Aion-JSW Steel files Rs 3,500 crore resolution plan for Monnet Ispat
28 December 2017
The Aion Capital-JSW Steel consortium, which last week emerged as the frontrunner to acquire bankrupt Monnet Ispat and Energy, submitted a Rs 3,500-crore resolution plan that involves paying Rs 2,500 crore to lenders and an equity investment of Rs 1,000 crore, backed by a letter of comfort from ICICI Bank, said two top bankers. The Rs 2,500-crore payment will be a one-time settlement for loans of Rs 10,000 crore, an effective haircut of 75%, under the proposal, they said.
"The (Aion-JSW) JV has proposed that they would first write down almost the entire equity and subsequently infuse Rs 1,000 crore capital as equity," said one of the bankers cited above. "Post this equity restructuring, the JV will have 70% equity, lenders led by SBI will have 10% and the public 20%."
Lenders to Take a Call
The lenders will decide next week whether to support the Aion-JSW venture or invite a second round of bids, said the bankers.
ICICI Bank did not respond to an email seeking comment. A bidder is required to furnish a letter of comfort from a bank explicitly stating that it will provide financial support to the bidder in case it emerges as a winner, a top executive said. Monnet is one of the 12 defaulting companies against which the Reserve Bank of India asked lenders to initiate bankruptcy proceedings in June. After State Bank of India referred Monnet to bankruptcy court, the resolution professional in charge of the process received claims to the tune of Rs 10,359 crore from financial creditors and Rs 116 crore from operational creditors.
Aion Capital holds a 70% stake in the consortium and JSW SteelBSE 2.64 % has the remaining 30%. Of the proposed equity investment, Aion Capital has committedRs 600 crore and JSW Steel Rs 400 crore, senior bank officials said. They added that other interested entities, such as SSG Capital and Blackstone, had backed out.
Currently, founder Sandeep Jajodia and his family have a 25% stake while lenders hold 49%. Monnet Ispat owns a 1.5 million tonne integrated steel plant along with a 0.8 million tonne sponge iron plant, a 2 million tonne pellet plant, a 0.96 million tonne sinter plant and a 230 MW captive power plant in Chhattisgarh. The company also has 7.5 million tonnes of coal beneficiation facilities in Chhattisgarh and Odisha.
Aion Capital is a joint venture between ICICI Venture and Apollo Global Management. Sajjan Jindal-led JSW Steel has been eyeing distressed assets after successfully turning around Ispat Industries.