Private sector lender Axis Bank has sold its loans to Essar Steel worth around R1,000 crore to Edelweiss Asset Reconstruction Company (ARC) at a discount of 45%, sources told FE. It is the fourth bank to sell Essar Steel loans after HDFC Bank, ICICI Bank and Federal Bank sold a total of R2,220 crore loans.
Essar Steel reported gross revenues of R4,482 crore in the three months to June, up 12% year-on-year. Flat steel production in Q1FY17 was 1.22 million tonnes, up 48% over the same period last year. The management hopes to increase capacity utilisation substantially by March next year, producing 80% of its rated capacity. Other lenders in the 20-member consortium include State Bank of India (SBI), IDBI Bank and Punjab National Bank.
Meanwhile, last year, Axis Bank had sold its exposure to Abhijeet Group loan to an asset reconstruction company (ARC).
FE had reported last week that a group lenders to Essar Steel had decided recast the R44,000-crore exposure to the company rather than take a 50% haircut by selling it to Asset Care and Reconstruction Enterprise (ACRE), which is backed by Hong Kong-based SSG Capital. “We are not comfortable taking such a big haircut by selling to an ARC and prefer a recast plan which would mean a smaller haircut,” a senior banker had said.
The steelmaker had, at a recent meeting, requested banks to convert R12,200 crore of loans into preference capital and equity shares. While R9,000 crore was sought to be converted into preference shares, to be redeemed after 12-18 years,the company requested the remaining R3,200 crore be converted into common equity. For the balance R31,800 crore, the company has sought an extended repayment period.
It is the fourth bank to sell Essar Steel loans after HDFC Bank (R 550 crore), ICICI Bank
(R1,600 crore) and Federal bank (R70 crore) sold their loans
Essar Steel reported gross revenues of R4,482 crore in the three months to June, up 12% year-on-year
Last year, Axis Bank had sold its exposure to Abhijeet Group to an ARC
The steelmaker had recently asked banks to convert R12,200 crore of loans into preference capital and equity shares