Tata Steel, through its wholly-owned subsidiary Bamnipal Steel Ltd (BNPL), has acquired 72.65 per cent controlling stake in Bhushan Steel Ltd (BSL) for around Rs 36,400 crore.
The announcement was made by Tata Steel in a statement on May 18, 2018. The deal is set to help the banks recover NPAs amounting to over Rs. 36,000 crore in the time to come.
Speaking on the development Union Finance Minister Piyush Goyal said, "Liquidation value of Bhushan Steel was Rs. 14,541 crore but creditors received almost 4 times the amount (Rs. 36,400). This was possible due to the robust and transparent Insolvency & Bankruptcy Code.”
Acquisition: Key Highlights
• Under the deal, Tata Steel acquired 79 crore share at Rs 2 each. The deal was finalised in accordance with the approved Resolution Plan under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency and Bankruptcy Code 2016 (IBC).
• Tata Steel acquired all necessary approvals, like from Competition Commission of India (CCI) and National Compan Law Tribunal (NCLT). The company has also paid the admitted CIRP cost and employee dues, as required under IBC.
• Besides, settlement of Rs 35200 crores towards financial creditors of BSL will be carried out as per the terms of resolution plans and corresponding transaction documents.
• Additional Rs 1,200 crore will be paid to the operational creditors of BSL over the course of 12 months as per their admitted claims and as per the terms of the approved Resolution Plan.
• The total claims of financial creditors were Rs 56,018 crore and that of operational creditors of Rs 843 crore while the Liquidation value for Bhushan Steel was Rs 14,541 crore.
• Bamnipal Steel made its investment in BSL through a combination of the equity of Rs 158.89 crore and inter-corporate loan of Rs 34,973.69 crore.
• Additionally, BNPL paid Rs 100 crore to the financial creditors of BSL as consideration for novation of the remaining financial debt of BSL.
• The acquisition is being financed through a combination of an external bridge loan of Rs 16,500 crore availed by BNPL and balance amount through investment by Tata Steel in BNPL.
• The bridge loan availed by BNPL is expected to be replaced by debt raised at BSL over time.
• The lenders (banks) recovered almost the entire principal loan of Bhushan Steel through Rs 36,400 crore transparent bid by Tata Steel and also got 12 per cent stake in the company.
• For the first time, such a large loan resolution was achieved through upfront payment received by banks through the sale of a company.
• The step is a significant one for resolving the legacy of an unprecedented amount of bad bank loans inherited by the centre.
• With the recovery of Non-performing assets, banks will be in a position to offer more and affordable credit to major sectors of the economy especially the MSME sector. This will help boost employment and economy.
The nominees of BNPL have been appointed on the board of Bhushan Steel after its existing directors stepped down as per the approved resolution plan.
As per the plan, BNPL has been named as the promoter of BSL and the outgoing promoters have been classified as public shareholders.
• Tata Steel Ltd had in March 2018 won the bid to acquire Bhushan Steel in an insolvency auction under the IBC.
• The company was selected as the highest bidder to buy a controlling stake in Bhushan Steel, as part of bankruptcy proceedings.
• Tata Steel and India's biggest domestic steelmaker JSW Steel Ltd were the two primary industry bidders for the acquisition of Bhushan Steel.
• Bhushan Steel was among the 12 large stressed assets the Reserve Bank of India had referred to the National Company Law Tribunal for resolution in 2017.