As lenders get money with Tata Steel taking over Bhushan steel, FM Goyal hails PM for breakthrough in banks' NPA woes

On Friday, interim Finance Minister Piyush Goyal praised PM Modi and BJP president Amit Shah for the ‘historic breakthrough’ in resolving legacy issues of banks. He was referring to the acquisition of Tata Steel in an insolvency auction. Tata Steel won the bid to acquire debt-laden Bhushan Steel Ltd (BSL) in an insolvency auction. The bankrupt firm was among the 12 stressed assets that the RBI had referred to the NCLT proceedings last year.

Piyush Goyal wrote on Twitter: “Congrats to PM @narendramodi ji & @arunjaitley ji for a historic breakthrough in resolving legacy issues of Banks. Lenders recovered almost entire principal loan of Bhushan Steel through Rs 36,400 cr transparent bid by Tata Steel and also got 12% stake in the company.

Liquidation value of Bhushan Steel was Rs 14,541 cr but creditors received almost 4 times the amount. This was possible due to the robust and transparent Insolvency & Bankruptcy Code brought by this Government #NPAturnaround”

He added: “For the first time such a large loan resolution has been achieved through upfront payment received by Banks through sale of a company. This is a record step towards resolving the legacy of unprecedented amount of bad bank loans inherited by this Government. #NPAturnaround

The NPA resolution process is being done through a fair and transparent Insolvency & Bankruptcy Code helping boost both the banking sector & the economy. This has been recognised by International Credit Rating Agencies as well #NPAturnaround”

He went on to write: “Government under leadership of PM @narendramodi ji has been systematically cleaning the financial & economic mess left behind by the Congress. Cleaning up banks & resolving NPAs is part of Congress Mukt Bharat #NPAturnaround

With recovery of NPAs, banks will now be in a position to offer more and affordable credit to major sectors of the economy especially the MSME sector. This will boost employment & the economy even more #NPAturnaround”

The acquisition of debt-ridden Bhushan Steel by Tata Steel reflects success of the insolvency and bankruptcy law which will help in cleansing the banking system as well as boost lenders' profitability, Financial Services Secretary Rajiv Kumar said today. 

Bamnipal Steel Ltd (BNPL), a wholly-owned subsidiary of Tata Steel, has successfully completed the acquisition of controlling stake of 72.65 per cent in Bhushan Steel Ltd (BSL) for consideration of Rs 36,400 crore. This amount would go directly to lenders improving their bottomlines.
 

Tata Steel won the bid to acquire debt-laden Bhushan Steel Ltd (BSL) in an insolvency auction. The bankrupt firm was among the 12 stressed assets that the RBI had referred to the NCLT proceedings last year.

"It is a historic day as banks recover Rs 36,400 crore from sale of Bhushan Steels to Tata Steel under Insolvency and Bankruptcy Code. Banks will gain from write back. Result of silent and transformative change in credit culture," he told PTI. 

The outstanding principle amount to a consortium of lenders was Rs 44,000 crore excluding interest.

"It is changing the culture and ethics by a sound exit route where bad assets can be sold at reasonably high value," he said, adding Tata Steel's acquisition of Bhushan Steel gives a clear signal to non-serious businesses to mend their ways or exit.

It may be recalled that the government barred promoters of defaulting companies from participating in the IBC process putting a check on defaulters gaining backdoor entry in the same business.

There are cases where debtors are now coming on their own and resolving the cases outside the IBC, he said.

Bamnipal Steel Ltd (BNPL), a wholly-owned subsidiary of Tata Steel, has successfully completed the acquisition of controlling stake of 72.65 per cent in Bhushan Steel Ltd (BSL).
Tata Steel Ltd had won the bid to acquire debt-laden Bhushan Steel Ltd (BSL) in an insolvency auction. The bankrupt firm was among the 12 stressed assets the RBI had referred for NCLT proceedings last year.
 

"BNPL has successfully completed the acquisition of controlling stake of 72.65 per cent in BSL in accordance with the approved resolution plan under the Corporate Insolvency Resolution Process (CIRP) of the Insolvency and Bankruptcy Code 2016 (IBC) which has been managed by Vijaykumar V lyer, Partner, Deloitte Touche Tohmatsu India LLP, in his capacity as the resolution professional," Tata Steel said in a statement.

The admitted CIRP cost and employee dues have been paid as required under IBC, it said.

Further, settlement of the amounts equivalent to Rs 35,200 crore towards financial creditors of BSL is being undertaken as per the terms of the resolution plan and corresponding transaction documents, the company said.

Tata Steel said Rs 1,200 crore will be paid to operational creditors of BSL over a period of 12 months as per their admitted claims and as per the terms of the approved resolution plan.

"The investment from BNPL in BSL has been done through a combination of equity of Rs 158.89 crore and inter-corporate loan of Rs 34,973.69 crore. Additionally, Rs 100 crore has been paid by BNPL to the financial creditors of BSL as consideration for novation of remaining financial debt of BSL.

"The acquisition is being financed through a combination of external bridge loan of Rs 16,500 crore availed by BNPL and balance amount through investment by Tata Steel in BNPL. The bridge loan availed by BNPL is expected to be replaced by debt raised at BSL over time," the company said.

The nominees of BNPL have been appointed on the board of BSL and the existing directors of BSL are deemed to have resigned from its board as per the terms of the approved resolution plan, it said.

"As per the resolution plan approved by NCLT, BNPL shall be classified as the promoter of BSL, and the existing promoters/promoter group shall be re-classified from promoters/promoter group to public shareholders of BSL for the purposes of SEBI..." Tata Steel said.