Lenders to take 51% stake in Blackstone-backed Monnet Ispat
Photo Credit: Courtesy: Monnet Ispat

A group of lenders to Monnet Ispat & Energy Ltd have decided to convert their unsecured loans into shares, a move that will give the creditors a majority stake in the steelmaker.

The lenders will convert outstanding debt of Rs 367.79 crore for a 51 per cent stake, Delhi-based Monnet said in a disclosure.

The lenders can now sell their holdings to a new promoter. They will have up to 18 months to find a buyer for this stake.

However, the existing management will continue to run the operations.

After the conversion, the promoters’ stake in the company would shrink to 24.06 per cent from 48.59 per cent.

Lenders to a company can convert their loans into a majority stake shares under the Reserve Bank of India's strategic debt restructuring (SDR) guidelines, announced in June this year.

Earlier this week, lenders to Mumbai-based engineering and construction company Gammon India Ltd decided to convert part of the company's Rs 15,000 crore debt into equity. Previously, lenders to Electrosteel Steels Ltd, Lanco Teesta Hydro Power Pvt. Ltd, VISA Steel Ltd and Jyoti Structures Ltd also invoked SDR norms.

Monnet Ispat has scheduled a meeting of shareholders on December 21 to get approval for the debt conversion.

Monnet Ispat had total consolidated debt of about Rs 12,500 crore at the end of March this year, raised mostly for expansion plans.

Founded in 1994, the Monnet Group company makes sponge iron, steel and ferro alloys. The company had set up its first sponge iron unit with a capacity of 1 lakh tonnes a year and now has grown to be the second-largest coal-based sponge iron producer in the country.

In July this year, private equity firm CX Partners made its maiden full exit from its portfolio by selling its entire stake in Monnet Ispat at a loss.

Blackstone remains a shareholder with a 6.9 per cent stake in Monnet Ispat and is sitting on huge loss of value on its original investment. It is also separately an investor in the company's Monnet Power unit.

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