Insolvency proceedings: Tata Steel readying blueprint to buy Bhushan Power

Tata Steel is gearing up to acquire Bhushan Power & Steel, going through insolvency proceedings, if it gets the requisite approvals.

Much like the Bhushan Steel deal, Tata Steel is keeping its financing arrangements ready and is sounding out people within the organisation for Bhushan Power & Steel.

As far as the financing is concerned, Tata Steel would take a short-term loan, the balance would be a mix of cash accruals and there could be possibly some leveraging at the holding company level.

“We will not be in a position to comment on Bhushan Power & Steel as the matter is under the IBC (Insolvency & Bankruptcy Code) process,” a Tata Steel spokesperson said.

Tata Steel recently got a rating done by ICRA for a Rs 90 billion commercial paper programme. Will it be used for Bhushan Power? The spokesperson replied the commercial paper rating was for general working capital and other requirements. Tata Steel didn't comment on the timing of the commercial paper issuance.

For Bhushan Power & Steel, Tata Steel is believed to have offered an immediate upfront payment of Rs 175 billion to financial creditors. The total bid value, however, is likely to be Rs 245 billion.

“Tata Steel would make a capital infusion of Rs 70 billion into the company. Fresh equity would be issued and it would be used as capital expenditure for future expansion,” indicated sources.

Sources said Tata Steel would not like to waste any time if and once it got the approvals. Tata Steel had taken control of Bhushan Steel in 48-72 hours of getting approval from the National Company Law Tribunal. It had worked intensively for six months towards it.

Sources said within the organisation some people had been sounded out for Bhushan Power & Steel.

The committee of creditors (CoC) for Bhushan Power & Steel was expected to meet and finalise the preferred bidder and vote on the resolution plan after the National Company Law Appellate Tribunal (NCLAT) refused to stay the insolvency proceedings as per a plea from Liberty House. 

The Liberty House bid is higher than Tata Steel's by around Rs 10 billion. Lenders when they last met were divided though the majority were in favour of Tata Steel.

The NCLAT has modified its earlier order and asked the CoC to go ahead with the resolution process and place it before the adjudicating authority for approval. The adjudicating authority is also free to pass any orders.

The NCLAT had passed an order on May 9 that said, during the pendency of appeal, the CoC might consider the resolution plan submitted by all resolution applicants which will be subject to the decision of this appeal. Though the CoC may approve the same with prior permission of the Appellate Tribunal, it cannot be placed before the adjudicating authority and must be kept in a sealed cover.

The bidding

Capacity: 3 million tonnes  Debt: Rs 470 billion
 

 Tata Steel's bid

Upfront payment : Rs 175 billion    Total bid : Rs 245 billion