Home / Companies / News /  Bhushan Steel’s debt revamp gets approvals from lenders

New Delhi-based steel maker Bhushan Steel Ltd has won majority banker approvals to refinance its 35,000 crore debt under the Reserve Bank of India’s (RBI) 5/25 scheme, two people in the know said.

Under the 5/25 scheme, banks can extend loan repayment periods up to 25 years, with an option of refinancing the loan every five years.

In a notification on BSE Ltd on 5 June, the company had stated that the debt refinancing scheme was approved by a joint lenders’ forum (JLF), but was still pending approvals from individual bank boards.

“Over 70% of the lenders in the lending consortium have already approved the corrective action plan. We have a four-year moratorium on principal repayment. After this, there will be a 21-year repayment period, with a provision to refinance every five years," said Nitin Johari, director-finance, Bhushan Steel.

Bhushan Steel is among the biggest corporate exposures for the Indian banking system and, therefore, lenders cannot afford to let it slip into the non-performing category.

“The account is standard and the promoters are cooperating with lenders in the management of debt. We will be looking at ways to reduce the indebtedness of the company," said the executive director of a large public sector bank on conditions of anonymity as he is not allowed to talk to the media.

The 51-lender JLF was set up in August last year after the company’s vice-chairman, Neeraj Singal, was arrested by the Central Bureau of Investigation (CBI) on alleged corruption charges.

On 20 March, Mint had reported that the JLF was working on a corrective action plan for the integrated steel maker and that the 5/25 refinancing scheme would be the most preferred mode of debt management.

Apart from refinancing debt, Bhushan Steel is also trying to hive off and sell some non-core assets to reduce debt. The JLF had approved the move in August last year. The steel producer recently agreed on a sale and leaseback of its oxygen plant in Odisha to improve cash flow.

Bhushan Steel’s net loss in the March quarter stood at 360.77 crore, higher than the 23 crore loss reported in the year-ago period, as net sales dropped by 3.6% year-on-year to 2,420 crore.

The company has reported losses for six consecutive quarters now. The company’s other income during the fourth quarter also fell to 710 crore, down from the 1,329 crore reported in the same quarter last year.

Singal was arrested by the Central Bureau of Investigation (CBI) on 7 August on charges of bribing then Syndicate Bank Ltd chairman S.K. Jain to get loan approvals. Jain himself was arrested on 2 August, along with Ved Prakash Agarwal, chairman-cum-managing director of Prakash Industries Ltd, chartered accountant Pawan Bansal and three others. On 1 October, those accused in the bribery case received bail from a CBI court.

The JLF is being led by Punjab National Bank (PNB) and State Bank of India (SBI). SBI has lent 6,000 crore to Bhushan Steel, while PNB has not disclosed its exposure.

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