RAJIV BAJAJ AIMS TO SCRIPT SUCCESS WITH TRIUMPH TIEUP

The interim resolution professional (IRP) for Essar steel is in talks with potential lenders to raise as much as ₹2,500 crore in priority funding to meet the company’s immediate working capital needs, two people directly aware of the development said.

Essar Steel’s IRP, Satish Kumar Gupta of global turnaround advisory firm Alvarez and Marsal, has reached out to lenders to raise the required capital last month, according to the people aware of the matter.

The fund raising is being done under the interim funding framework of insolvency proceedings.

Priority funding allows a new lender to come in on the promise that it will be accorded higher priority during the payout phase, once a turnround is effected or the firm is liquidated. In such transactions, existing lenders may cede charge on the assets in favour of a new lender, which has the first right on the firm’s cash flows. This is typically done to ensure the underlying asset quality does not deteriorate till a resolution plan is put in place.

Responding to a query, a spokesperson for Alvarez & Marsal said “As a policy, A&M does not comment on client or potential client engagements.”

An SBI spokesperson said: “As a matter of policy, SBI doesn’t comment on any individual account and its treatment.” A request for comment sent to Essar Steel did not elicit a response as of press time.

Essar Steel owed lenders around ₹45,000 crore, of which ₹31,671 crore had become nonperforming as of 31 March 2016. The company owes as much as 93% of this amount to a consortium of 22 creditors led by SBI, Mint reported in August.