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Stressed assets this week: Essar Steel, Jet Airways and Sterling SEZ in focus
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The Insolvency and Bankruptcy Code, instituted in 2016 to tackle the bad loans weighing down on India’s banking system, has seen a total of 1,484 cases being admitted for resolution under several branches of the National Company Law Tribunal (NCLT).

Among those, 302 cases have begun the process of liquidation while the resolution plans of 79 cases have been approved, according to the Insolvency and Bankruptcy Board of India (IBBI).

In the second series of weekly round-ups on insolvency cases, we examine the top cases that made headlines.

This week, domestic carrier Jet Airways and debt-ridden Essar Steel grabbed headlines in the distressed assets sector.

ArcelorMittal’s bid for Essar Steel gets delayed

In one of the biggest insolvency cases, the Supreme Court on Friday stopped global steel major ArcelorMittal from paying lenders to buy the debt-laden Essar Steel.

The bankruptcy tribunal had a month earlier approved ArcelorMittal to buy assets worth Rs 42,000 crore ($6 billion) in Essar Steel.

The apex court’s order came in response to pleas issued by banks in a bankruptcy appeals tribunal. The lenders are in a tussle over the distribution of capital that will come out of Essar Steel’s sale.

The apex court directed the bankruptcy appellate tribunal to quickly come to a decision in the case.

The latest directive will further delay ArcelorMittal’s plans to enter India. It intended to set up operations in the country by purchasing the steel manufacturer, which can produce 10 million metric tons of the metal annually.

Jet Airways gets a new lease of life

Abu Dhabi-based Etihad Airways has agreed to hike its stake in the struggling domestic airline Jet Airways, The Economic Times reported.

Jet’s consortium of lenders, led by the State Bank of India (SBI), has been trying to persuade Etihad to acquire a majority stake in the homegrown carrier, said the report.

Etihad currently owns 24% stake in Jet, the report added.

On April 10, SBI extended Jet’s stake sale process, giving potential investors time till Friday to place a bid.

This came after SBI initiated the process to sell up to 75% stake in Jet to settle all its credit obligations.

Bankruptcy proceedings against Sterling SEZ to continue

The insolvency proceedings against Sterling SEZ and Infrastructure Ltd, a subsidiary of Sterling Biotech group, are set to continue in the NCLT after the tribunal on Friday reversed its previous order on the matter.

The reversal came about after the government intervened in the issue, a person close to the development told VCCircle.

Two days ago, the NCLT had agreed to withdraw the insolvency proceedings against Sterling SEZ as the company’s absconding promoters made a one-time settlement (OTS) offer to its lenders from overseas, a Business Standard report had said.

The group is owned by brothers Nitin and Chetan Sandesara, who are now fugitives from Indian law.

About 90% of Sterling’s lenders, which have take a haircut of almost 65% in the company, had agreed to the one-time settlement, the report stated.

In the absence of the founders, the court appointed Sterling’s resolution professional as administrator of the firm.

The Sterling Biotech group was summoned to the NCLT in July 2018 for debt resolution under the IBC after it failed to repay dues worth Rs 8,100 crore, said the report.

Adani to buy Korba West Power

Billionaire Gautam Adani-led Adani Power Ltd received a letter of intent on Saturday to buy debt-ridden Korba West Power Co Ltd, a thermal power producer with 600 megawatts capacity, as per a stock market disclosure.

A person close to the development told VCCircle that 69% of lenders had approved a bid amount of Rs 1,000 crore ($143 million) for the transaction.

The person added that Rs 100 crore will be paid upfront and the balance will be paid over a period of eight years with a moratorium of two years.

The lenders have taken an 80% haircut on the deal after Korba West Power, which owed total dues of Rs 5,032 crore, was admitted for insolvency proceedings in July 2018.

Agricultural wholesaler Abhay Nutrition referred to NCLT

Swiss emerging markets fund ResponsAbility Fair Agriculture Fund has admitted a bankruptcy petition against livestock feed manufacturer Abhay Nutrition for failing to repay advances of about $4.75 million (around Rs 33 crore), according to an Economic Times report.

The advance refers to a corporate guarantee issued to Abhay Nutrition’s Dubai subsidiary Krishi Nutrition, which defaulted on payments to the Swiss fund, said the report.

While allowing the Swiss firm to file its plea, the NCLT’s Mumbai bench said it was open to the ‘financial creditor’ to initiate Corporate Insolvency Resolution Process against the corporate guarantor, the ET report stated.

Maharashtra-based Abhay Nutrition counts SEAF, a US-based emerging markets private equity firm, as an investor. Its cotton seed processing unit has an annual capacity of 2 lakh tonnes, said ET.

Vikas Prakash Gupta was appointed as the interim resolution professional for Abhay Nutrition’s resolution process, the report added.

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