Lenders to loss-making Visa Steel are planning to classify the exposure a non-performing asset (npa) since a strategic debt restructuring (SDR) plan for the firm has been held up. The scheme has been stopped by the Orissa High Court following an objection by non-consortium lender HUDCO, sources told FE. Moreover, the promoters of Visa Steel have not yet agreed to bankers converting loans, to some subsidiaries, into equity shares.
In FY15, Visa reported a loss of R273 crore on the back of R1,260 crore in net revenues. The finance costs more than doubled to R229 crore and according to Bloomberg data, the gross debt stood at R3,094 crore, up 10.5% over FY14.
“The company does not want banks to convert the loans given to a few subsidiaries and is therefore resisting the move although an SDR has been agreed upon,” a banker confirmed to FE. He added that while the Reserve Bank of India(RBI) was urging banks to clean up balance sheets, it was not possible to wait any longer. A conversion would allow banks to retain the standard asset classification for 18 months following the SDR. “Moreover, the case is still not resolved at the Orissa High court,” the banker noted.
Promoters of Visa Steel were present at Tuesday’s joint lenders’ forum (JLF) meeting held at State Bank of India (SBI). At the meeting, banks are understood to have expressed their displeasure with the company’s performance and asked the promoters to rope in an external investor. “We will be classifying the asset as non-performing since the debt-to-equity conversion isn’t likely soon,” a senior public sector banker present at the meeting said.
FE had earlier reported that the consortium of lenders to Visa Steel, led by SBI, is looking to de-merge and sell its stake in the company’s special steels unit. However, HUDCO has objected to the move in the Orissa High Court, fearing dilution of its collateral. Of the `3,000 crore that Visa Steel owes lenders, HUDCO’s exposure is just `80 crore.
Visa’s borrowings of around `3,000 crore was restructured under the corporate debt restructuring (CDR) mechanism in FY13. In September last year, lenders decided to convert a large portion of debt into equity using the SDR scheme.
Two people aware of the development told FE that Hudco has declared Visa Steel an NPA. Other lenders to Visa Steel are Bank of Baroda (BoB), Punjab National Bank (PNB), Bank of India (BoI), Canara Bank a few banks from the SBI Group and Syndicate Bank. According to the FY15 annual report, the company plans to expand capacity from 0.5 million tonne per annum (TPA) to 1 million TPA special steel at Kalinganagar in Odisha. The 0.5 million TPA special steel business includes production of hot metal, pig iron and other materials for supply to the automobile, construction, infrastructure, engineering, railway and defence sectors.