Japan's JFE Holdings may partner JSW steel for Bhushan bid

Sajjan Jindal's JSW Steel and Japanese steelmaker JFE Holdings are likely to put in a joint bid for the bankrupt Bhushan Power & Steel, reports The Economic Times, reflecting the upswing in an industry overcoming four years of supply overhang.

Bankers to the troubled steelmaker have meanwhile decided to extend the deadline for bids from today to 3 February to give more time to bankers to fine-tune the terms for the bidding process, a top executive source told ET.

JFE is keen to participate and a team from Japan accompanied JSW for the due-diligence process for Bhushan Steel, including making joint site visits to the steel plant.

While the contours of the JSW - JFE bid are being worked out, the understanding is that Ajay Piramal's private equity-arm and JFE will have sizeable equity, with JSW holding the rest. JSW will get operational control of Bhushan Steel if they win the bid.

JFE has had a seven-year association with JSW and holds a 15 per cent equity stake in the Indian steelmaker. The success of the partnership is said to have whetted its appetite to increase its presence in India. At the same time, the Japanese steelmaker is known to be cautious and risk-averse, which explains the delay in sealing the partnership, the executive said.

''JFE will take a final call in a few days on whether they are intending to join JSW in bidding for Bhushan Steel," the executive said on Tuesday. Unsure about JFE's final nod, JSW also has a plan B ready, he added.

Bhushan Steel faces Rs55,868 crore in claims from financial creditors. It also faces claims of Rs1,436 crore from operational creditors.

Bhushan Steel is among the 12 entities which the Reserve Bank of India has directed banks to refer to the bankruptcy court immediately.

JSW Steel is in talks with ICICI Bank for a letter of comfort, which is mandatory for all bidders to furnish along with the resolution plan.

"Since the debt is huge, it will not be an all-cash bid. It is expected to be a combination of cash, debt recast and some haircut and some equity upside for lenders," a banker who did not want to be named told ET (See: ArcelorMittal pulls out of race for Bhushan Power & Steel).