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Business News/ Companies / News/  SBI puts loan exposure to Essar Steel on the block

Mumbai: The State Bank of India (SBI) on Wednesday put on sale its 15,431 crore exposure to Essar Steel Ltd, as last-minute litigations continue to delay the recovery of its loans to the steelmaker. The bank has set the aggregate reserve price for the full-cash sale at 9,588 crore.

In a notice on its website, SBI said its exposure to Essar Steel includes categories such as working capital, term loan, corporate loan, export performance bank guarantee and standby letter of credit. The bank said the loans may be assigned in whole or in part to buyers and all the security in relation to that will be transferred and shared pari passu to the extent of the amount sold. Asset reconstruction companies, other banks and non-banking financial companies can apply to buy these loans.

This is SBI’s second attempt to sell its Essar Steel loan exposure after dropping the process in September last year. Other lenders such as HDFC Bank Ltd, Axis Bank Ltd, ICICI Bank Ltd, and Federal Bank have already sold their Essar Steel exposure, either partly or in full, over the last few years.

Essar Steel owes more than 49,000 crore to more than two dozen banks led by SBI. It runs a 10-million-tonne steel mill at Hazira in Gujarat, which is involved in ore beneficiation, pellet-making, iron-making, steel-making, and downstream facilities.

On 25 October 2018, Essar Steel’s committee of creditors (CoC) voted in favour of handing over the debt-laden company to ArcelorMittal after it cleared pending dues of Uttam Galva and KSS Petron. ArcelorMittal’s resolution plan envisages an upfront payment of 42,000 crore to lenders and an additional 8,000 crore towards capital expenditure.

On Wednesday, SBI said the resolution plan has been approved and filed before the Ahmedabad bench of the National Company Law Tribunal (NCLT). The minimum recovery for SBI under the plan is 11,313.42 crore and the reserve price of 9,588 crore has been fixed on the basis of net present value of minimum recovery discounted at 18%.

Earlier this month, the NCLT Ahmedabad said it will pronounce before 31 January its order on a petition filed by Essar Steel shareholders for submission of its proposal to settle dues amounting to 54,389 crore. This came after observations made by the National Company Law Appellate Tribunal (NCLAT), which had asked NCLT Ahmedabad to expedite the insolvency case filed against Essar Steel (India) Ltd.

Essar Steel Asia Holdings Ltd (ESAHL), which holds 72% of shares in Essar Steel, has submitted to NCLT Ahmedabad a proposal for settling the entire debt for about 54,389 crore.

In October 2018, the Supreme Court allowed ArcelorMittal and Numetal Mauritius to bid for Essar Steel, provided they paid the dues of defaulters connected to them within two weeks.

At the Ahmedabad NCLT, the CoC and the resolution professional have opposed ESAHL’s debt recast plan, claiming it was against the apex court’s order and also against the insolvency law and that such proposals by Essar Steel shareholders have been rejected by them in the past.

ArcelorMittal and the lenders have been seeking permission of the tribunal to complete the debt resolution process, while Essar Steel Asia Holdings, Standard Chartered Plc, and several operational creditors have objected to ArcelorMittal’s proposal.

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Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Updated: 17 Jan 2019, 08:29 AM IST
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