Resolution of Bhushan Steel bankruptcy is credit positive, says Moody's

Resolution of Bhushan Steel bankruptcy is credit positive, says Moody's

On Wednesday, Tata Steel said it had emerged the top bidder for the stressed asset of Bhushan Steel by committing a financial package of ₹45,400 crore.

While Tata Steel did not disclose the final purchase price or the transaction's terms and conditions, Moody's said nevertheless, based on media reports, the purchase price could result in a haircut of around 25% for the lenders to Bhushan Steel.

L&T's lawyer Mukul Rohatgi asked NCLT to declare it as a "secured creditor, ' rather than an 'operational creditor" under the IBC, to move up the priority ladder.A 3-member bench presided by chairperson M M Kumar directed Vijaykumar V Iyer, Bhushan Steel's Insolvency Resolution Professional to reply to L&T's plea within a week.

Salt-to-software conglomerate Tata Group's steel business and India's biggest domestic steelmaker JSW Steel Ltd were the two primary industry bidders for the acquisition of Bhushan Steel.

The Tata Steel scrip was also under pressure, ending at Rs 648, down by Rs 12.50 or 1.89 per cent, on the BSE.

Since Bhushan Steel is one of the Indian banking sector's largest nonperforming assets, It also sets a precedent for the resolution of the other NPAS in the steel sector, the global ratings agency added. Bhushan Steel owes Rs. 45,000 crore to the banks. Experts believe that Tata Steel will gain from Bhushan's captive iron ore mines and benefit from market synergies.

Bhushan Steel, which makes auto-grade steel, has an annual production capacity of 5.6 million tonnes. In fact, PNB reportedly had an exposure of close to Rs 5,000 crore, much of which will now come back to coffers and help it to partly offset the damage allegedly wrought by Nirav Modi over the past seven years.