A consortiumof 30 banks led by the State Bank of India will meet early
next week to decide if Bhushan Steel should be given a lifeline for a second time after it
failed to repay monthly payment on a Rs 40,000crore loan.
The consortium will meet the top management of Bhushan Steel on July 12 at the bank's
headquarters. "Lenders will have to decide whether to restructure the loan or to take legal
action to recover dues," said a senior bank official who did not want to be named.
Although the lead bank did not spell out the agenda for the meeting, bankers said they may
consider exercising the scheme for sustainable structuring of stressed assets better known
as S4A.
This could be the first instance of lenders exercising S4A if all the lenders agree. Under this scheme, banks need to separate sustainable
debt from unsustainable debt after the company has started commercial operations and is endorsed as commercially viable by external
agency.
Lenders could convert the unsustainable portion of loan into equity or equity related instruments. In effect, the borrower's stake will erode
though it need not bring cash into the deal.
"Based on the review, it is for the bankers to decide on extent of equity reduction. We can run the company with minority share holding
too, with cooperation from the banks," a top company official of Bhushan Steel told ET.
He said the firm would buy back shares from banks as they'll have the first right of refusal. He, however, admitted that given its debt
situation and the current steel market scenario, it will take a long time for the company to get back on its feet.
Bankers fear the company's past may come back to haunt them. A couple of years ago, Central Bureau of Investigation filed a charge
sheet against Bhushan Steel's vice chairman Neeraj Singal in a bribery case which involved former CMD of Syndicate Bank SK Jain.
"One of the prerequisite for exercising S4A is to ensure that the promoter has not diverted funds. The alleged bribery case may cast its
shadow," said a senior official who did not want to be named.
Source: Economic Times