JSW Steel seeks time till March to close BPSL deal

MUMBAI: Sajjan Jindal-led JSW Steel has asked for time until March next year to complete the acquisition of Bhushan Power & Steel Ltd (BPSL) as part of an insolvency resolution plan. Creditors had expected JSW to start making payments by March this year.The company has sought “flexibility up to March 31, 2021, for implementation” of the Rs 19,700 crore resolution plan due to the “dislocation of the financial markets” caused by the Covid-19 pandemic, it said in a letter last week to the committee of creditors (CoC) led by Punjab National Bank (PNB) that ET has seen. “Given the unprecedented situation caused by Covid-19, there has been a severe dislocation in the financial markets. While we will do our very best to implement the plan at the earliest, post disposal of all appeals before the SC (Supreme Court), we request flexibility up to March 31, 2021, for implementation,” the letter said.Challenges Facing BanksThe move, which could put the much-delayed resolution of the 3.5 million tonne BPSL steel plant in limbo, highlights the challenges facing banks looking to recover bad loans amid the disruption caused by the Covid-19 outbreak. JSW pointed out in its letter that the CoC has the flexibility to change the schedule under the provisions of the resolution plan.76635531The communication to the CoC was in response to a letter written to the company by lenders warning that any interest losses due to delays in execution of the resolution plan would have to be borne by JSW. Lead bank PNB, on behalf of the CoC, said lenders will start levying interest on loans to BPSL 30 days after the date of the National Company Law Appellate Tribunal (NCLAT) order confirming JSW as winner of the bid in February 2020. That’s because JSW hadn’t started making payments by mid-March as expected, it said.Before the letter to the CoC this week, JSW had not made any payments on the grounds that it was waiting for the Supreme Court to complete its hearing in a case that involves an Enforcement Directorate investigation into allegations of fraud against the erstwhile promoters of BPSL.“This letter by JSW is a fresh twist in the case,” said a person familiar with the matter. “The company has delayed payment citing various issues like immunity from the liabilities of previous promoter, to completion of ED investigation.” This latest letter could lead to a further delay in the three-year-old case, he said.A senior JSW executive said that due to the current situation, what took five days before now took more than 50 days to complete. “This is the main reason for seeking an extension. We are very much interested in completing the deal,” the person said.The executive said JSW has asked for the lifting of any attachment by the Enforcement Directorate to enable the company to get unencumbered assets.“The matter is sub judice before the Supreme Court as all the parties in the last hearing on June 10 were asked to file their submissions within two weeks in response to the application filed by JSW Steel,” he said. “Pending the adjudication of appeals and CoC application before SC, the plan is incapable of implementation, more so when the assets of BPSL continue to be attached by ED.”The money due from JSW is crucial for lenders such as State Bank of India and PNB as recoveries have dried up due to the economic slump. Banks now can move the National Company Law Tribunal (NCLT) or invoke Rs 100 crore bank guarantees to force JSW to pay.Bankers, however, said their hands are tied because of bleak recovery prospects due to the economic situation.“The Rs 19,700 crore JSW was willing to pay was much more than the Rs 12,000 crore offered by Tata Steel for this plant,” said a financial creditor. “I doubt we will get a better price in the present situation. In that sense we are stuck. We will firm up our plan in the next few days.”JSW had been declared the winning bidder by NCLT in September 2019. However, it approached the NCLAT seeking immunity from prosecution against any investigation pursued by government agencies against the previous promoters. That immunity was granted by the NCLAT in February. However, the company is also party to the case against the previous owners in the Supreme Court. The previous owners claim that since JSW had a business relationship with BPSL, it should not have been allowed to bid since it was a related party.The banks have sought to assure JSW that they will return its money if the court doesn’t rule in favour of the company. JSW told the lenders in its letter that it’s committed to the transaction because the deal is “strategic” for the company.To be sure, JSW has invested in infrastructure in Odisha by aggressively bidding for iron ore mines, ahead of completing the BPSL acquisition. Bankers fear the company may have second thoughts because of the sharp downturn in India's economic prospects.

from Economic Times https://ift.tt/388HTAD