Aion-JSW rebid: Monnet creditors in huddle

The committee of creditors for Monnet Ispat & Energy, which has asked the Aion Capital-JSW Steel combine to improve its offer the company undergoing insolvency proceedings, are meeting next week to decide on their course of action.

Sources, however, said as the only bidder for the assets of Monnet Ispat & Energy, Aion Capital-JSW Steel was unlikely to vastly improve its offer.

If the offer is not accepted, the creditors can put Monnet Ispat & Energy up for liquidation or seek another bid.

Monnet Ispat & Energy received expressions of interest from nine companies, including Tata Steel, but only one final bid. An Ordinance followed by amendments to the insolvency law, in effect, debars the promoters of Monnet Ispat & Energy from bidding for their company.

A spokesperson for Aion Capital declined to comment on the issue.

Aion Capital-JSW Steel is ready to pay ~24.70 billion in cash to Monnet Ispat & Energy’s lenders and infuse over ~10 billion as equity in the company. The liquidation value of Monnet Ispat & Energy is estimated to be ~23.85 billion and it has debts of over ~89 billion. Lenders may thus have to settle for a 70 per cent haircut on their loans.

This is the third time Monnet Ispat & Energy has been put on the block, twice through the debt restructuring route and now under the Insolvency and Bankruptcy Code. During the last debt restructuring round JSW Steel had emerged as the sole bidder, but lenders had found its offer too low.

The offer entailed a debt takeover of ~22 billion, which is close to the latest offer for Monnet Ispat & Energy. The difference now is that the Aion Capital-JSW Steel combine will pay the cash upfront.

Monnet Ispat & Energy’s 180 days for insolvency resolution will be up on January 13. It is expected the company will seek an extension of 90 days.

Monnet Ispat & Energy transformed from a sponge iron to an integrated steel producer after the commissioning of a 1.5 million tonne steel plant in Raigarh in 2013-14. Its facilities are spread across Raipur and Raigarh.

Monnet Ispat & Energy is among the 12 companies referred by the Reserve Bank of India for insolvency proceedings at the National Company Law Tribunal.

The government has provided a window to promoters to make the loan accounts of their companies operational in order to bid for them during insolvency resolution.

Most steel companies these proceedings, apart from Essar Steel, appear unlikely to use this opportunity because of their large overdues.