Insolvency Proceedings Scenario:

In order to tide over the mounting non-performing assets of banks, especially in the power and steel sector, the government legislated Insolvency and Bankruptcy Code (IBC). After one and a half year, lender’s filing cases against defaulting corporate debtor started picking up the pace, but only a few are reaching its desired conclusion and yielding in resolution plan. As per information available (June 2018), 33 cases have successfully resolved the matter by way of resolution plan till date. Amongst them, the bigger names are Bhushan Steel and Electro steel steels Ltd which are part of 12 companies which were initially recommended by RBI for insolvency proceedings. In these two companies, financial creditors have taken a haircut of 36.51% and 59.62% respectively.

Table 1: Top 10 Cases Resolved under the IBC (All figs in INR Crores – As of June 2018)

Sl.
No.
Name of Corporate Debtor Total Admitted Claims Admitted Claims of FCs# Liquidation Value Resolution Amount for FCs# Haircut taken by FC# (%)
1 Bhushan Steel Ltd. 57,505.05 56,022.06 14,541.00 35,571.00 36.51%
2 Electrosteel Steels Ltd. 13,958.36 13,175.14 2,899.98 5,320.00 59.62%
3 Kohinoor CTNL Infrastructure Company Pvt. Ltd. 2,578.64 2,528.40 329.90 2,246.00 11.17%
4 MBL Infrastructure Ltd. 1,506.87 1,428.21 269.90 1,597.13 0.00%
5 Sree Metalik Ltd. 1,289.73 1,287.22 340.62 607.31 52.82%
6 Kamineni Steel & Power India Pvt. Ltd. 1,523.50 1,509.00 760.00 600.00 60.24%
7 Orissa Manganese & Minerals Ltd. 5,414.49 5,388.54 301.02 310.00 94.25%
8 Sharon Bio-Medicine Ltd. 917.92 891.38 182.69 294.03 67.01%
9 West Bengal Essential Commodities Supply Corporation Ltd. 344.93 344.93 NC 185.84 46.12%
10 Shirdi Industries Ltd. 695.74 673.88 103.05 176.36 73.83%

(#Financial Creditors – FC. Source: IBBI, CIRP)

Background

Monnet Ispat & Energy Ltd was amongst one of the 12 companies which were dragged into insolvency proceeding by lenders on recommendation by RBI and admitted by NCLT in July 2017. Total admitted claims for the company during Insolvency proceedings was around Rs 11,478 crores, out of which over 11,014 crores (96%) pertaining to financial creditors and rest are of all other creditors including employees and workmen.

Resolution Plan

There was only one bidder who put forward resolution plan, a consortium of JSW and AION Investment which showed interest in acquiring steelmaker.

Structure

Monnet-Ispat-Resolution-Insolvency Resolution-JSW-AION-1

The offers to lenders of Rs. 2,892.12 crores out of which Rs 2,676.92 crores are paid upfront (including purchase of OCPPS by consortium) and Rs 215.2 crores settled by way of conversion of debt into equity. Further Rs 25 crores will be paid to Operational creditors in a time of one year. However, to note that Total Infusion by Consortium is Rs. 3,457 Crores out of which Rs. 875 crores will be infused as Equity and CCPS and other as a loan.  The details as follows:

Please Subscribe to read the full article.