In a bid to cash in on the steel upcycle, Sajjan Jindal-controlled JSW Steel has offered to make the upfront payment to lenders of Bhushan Power & Steel to close more than a three-year corporate insolvency resolution process (CIRP). JSW Steel has proposed to increase the offer by Rs 400 crore.
The proposal was made last week and the payment will be made subject to a bank guarantee or indemnity bond from lenders, so that in case the Supreme Court invalidates JSW’s resolution plan, the settlement amount will be reversed.
Lenders are yet to accept the proposal. Till now JSW Steel’s upfront payment to financial creditors was Rs 19,350 crore. Now with this additional Rs 400 crore, it would be enhanced to Rs 19,750 crore. The accumulated of financial creditors is to the tune of Rs 47,157.99 crore.
JSW’s readiness to pay is a change from an earlier stance. In June, after the Covid-19 pandemic, it had sought flexibility in payment schedule for its bid, but lenders had rejected the demand. Between then and now, however, the fortunes of the steel industry have changed with prices touching a two-year high and spreads at a three-year high.
If and when JSW Steel is able to close the Bhushan Power deal, it would add about three million tonnes per year capacity to JSW Steel’s existing 18 million tonnes.
The additional outgo of Rs 400 crore would be distributed from the earnings before interest, taxes, depreciation and amortization (EBITDA) accrued to the company.
The National Company Law Tribunal (NCLT) while approving JSW’s resolution plan in September 2019 had said that profits earned by running the corporate debtor during the CIRP (Corporate Insolvency Resolution Process) are to be redistributed in accordance with the Essar Steel judgment of July 4, 2019. The Essar order had said that where the successful resolution applicant is not paying the total dues to creditors but pays lesser than the claim, the profit should be distributed among all creditors including financial and operational.