HDFC sells Essar Steel loan to Edelweiss ARC

HDFC sells Essar Steel loan to Edelweiss ARC
01/09/2018 , by , in ALLIED

Mortgage lender Housing Development Finance Co. has sold its Rs1,000 crore loan in Essar Steel to an asset reconstruction company at a 30 percent loss as the resolution of the bankrupt metals company drags on with promoter Ruia partnered Numetal and billionaire Lakshmi Mittal battling it out in courts.

With the resolution of other steel firms such as Bhushan Steel and ElectrosteelSteelsNSE 4.76 % signalling that there is enough demand for steel producers due to revival of fortunes, managed to wrest 20 percentage points more than what Indian Overseas BankNSE 0.32 % managed a few quarters ago, said people familiar with the transaction.

Edelweiss Asset Reconstruction Co. the biggest in the business, is learnt to have bought the loan from HDFC and subsequently sold to other financial investors, including international ones, said those people who did not want to be identified.

“Edelweiss ARC acquired the loan on its books and sold it to foreign investors,’’ said one of the persons. “As per the structure, Edelweiss ARC will own 15% of the acquired loan while the balance is sold to foreign investors.”
Essar Steel is facing insolvency proceedings at the bankruptcy court with Rs 54,851 crore of claims from financial and operational creditors. The resolution professional backed by Alvarez and Marsal has accepted claims of Rs 49,138 crore. The resolution is being delayed with promoters Ruias and ArcelorMittal’s Lakshmi Mittal sweating it out in courts about their eligibility to bid for the asset.
While many of the first round referred cases such as Bhushan Steel and Electrosteel Steels have been resolved with Tatas and Vedanta Resouorces buying out these firms respectively, the fate of Essar Steel is getting dragged as both Ruias and Mittals are determined to take control of it.

A year ago, Indian overseas Bank sold its Rs 1600 crore loan to Edelweiss ARC at a 50% haircut. “The fact that the haircut is lower a year later shows that it company is well run and managed in the administrator and that the investors are bullish about getting a higher return,” said the second person mentioned above.

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