Mumbai: Stemcor Holdings Ltd., a UK steel trader restructuring $1.25 billion of debt, reached an agreement with ICICI Bank Ltd. that will pave the way for the sale of its Indian iron and manganese ore units, said five people familiar with the situation.
Stemcor, which was restrained by an Indian court in September from selling the local assets after a petition from ICICI Bank, now has been told by the Mumbai-based lender it doesn’t oppose a sale, four of the people said, asking not to be identified before an official announcement.
London-based Stemcor, which posted a loss of £20 million ($32.7 million) in 2012, failed to repay an $850 million international credit line in May because of a decline in sales and has until the end of this month to reorganize its $1.25 billion debt. A delay in selling the Indian businesses may have jeopardized its restructuring plans with lenders including ABN Amro Bank NV, HSBC Holdings Plc and Societe Generale SA.
“The Stemcor assets should be very attractive for any steelmaker as they give ready access to iron ore, something which is difficult to find these days,” Rahul Jain, a Mumbai- based analyst with CIMB Securities India Pvt., said on Thursday. “The company’s assets appear to be sound with all approvals in place.”
Jindal Steel & Power Ltd. (JSPL), the country’s third-largest producer by market value, JSW Steel Ltd., the country’s third-biggest producer by volume, are among the potential buyers of the Indian assets, three of the people said. One bidder estimates the enterprise value of the Indian units, including the iron-ore mines, at about $1.5 billion, one of the people said.
Shares of JSPL rose 0.7% to Rs284.05 as of 10:15 am in Mumbai, while JSW Steel fell 0.2% to Rs930.5. ICICI Bank’s declined 0.7% to Rs1,128.
6 January Deadline
The competing bidders also may seek to acquire stakes held by the Saraf family, a minority shareholder in Stemcor’s Indian ventures, two people said.
The short-listed bidders must submit binding offers along with financing details by 6 January, three of the people said.
“Discussions relating to our Indian assets are continuing to make good progress,” Charles Armitstead, a London-based external spokesman for Stemcor, said in an email on Thursday. Manish Mallick, a spokesman for JSW Steel; Naman Saraf, a member of the Saraf family; and ICICI Bank spokesman Sujit Ganguli didn’t respond to email and text messages seeking comments.
“We will put in our bids in the second round for sure,” Jindal Steel’s managing director Ravi Uppal said in a telephone interview on Thursday. He declined to comment on whether his company would buy the Saraf family stake.
JSW was shortlisted for the Stemcor assets, JSW chief financial officer Seshagiri Rao said on 29 October.
The Calcutta high court in September issued an order saying Stemcor’s Indian assets are among the collateral for a Rs587 crore ($95 million) loan extended by ICICI Bank, in response to a petition by the second-largest Indian bank.
Closely held Stemcor owns the Indian ore mines and a pellet plant through majority holdings in Aryan Mining & Trading Corp. and Brahmani River Pellets Ltd., according to a company presentation. Stemcor also owns a slurry pipeline connecting the mine to the factory.
Stemcor has a 73% stake in Aryan Mining, which owns iron ore and manganese ore mines, while the Kolkata-based Saraf family own the rest of the stake, according to Armitstead. Aryan Mining owns 100% of Brahmani River, according to him.
The mines, situated in Odisha, can produce 3 million metric tonnes of iron ore a year, while the pellet plant has an annual capacity of 4 million tonnes.
The bidders are attracted by the ready availability of the steelmaking raw material, whose output in India fell 15% to about 135 million tonnes in the fiscal year that ended 31 March, following government and court-led restrictions to check illegal mining. Bloomberg
Rajesh Kumar Singh in New Delhi also contributed to this story.