<article>Creditors of Bhushan Steel Ltd are looking to carve out some parts of the business for sale as they seek to recover some of the more than Rs.44,000 crore owed by the steel producer, said two people with knowledge of the matter.</article>

Creditors of Bhushan Steel Ltd are looking to carve out some parts of the business for sale as they seek to recover some of the more than Rs.44,000 crore owed by the steel producer, said two people with knowledge of the matter.
At the same time, the lenders are trying to figure out restructuring options for the rest of the company.
They have identified the Bhushan Steel asset in Odisha as a high-quality asset that can be separated from the company and sold, said one of the two persons cited above.
“This would help in resizing the large debt in the company,” said the person, who added that the plan is still in the discussion phase but is a probable solution to problems that have been plaguing the company for over two years.
As of March 2016, consolidated debt of Bhushan Steel was Rs.44,477.93 crore. A large part of this is owed to a consortium of 40 banks led by State Bank of India and Punjab National Bank. The two lead lenders did not respond to emailed queries sent on Tuesday.
Lenders met with the company’s management in June as part of a quarterly exercise designed to deal with stressed debtors. The plan to carve out parts of the company and sell them came up after the management submitted a progress report at the meeting, said the second person cited above, also on condition of anonymity.
The consortium had met with the promoters in March and asked them to try and increase production if they wanted to access further bank funding.
By 2 September, the capacity at Bhushan Steel’s hot strip mill in Odisha had been raised to 5 million tonnes per annum (mtpa), from 4mtpa earlier, the company had said in a stock exchange notification.
Bhushan Steel’s standalone net loss widened to Rs.670.47 crore in the March quarter from Rs.360.77 crore a year ago. Net sales rose 29.5% to Rs.3,031.30 crore from Rs.2,341.02 crore in the previous year.
“(The lenders’ plan is) not known to us,” said Nitin Johari, director of finance, Bhushan Steel.
Banks have been struggling with the account since August 2014, when they first formed a joint lenders’ forum to monitor the company after vice-chairman Neeraj Singhal was arrested by the Central Bureau of Investigation in connection with a loan-for-bribe scandal.
After working on a number of options, including refinancing debt under the so-called 5/25 scheme which allows infrastructure firms to extend the duration of loans, banks ended up <a href="http://www.livemint.com/Companies/dJysXhum8SFZFQO9uzFUTK/Banks-classify-Bhushan-Steel-loans-as-nonperforming-assets.html" target="_blank">classifying the account as a non-performing asset</a> in the March quarter,Mint reported in April<a href="http://www.livemint.com/Companies/dJysXhum8SFZFQO9uzFUTK/Banks-classify-Bhushan-Steel-loans-as-nonperforming-assets.html">.</a>
According to the second person cited above, more such assets could be identified and carved up for sale as bankers look to make the sale package more attractive and ensure that a transaction actually happens.
“Investors typically don’t want to buy the whole company and run it when they can have smaller parts which fit into their broader market strategy,” the second person said.
Experts say that while brainstorming on such options is a good idea, real sales would probably yield more comfort to the broader economy.
“So far, apart from the Jaypee Group case, lenders have not been able to properly complete a sale of an asset from a stressed firm. It is true that discussions are on, but then a completion of about three or four sales would give lenders more confidence in moving ahead,” said Karthik Srinivasan, senior vice president at rating agency Icra Ltd.
A plan to carve out healthy businesses and sell them was also implemented at the Jaypee Group, another case where large debt and a difficult macroeconomic situation had made it difficult for bankers to recover their loans. On 5 July, Jaypee Group announced that it had approved the <a href="http://www.livemint.com/Companies/Tw1BXAERpx9iqLDMcABpuJ/Jaypee-salvages-UltraTech-cement-deal-loses-control-of-Jaip.html" target="_blank">sale of its cement assets</a> to UltraTech Cement Ltd for a valuation of Rs.16,189 crore. The deal was pushed hard by lenders who were able to reduce the group’s large debt and are now working out restructuring options at the Manoj Gaur-led group.
As of 31 March, Jaiprakash Associates, the flagship company of the Jaypee Group, had consolidated debt of Rs.58,250 crore.
<h4>This article was first published on <a href="http://www.livemint.com/Companies/Eoq2zpi9hWIKzCh0phSQgN/Bad-loans-fallout-Bhushan-Steel-lenders-look-to-sell-assets.html">Livemint.com</a></h4>

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India: Bhushan Steel lenders look to sell assets

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