Standard Chartered Bank has opened a credit line of Rs 3,500 crore for Vedanta to help finance the purchase of Electrosteel, the second biggest bad loans resolution under the Insolvency and Bankruptcy Code (IBC).
The loan is for 10 years and Vedanta has given a guarantee, two people familiar with the matter told ET. The bank is said to have offered funds in the range of 8.7-9.10%.
“Once Electrosteel shows a consistent revenue stream with a rating upgrade, the Vendanta guarantee will automatically fall off,” said one of the persons cited above.
Standard Chartered declined to comment on the matter. A Vedanta spokesperson did not reply to ET’s email queries.
Standard Chartered was not part of the State Bank of India-led consortium of 26 lenders that had lent more than Rs 14,000 crore to the insolvent Kolkata-based steelmaker. The loan turned bad, triggering bankruptcy proceedings.
“Although there are no such regulatory restrictions on existing lenders to fund the acquisition, state-owned or private banks are clearly not comfortable lending money to a company that could not repay its dues,” said a resolution professional who was involved in one of the large recoveries.
In April, Vedanta was officially declared the successful bidder for Electrosteel. In June, the acquisition process was completed, with the new management taking control. Billionaire Anil Agarwal-owned Vedanta has already deposited Rs 5,320 crore for the Electrosteel purchase.
“Large foreign banks with sizable India presence, like Standard Chartered, find the IBC an opportunity to extend corporate lending as local banks are seen averse to loaning funds to companies, focusing instead on retail customers,” said another person with knowledge of the matter.
The new owner of the company has decided to delist Electrosteel. Even the National Company Law Appellate Tribunal (NCLAT) three weeks ago refused to stay the delisting of Electrosteel Steel Ltd shares by its new promoter.
Vedanta Star Ltd, a wholly-owned subsidiary of Vedanta Ltd, intended to make a delisting offer to the existing shareholders of Electrosteel, proposing an equivalent exit price of Rs 9.54 per share.
Source: July 23, 2018, Economic Times