The strategic debt restructuring (SDR) plan for Visa Steel has run into rough weather with one of the non-consortium lenders, Housing and Urban Development Corporation (Hudco), throwing a spanner in the works. While the consortium of lenders led by State Bank of India (SBI) seeks to spin off and sell their stake in the company’s special steels unit, Hudco has objected to the move in the Orissa High Court. Hudco fears a de-merger and subsequent sale would dilute its collateral. Of the R3,000 crore that Visa Steel owes lenders, Hudco’s exposure is close to R80 crore.
Visa’s debt of around R3,000 crore was restructured under the corporate debt restructuring (CDR) mechanism in FY13. In September, lenders decided to convert a large portion of debt into equity using the SDR scheme. They have 18 months to come up with a buyer for their stake beyond which the account will turn into an non performing asset (NPA).
Two people aware of the development told FE that Hudco has declared Visa Steel an NPA but the 20-member consortium has classified the account as a standard account.
“Hudco has moved the Orissa High Court with an affidavit opposing the de-merger over concerns of dilution of its security coverage after the de-merger,” a source said, adding that Hudco has said in its prayer that the lender should have collateral in de-merged entities in the same ratio as it had earlier. “The assets pledged to us should remain with us even after the de-merger since they could be used for NPA recovery,” he said.
The company’s FY15 annual report states that loans from Hudco are secured by way of first charge on all the fixed assets, both present and future, of the company’s plant including township being financed by Hudco at Kalinganagar Industrial Complex in Odisha and second charge on the current assets of the company within the Integrated Steel Complex including township being financed by Hudco.
A company spokesperson said, “Hudco’s concerns have been addressed by the company and the lenders and we are awaiting their approval. Meanwhile, 98% lenders have already approved the scheme and the final high court order is expected shortly.”
Other lenders to Visa Steel are Bank of Baroda, Punjab National Bank, Bank of India, Canara Bank, a few banks from the SBI group and Syndicate Bank.
In FY15, Visa reported a loss of R273 crore on the back of R1,260 crore in net revenue. The finance cost of the company more than doubled on a year-on-year basis in FY15 to R229 crore and according to Bloomberg data its gross debt stood at R3,094 crore in FY15, up 10.5% from the previous year.
According to the FY15 annual report, the company plans to expand capacity from 0.5 million tonnes per annum to 1 mtpa at its special steel unit at Kalinganagar in Odisha. The 0.5 mtpa special steel business includes production of hot metal, pig iron and other materials for supply to the automobile, construction, infrastructure, engineering, railway and defence sectors.
Source: http://www.financialexpress.com/