Monnet Ispat's creditors approve resolution plan by AION and JSW Steel

The resolution application will be filed within the 270-day period which is April 13

The Committee of Creditors has approved the resolution plan for Monnet Ispat & Energy submitted by the JSW-AION combine.

The letter of intent will be issued shortly, sources close to the development said. The resolution application will be filed by April 13, when the stipulated 270-day period ends. The upfront offer for Monnet Ispat & Energy is Rs 27.90 billion, and the claims made by the lenders are around Rs 114 billion, which includes new claims of around Rs 8.09 billion, admitted in accordance with the instructions of the Mumbai Bench of the National Company Law Tribunal (NCLT).

The total bid includes bank loans of Rs 27.90 billion), beside equity (Rs 3.89 billion), convertible preference shares (Rs 2.80 billion), quasi equity (Rs 2.50 billion) and additional debt or equity (Rs 2 billion). The new claims had increased the upfront payment marginally, sources said. The total bid value is in excess of Rs 37.50 billion.

Sumit Binani, the resolution professional for Monnet Ispat & Energy, declined to comment.

After the implementation of the resolution plan, JSW-AION will hold 75 per cent stake in the company, lenders 18.75 per cent, and the existing promoter group 3.16 per cent. At present, the promoter group holds 25.27 per cent and financial institutions around 51 per cent. The rest is with public shareholders. 

Monnet Ispat & Energy was one of the first companies in which the lenders had converted debt into equity under the strategic debt restructuring (SDR) scheme. Subsequently, it went into the first list of Reserve Bank of India (RBI)-mandated cases for debt resolution under the Insolvency and Bankruptcy Code (IBC). So far, from the list, resolution applications for Bhushan Steel and Electrosteel Steels have been filed with the NCLT for approval. 

Monnet Ispat & Energy will add 1.5 million tonnes (MT) of steel-making capacity to JSW Steel's existing 18 MT. JSW had bid for Bhushan Steel and Bhushan Power & Steel, but Tata Steel emerged as the highest bidder in both. JSW is now partnering Numetal as an investor in the second round of bidding for Essar Steel.

With Monnet Ispat & Energy, JSW Steel will get a foothold in the eastern market. Monnet Ispat & Energy has an integrated steel plant at Raigarh, which produces hot-rolled plates, rebars and structure profiles. It also has a 230-megawatt captive power plant in Chhattisgarh.

Monnet Ispat & Energy is the flagship company of the Monnet group and has a 0.8-MT sponge iron plant, a 2-MT pellet plant and a 0.96 MT sinter plant. The company also has 7.5 MT of coal beneficiation facilities in Chhattisgarh and Odisha.

As part of the resolution plan, non-core assets of Monnet Ispat & Energy could be hived off to into a separate company and sold at fair market value later.