its June 13 press release, the central bank had directed lenders to refer a dozen companies to the bankruptcy court under the Insolvency and Bankruptcy Code (IBC) following several failed attempts at loan recovery.

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