International Group has emerged as the most likely candidate for acquiring a controlling stake in financially troubled Electrosteel Steels, the first company that lenders have put on the block as part of the strategic debt restructuring (SDR) scheme. First International’s offer is more attractive than that of Tata Steel, said two bank executives who didn’t want to be named. Kolkata-based Electrosteel had loans of Rs 10,235 crore at the end of March 2015. Under SDR scheme, banks convert debt that companies can’t repay into equity and sell a controlling stake to recoup some of their money as they try and alleviate their bad loan burden. First International has asked for a loan waiver of Rs 2,559 crore while Tata Steel, the world’s second-largest steel producer, has asked for a waiver of Rs 6,241 crore, said the two people cited above. Both were present at recent meetings of the asset sale committee, which consists of lenders. The overseas group proposes to invest Rs 4,718 crore through the conversion of debt to cumulative redeemable preference shares (CRPS). Tata SteelBSE -1.34 % has proposed an investment of Rs 4,294 crore through a structure that involves conversion of debt into equity and CRPS. Lenders had invoked SDR in July 2015 and in December proposed to convert 2,500 crore of debt into equity. However, the conversion did not take place as they were negotiating with prospective buyers. The change of management is proposed to be made outside the SDR process, said one of the people. “The lead bank, State Bank of India, asked all lenders to give a mandate to change management outside SDR and consider First International as a prospective buyer,” said the person. This means the prospective buyer will buy equity directly in the company and not through the banks.
Source: Economic TimesFirst International may acquire stake in Electrosteel.
Industry: Steel 2016-02-04
