Banks may initiate debt recast programme forElectrosteel, Visa Steel, Bhushan Steel, learns CNBC-TV18 from sources.Bhushan Steel, which has a debt of about Rs 40,000 crore, seems to be the most likely contender for the S4A or Scheme for Sustainable Structuring of Stressed Assets. Electrosteel has a debt of Rs 10,000 crore, while Visa Steel has debt of Rs 4,000 crore.Sources further inform that banks have started the techno economic viability study for these three companies. They have to establish that 50 percent of their debt as mentioned under the scheme is sustainable and can be serviced under the current situation and the unsustainable part of the debt can be converted into preference shares.Soon, based on the study, banks will take a call on involing S4A because Bhushan Steel has the benefit of 5/25 where a moratorium on the bank has been extended by 5 years, and repayment is stretched over the next 25 years. It makes it a suitable candidate. A forensic study will also have to be conducted to see if there is no fraud in the company and whether the company is suffering from only an economic downturn. Reacting to the news, RK Bansal ED of IDBI Bank said that banks have been considering different options. "Now that many of the steel companies have good cash flows, S4A can work on some of them." The bank has exposure to Bhushan Steel. Each case is different, he said, adding that steel companies do fall under this scheme.
Below is the verbatim transcript of RK Bansal’s interview to Reema Tendulkar & Nigel D'Souza on CNBC-TV18.
Nigel: Could you confirm these details that you are likely to revoke S4A on a couple of these accounts?
A: Banks have been considering different options, earlier also, and now that many of the steel companies are having reasonably good cash flows, so S4A can work in some of them.
Nigel: How soon can we hear on these, is it likely in the next one week ten days or so?
A: Not so soon it will take time because we have to look into techno economic viability (TEV) study, we have to look into their cash flow. Prima facie banks are discussing different options for many of these companies overall whether we really go for it that will take some time.
Reema: If you could at least tell us if S4A or the scheme for sustainable structuring of stressed assets is the preferred option?
A: In steel cases we have tried strategic debt restructuring (SDR) also in some of them. The issue was basically industry being under so much stress, there were two issues. One, at that point of time they were not having cash flows, prices were too low. Second, the entire industry was under stress so it was difficult to find buyers. Now that industry has improved, prices have improved worldwide; China dumping has stopped after minimum import price (MIP) so, some of the companies S4A can be considered because you don’t need immediately new buyer. You can work around with the existing promoters with some equity conversion and all.
Nigel: You are saying that things have improved but in the event if they look for a buyer, do you believe that in fact there are a couple of names that are doing their rounds do you believe that there is interest and if yes have you all started the process for any of these accounts?
A: We have tired these options earlier also, you are also aware. What I am saying is your question is otherwise on S4A. S4A doesn’t need a new buyer.
Reema: We understand that the banks may invoke S4A for three accounts? One is Bhushan Steel, the other one is Electrosteel Steels and third one is Visa Steel. Do you think these could be the three candidates first up for this new scheme of restructuring?
A: Individual cases are difficult to say as of now but steel cases are one category perhaps; some of them can fall into S4A because as I said they do have reasonably good cash flow, so we need to have at least 50 percent sustainable debt. So, I think some of them even one or two bigger ones can sustain 50 percent of debt so that can work.
Reema: What would be your exposure to these three accounts?
A: We don’t have exposure in Electrosteel Steels or Visa Steel. We have some exposure in Bhushan Steel. I don’t want to discuss the amount but we have exposure.
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