ALSO READInsolvency Code ordinance: Promoters' loss is PEs' gain Promoters of stressed companies may challenge IBC tweak in court Insolvency ordinance: Defaulting promoters all set to lose their companies Insolvency and Bankruptcy Code: Lenders, bidders split on assets valuation Stressed asset buyers may get relief from competition law, MAT
Promoters of five steel majors undergoing insolvency resolution will have to cough up a total of at least Rs 29,000 crore to be eligible to submit bids and retain their companies. Some other companies trying to resolve their bad loans under the Insolvency and Bankruptcy Code (IBC) are seeking details from lenders about the principal and interest they have to pay for being able to bid for their own assets.
The recent amendments to the IBC practically barred promoters from re-acquiring their own assets, leaving only a small window to convert their non- performing assets into standard assets by paying the overdues. According to steel companies, which have had discussions on this issue with lenders, the overdue includes the principal in default along with interest which has not been paid unless the lenders have recalled the entire loan.
For Bhushan Power, the overdue amount based on this definition is estimated at around Rs 10,000 crore while in the case of Bhushan Steel, it is over Rs 6,000 crore. In Electrosteel Steels, the amount due is to the tune of Rs 2,500 crore, it is learnt. According to sources, Essar Steel has total overdues of around Rs 7,000 crore, including a Rs 3,000-crore interest component. Monnet Ispat’s overdues are around Rs 3,500 crore, according to those who have shown interest in bidding for the asset.
Another steel company, which is in the National Company Law Tribunal (NCLT), pointed out that it’s difficult to find investors because paying the overdue money would make the promoters eligible bidders, but there’s no guarantee that their resolution proposal would be approved by the committee of creditors as the best one. ‘’So you are risking your money,” he said.
There are other restrictions too related to eligibility of bidders. Among those barred from bidding are willful defaulters, as well as holding company, subsidiary or associate company or related party of promoters of the distressed asset. The code defines a “related party” as someone who controls more than 20 per cent of the voting rights in the distressed company and also a director in a public company with more than 2 per cent stake.