Bhushan, Electrosteel might be candidates for debt recast

Lenders are likely to consider Electrosteel, Bhushan Steel and Visa Steel for debt recast under the Scheme for Sustainable Structuring of Stressed Assets (S4A). The combined debt burden of these three steel companies is around ~54,400 crore, according to data from Capitaline compiled by Business Standard Research Bureau.
Lenders would have to subject the stressed loans of these companies to independent techno-economic viability study, said a senior public sector bank executive. The assessment would be done by a professional agency. Only after these loans pass the viability norms can lenders consider debt recast.
Last month, the Reserve Bank of India came out with a scheme for resolution of bad loans of large projects. Under this, a portion of the debt could be converted into equity or other instruments under the supervision of India Bank Association’s overseeing committee.

The scheme (S4A) will cover those projects that have started commercial operations and have outstanding loan of around ~500 crore.  S4A envisages determination of the sustainable debt level for a stressed borrower and, then, bifurcation of the outstanding debt into sustainable debt and equity/quasi-equity instruments, which are expected to provide upside to the lenders when the borrower turns around.