The Mumbai bench of the National Company Law Tribunal on Thursday approved the Aion-JSW Steel resolution plan for Monnet Ispat and Energy “with modifications” a year after it was admitted to the bankruptcy court for defaulting on debt of Rs 10,000 crore.
The plan for the 1.5 million tonne steel maker based in Chattisgarh was approved by a bench presided by BSV Prakash Kumar and Ravi Kumar Duraisamy with a modification that the coal mine Gare Palma IV/7 will not be included in the liquidation value of the company as the agreement for the mine had been cancelled by the coal ministry. The detailed order is expected by Monday.
“The plan is approved with modifications that the coal mine will not be included,” said Justice BSV Prakash Kumar as he pronounced his order at the end of a long hearing during which he heard (and dismissed) a set of fresh pleas related to the resolution plan.
The judge also made the consortium sign an undertaking that a proposed capital reduction plan will not entail elimination of (minority) shareholders going forward. As cited in the court, the resolution plan aims to restructure the capital of the company where the number of shares held by shareholders of the company will be reduced to one-third, which could pose a danger of elimination of shareholders holding small quantities of the company’s total shares.
The undertaking follows last week’s development when the consortium had agreed to pay an additional Rs 25 crore to the operational creditors of the distressed steel company after the tribunal pointed out that there was nothing for small companies in the initial offer of Rs 2,850 crore. The new offer now stands at Rs 2,875 crore with an additional Rs 1,000 crore pledged as equity and working capital requirements.
The private equity fund-steel major consortium will hold 75% of the equity in the company out of which Aion Capital will have a 70% share with JSW Steel controlling 30%. The lenders stake will be 18%. The consortium was the sole bidder for Monnet which will see lenders losing 75% of the total loans given out of which the State Bank of India had the maximum exposure.
In the hearing on Thursday, the judge also dismissed a plea by an unsecured financial creditor Deutsche Bank that wanted to be treated at par with the unsecured operational creditors who will now be getting Rs 25 crore on a pro rata basis. The counsel for Deutsche Bank argued that the company owes Rs 151 crore to the bank out of which it is getting back only 2.58% of its total exposure (Rs 3.9 crore) and hence it should also get the benefit of the additional Rs 25 crore that the consortium will be paying.
Justice Kumar said this does not amount to a violation of rights as the bank is part of the committee of creditors and had given its assent to the original plan whereas the small operational creditors were absent from all decision making.
The approval makes Monnet Ispat the third steel company to have gotten the go-ahead for resolution in RBI’s list of the top 12 defaulters. The other two companies that have crossed over to a new management are Bhushan Steel in favour of the Tata Steel and Electrosteel Steels going to the Vedanta group.
Source: Economic Times