Last week international metals company Liberty House won what many thought was a losing battle. The National Company Law Tribunal permitted it to submit an insolvency resolution plan for Bhushan Steel & Power Ltd, well after the bid deadline, set by the resolution professional, had passed. Now it may better Tata Steel who so far had the winning bid.
Liberty House’s win has boosted hopes of many other losing bidders, like UltraTech Cement.
In the case of Binani Cement, bidder UltraTech Cement is fighting to get its revised resolution plan accepted by the committee of creditors in an effort to best current winner Dalmia Bharat.
A flurry of late and revised bids could hurt a winning feature of the IBC – strict deadlines. Of upto 270 days to complete the insolvency resolution plan.
Electronic auctions are a better way of settling the bidding process, suggested Seshagiri Rao, joint managing director and group CFO of JSW Steel Ltd. His company has also been in the race for a few insolvent assets. “Otherwise anybody can come even in the last minute and submit a bid and then say this bid is superior,” he said in a recent interview to BloombergQuint.
But MS Sahoo, the chairman of regulatory body, the Insolvency and Bankruptcy Board of India, doesn’t quite agree.
He made two distinctions. That these are not bids they are plans. And plans are not suited to an auction process.
The resolution plan is expected to address the root cause of the failure of the firm, Sahoo said to BloombergQuint. “The resolution plan can require change in technology, business model, management, product portfolio and it may also require rewriting the debt, equity or corporate finance part. So, this is not just bidding which is commonly understood but it is a resolution plan.”
It’s a point Sahoo emphasised more than once in the interview. That’s why the government forewent its first right to claim dues and why financial creditors have been given the privilege to make the final decision, he explained.
Some might argue that most resolution plans have so far been assessed by lenders on the basis of the haircut proposed to various categories of creditors. But Sahoo disagreed with any approach that reduced a resolution plan to just a set of numbers stacked up in an auction.
“To me, this (auction) is not optimum utilisation of the code. We want the resolution to be sustainable. If we just pay out the dues of just one set of stakeholders and satisfy them but do not look at a sustainable resolution, then the code does not serve the purpose.”
MS Sahoo, Chairman, IBBI