The National Company Law Tribunal’s (NCLT) Mumbai bench on Tuesday morning instructed the resolution professional (RP), appointed to oversee Monnet Ispat and Energy Ltd (MIEL), to consider the new claims made against the corporate debtor and place them before the committee of creditors (CoC).
A source close to the deal told Business Standard that the committee of creditors will be meeting on Saturday to clear these new claims worth Rs 8.09 billion in total, in addition to prospective acceptance of the bid-offer made by JSW Steel and AION Investments.
MIEL is one of the twelve large non-performing asset accounts referred for insolvency and bankruptcy proceedings by the Reserve Bank of India, last June. The total claim made by lenders against the company is to the tune of Rs 107 billion.
MIEL is the flagship company of the Monnet Group and has a 0.8 million-tonne sponge iron plant, a 2 million-tonne pellet plant, as well as a 0.96 million-tonne sinter plant.
It also has an integrated steel plant at Raigarh which produces hot-rolled plates, rebars and structure profiles, and has a capacity of 1.5 million tonnes per annum (MTPA), and a 230-Megawatt captive power plant in Chhattisgarh.
The company also has 7.5 million tonnes of coal beneficiation facilities in Chhattisgarh and Odisha.
The bench comprising Justice BSV Kumar and Justice Duraiswamy said, “On hearing the applications, at the request of all parties to pronounce an order before giving reasons to the order, this bench hereby allows all applications.”
Additionally, the court has allowed the CoC, overseeing MIEL, to conduct its next meeting wherein the decisions made will be subject to the tribunals’ orders.
Financial creditors and the debt owed by MIEL, prior to today’s order, included: State Bank of India Rs 22.52 billion, Axis Bank Rs 1.32 billion, ICICI Bank Rs 9.02 billion, and Punjab National Bank Rs 4.09 billion.
Three new claims were made before the bench, which included claims of Rs 1.47 billion by Standard Chartered Bank, an additional Rs 4.86 billion owed to ICICI Bank, and around Rs 1.76 billion is owed to the Industrial Finance Corporation of India (IFCI).
IFCI gave a loan to Monnet Power Company Ltd, for which MIEL was the corporate guarantor, therefore when Monnet Power defaulted on the loan it made MIEL liable to repay the debts.
The treatment of this loan by the CoC and RP became a bone of contention during the hearings on Tuesday, while IndusInd Bank withdrew their application against the company.
The RP must submit these claims to the CoC, who will evaluate the validity of the claim based on which they will decide to accept or reject a part or the entirety of the claim(s) made.
They (the CoC comprising of lenders) have agreed to take a haircut of around 72 per cent to settle the matter.
So far there is only one bidder for MIEL. Business Standard reported that in end-February, a revised offer made by the consortium of AION Investments Private II Ltd and JSW Steel Ltd would in all-likelihood be accepted by CoC.
JSW-AION had agreed to pay creditors an additional Rs 2 billion, over and above the Rs 27 billion offer made earlier. The combine also agreed to increase the various lending banks’ equity holding to 16 per cent, from eight per cent.
The source cited above also added that the offer made by JSW-AION stands as is.
AION Investments holds a 70 per cent stake in the consortium while JSW Steel has the remaining 30 per cent, and at present MIEL founder Sandeep Jajodia and his family have a 25 per cent stake and the lenders hold 49 per cent of the company.
The Corporate Insolvency Resolution Process, under the Insolvency and Bankruptcy Code, for MIEL will complete 270 days next week, and a resolution plan has to be submitted to the tribunal on or before the 13th of April.
With only one bidder in the running, and the banks taking a large haircut on such a large volume of debt, it will be of interest to see whether the CoC accept these new claims, and whether the final resolution plan will reflect the same.
The Sajjan Jindal-led JSW Steel is in expansion mode and plans to raise its capacity to 45 MTPA by 2030 from 18 MPTA at present.
On Wednesday MIEL closed at Rs 21.80, up by 0.46 per cent from its previous close on the Bombay Stock Exchange.