SBI puts on sale Essar Steel loan of Rs 15,431 crore

Mumbai: With last minute-litigation delaying recovery of Essar Steel loan, State Bank of India (SBI) on Wednesday put on sale its Rs 15,431-crore exposure to the steelmaker on a full-cash basis. In the sale notice on its website, the bank said the aggregate reserve price for the bidding has been set at Rs 9,588 crore.

These include categories like working capital, term loan, corporate loan, export performance bank guarantee (EPBG) and standby letter of credit (SBLC). The bank said that 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. SBI said that the loan could be sold to asset reconstruction companies (ARCs), other banks and non-banking financial companies (NBFCs).

This is SBI’s second attempt to sell its Essar Steel exposure after it withdrew from the process in September last year. Other lenders like HDFC Bank, Axis Bank, ICICI Bank and Federal Bank have sold their exposures, either partly or in full, over the last few years.

Essar Steel owes more than Rs 49,000 crore to over two dozen banks led by State Bank of India. 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.

The committee of creditors (CoC) of Essar Steel, on 25 October, 2018, 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 Rs 42,000 crore to lenders and an additional Rs 8,000 crore towards capital expenditure.

SBI said on Wednesday that the resolution plan has been approved and filed in NCLT Ahmedabad. As per the approved resolution plan of ArcelorMittal, minimum recovery to SBI is Rs 11,313.42 crore and the reserve price of Rs 9588 crore is on the basis of net present value (NPV) of minimum recovery discounted at 18%.

Earlier this month, the Ahmedabad bench of the National Company Law Tribunal (NCLT) 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 worth Rs 54,389 crore. The pronouncement 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 Rs 54,389 crore.

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

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