SBI puts Rs15,431-cr Essar Steel debt on the block

With no chance of an early resolution in the ongoing insolvency proceedings against Essar Steel, its largest creditor State Bank of India has put its Rs15,431-crore exposure to the stressed assets on the block.

The proceeding against Essar Steel under the Insolvency and Bankruptcy Code has been dragging on for over 500 days, against the prescribed resolution period of 180 days from the date of admission of the application to initiate such process.
The resolution process has dragged on following legal wranglings, counter offers and changing rules. With no end to the resolution process in sight, other lenders may also follow SBI’s path, say market experts.
SBI has set a reserve price of Rs9,588 crore for the e-auction, which is a 15 per cent discount to what SBI would have received under the NCLT deal. The auction will be conducted on 100 per cent cash basis on 30 January. Asset reconstruction companies, banks, non-banking finance companies and other financial institutions are expected to bid for the non-performing assets.
SBI would have recovered Rs11,308 crore if the proposal of leading bidder ArcelorMittal had been accepted.
While ArcelorMittal has offered to pay Rs42,000 crore for the stressed asset, Essar Steel Asia Holdings, part of the defaulted promoter Ruias-owned Essar Group, has placed a bid of Rs54,389 crore, which was not considered by the lenders.
Bankers expect an aggressive bidding considering that they can recover the entire money if Essar Steel’s resolution plan is accepted, say a banking source.
An early sale of bad assets would help banks write down their bad loans and reverse the provisions already made towards the stressed account, thereby shoring up the balance-sheet.
If the auction is successful, more lenders would opt for sale of bad loans than a resolution process under the NCLT.
Meanwhile, the Ahmedabad bench of NCLT has reserved its verdict till on the maintainability of Essar Steel Asia Holdings’ offer to repay the entire debt and retake the management of the debt-laden company till 31 January.