Banks drop plan to sell Essar Steel loans - Report
Financial Express reported that the consortium of lenders to Essar Steel has decided recast the INR 44,000 crore exposure to the company rather than take a 50% haircut by selling it to Asset Care and Reconstruction Enterprise, which is backed by Hong Kong based SSG Capital. A senior banker explained that “We are not comfortable taking such a big haircut by selling to an ARC and prefer a recast plan which would mean a smaller haircut.”
Essar Steel had, at a recent meeting, requested banks to convert INR 12,200 crore of loans into preference capital and equity shares. While INR 9,000 crore was sought to be converted into preference shares to be redeemed after 12 to 18 years, the company requested the remaining INR 3,200 crore be converted into common equity. For the remaining INR 31, 800 crore, the company has sought a prolonged repayment period. Senior bankers told FE such a deep restructuring proposal, if approved by the consortium, would amount to a haircut of around 28%.
In July, FE had reported lenders were exploring the possibility of restructuring INR 31,000 crore of loans via the scheme for sustainable structuring of stressed assets (S4A) norms. They had in April appointed MECON, a government-run engineering and steel sector consultant, to conduct a techno-feasibility study into Essar’s operations. At the same time, they had not ruled out the option of looking for a buyer for the company.
Private sector lenders HDFC Bank, ICICI Bank and Federal Bank have already sold their loans to Essar Steel worth INR 2,200 crore. Other lenders in the 20-member consortium include State Bank of India, IDBI Bank and Punjab National Bank, among others.
Source : Financial Express