Monnet Ispat lenders may take 64 pct haircut

After Electrosteel Steel and Bhushan Steel, another distressed steel asset - Monnet Ispat & Energy Ltd - is headed for a resolution under the Insolvency and Bankruptcy Code (IBC) with its creditors approving the resolution plan of AION-JSW. This was informed to the stock exchanges by Monnet Ispat on Tuesday.                  

All formalities relating to the resolution has to be completed by the deadline of April 13. According to a source in the know, the deal is likely to be around Rs 3,750 crore, of which close to Rs 2,750 crore could be in cash and remaining could be in equity.

With the total debt of Monnet Ispat at Rs 10,412 crore, creditors would be taking a haircut of 64%. The acquiring party will now give its nod for the resolution before the National Company Law Tribunal (NCLT) accepts it.

“The resolution professional (RP) is likely to submit the letter of intent (LoI) by tonight or latest by tomorrow. This will be approved by the acquiring entity -AION Investment Private Ltd and JSW Steel Ltd combine - and then the National Company Law Tribunal (NCLT) will give its nod and announce it,” said the source, who did not want be named.   

According to him, the deal worked out by AION-JSW and approved by the committee of creditors (CoC) involves bank loans amounting to around Rs 2,750 crore.

The major financial creditors of Monnet were State Bank of India (SBI) and Punjab National Bank (PNB).

The deal is also likely to include JSW Ltd’s Rs 125 crore working capital advance. The resolution could see Rs 389 crore being converted into equity, Rs 280 crore into convertible preference shares and Rs 250 crore into quasi equity.

According to the source, an additional Rs 200 crore could be brought in as debt or equity.

“This is the broad structure of the deal that has been worked out. There could be minor changes, but nothing major. The LoI will contain all the information in detail,” he said.

The note submitted by Monnet Ispat to the stock exchange said that the CoC had cleared the resolution plan by a 98.97% favourable voting through e-voting process.

The Monnet Ispat & Energy has an integrated steel plant at Raigarh with a capacity for hot rolled plate of 1.5 million tonnes per annum. Sajjan Jindal’s JSW Steel, which recently entered in the fray for Essar Steel’s asset as an investor along with Nu Metal, currently has a total production capacity of 18 million tonne per annum and is looking to take it to 45 million tonne by 2030.

By Praveena Sharma, DNA Money