NCLT stops Bhushan Power creditors from conducting meets on resolution plan

The National Company Law Tribunal (NCLT) has prohibited committee of creditors from holding a meeting on resolution plan for Bhushan Power & Steel till the tribunal decides on the petition filed by UK-based Liberty House. The committee was to hold the meeting on Wednesday.

The Delhi bench of NCLT said any such meeting could be prejudiced against Liberty House.
 
Earlier, the committee of creditors had rejected the bid of Liberty House for Bhushan Power without even opening it as it was submitted after a deadline of February eight. This has left Tata Steel and JSW Steel in the race. The Liberty House has moved NCLT against the committee's decision.
 
Justice M M Kumar said that the creditors have time till April to finalise a plan. The tribunal stated that the creditors need not be in a hurry to complete a plan as moratorium period of 270-days ends in April.
 
The creditors and resolution professional's counsels said they did not have even the choice of accepting Liberty House’s bid as yet. The Bhushan Power & Steel owes nearly Rs 450 billion to its lenders.
 
The counsel opposing Liberty House had argued in previous hearings that not just that the bid was placed after the deadline had passed but also that the bidder did not comply with the submission obligations set by the resolution professional.

Tata Steel seems to be emerging the highest bidder for Bhushan Power and Steel. According to sources, Tata Steel has offered to pay Rs 170 billion to creditors against JSW’s Rs 110 billion. The final bids were placed on February 9 and sent to the legal team for scrutiny.
 

Around 13 companies had submitted expressions of interest. Only five were provided access to the virtual data room. The liquidation value of Bhushan Power was estimated around Rs 90 billion and the fair value around Rs 250 billion. Bhushan Power was one of the few companies where lenders had pressed for a fair value before the insolvency regulator made it mandatory. The committee of creditors is likely to be guided by an average of the liquidation value and the fair value. 
 

The company’s debt stood at Rs 372 billion in 2015-16. Net sales were around Rs 77 billion and losses around Rs 24.36 billion. The dues had risen to Rs 470 billion when it filed for insolvency.
 

Apart from JSW and Tata Steel, Anil Agarwal’s Vedanta had conducted due diligence of the plant. However, it stayed away from submitting a bid. AION Capital had shown an interest but did not submit a bid.
 

Bhushan Power ran into trouble after its iron ore and coal mining licences were cancelled. It was allocated a coal mine with reserves of 250 million tonnes, which was deallocated in 2014.Two other mines were allocated in 2012 and 2014 after the intervention of the Supreme Court. Subsequently, the amended Mines and Minerals (Development and Regulation) Act was passed in 2015 and the company’s iron ore mines were cancelled. The unlisted company has a steelmaking capacity of 3 million tonnes.