PE investor JC Flowers emerges highest bidder for Sathavahana Ispat debt

Photo: Reuters

Lenders to Hyderabad-based Sathavahana Ispat Ltd have declared JC Flowers Asset Reconstruction Pvt. Ltd as the highest bidder for the company’s stressed loans, said a person aware of the development.

The company manufactures and sells pig iron and ductile iron pipes, among others, and owes Rs1,381 crore to a consortium of four banks led by Canara Bank. The debt was tagged as non-performing in the lenders’ books more than three years ago, the person said.

Lenders sell stressed loans to ARCs at a discount, either in exchange for cash or a mix of cash and security receipts. These receipts are redeemable as and when the ARC recovers the specific loan.

“Lenders are trying to maximize the recovery for themselves by taking advantage of the recent surge in steel prices, currently at an all-time high,” said the person cited above. He added that the consortium, comprising Canara Bank, State Bank of India (SBI) and IFCI, called for bids to sell the debt and received four offers.

Steel prices are at an all-time high due to a steep increase in the prices of iron ore as well as due to the strong growth in steel demand from China, India, US, Europe and other emerging markets, according to a report by Care Ratings on 30 March.

According to the person cited above, the consortium has evaluated the merits of all four bids and formally selected JC Flowers Asset Reconstruction as the highest bidder.

“As next steps and in accordance with due process, it has proposed to now run a Swiss challenge process to maximize value,” he said.

Under the Swiss Challenge method, a prospective buyer offers a bid to the lender, which then publicly calls for counter bids from other potential buyers. The new bidders are expected to put in higher bids than the original bidder, making the process more competitive.

Sathavahana Ispat is promoted by A. Mutya Bai (9.35%), A. Ashok Kumar (6.52%), A. Naresh Kumar (7.33%), A.S. Rao (2.8%), Ganapati Adusumilli Fininvest Pvt. Ltd (8.25%), and others. Promoters together held a 39.58% stake in the company in the December quarter, showed data from BSE.

In its FY20 annual report, the company said it has been suffering from working capital constraints which led to severe financial stress. To overcome the financial stress, it approached lenders to restructure the debt, it said.

This article was first published on livemint.com.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.