Union Bank Looks To Sell Essar Steel, Bhushan Steel Loans

Public sector lender Union Bank of India has sought bids to sell its exposure in Essar Steel Ltd. and Bhushan Steel Ltd., two of the largest stressed accounts under resolution through India’s new bankruptcy law.

The bank is selling Rs 1,569 crore worth of loans of Essar Steel and Rs 1,130-crore Bhushan Steel loans through competitive bidding, it said in a notice. The lender has sought bids from banks, non-banking finance companies and asset reconstruction companies by Jan. 22.

Essar Steel and Bhushan Steel were among the 12 large corporate accounts which the Reserve Bank of India had shared with banks in June last year for immediate resolution under the Insolvency and Bankruptcy Code. Together, they owe lenders more than Rs 1 lakh crore.

As the last date for submitting resolution plans draws closer, there has been a change in exposure of financial creditors. That’s because lenders, newer or even existing, have been buying these loans to gain a greater say in the committee of creditors.

Axis Bank Ltd. and Bank of Baroda Ltd. managed to sell nearly $200 million worth foreign currency loans of Essar Steel to a foreign fund in December, two people with direct knowledge of the transaction told BloombergQuint. Both Axis Bank and Bank of Baroda didn’t respond to queries mailed to them on Monday.

Similarly, Indian Overseas Bank sold more than Rs 600 crore worth of its exposure in Bhushan Steel last month. In September, the public sector lender had sold Rs 1,500 crore worth of Essar Steel loans to Edelweiss Asset Reconstruction Co Ltd.

The resolution professional appointed for Essar Steel has set Jan. 29 as the last date for submitting resolution plans, while the deadline in the case of Bhushan Steel is Jan. 18.

Five large metal companies have expressed interest in bidding for Essar Steel’s resolution process. Similarly, for Bhushan Steel, five metal companies are in advanced stages of firming up their bids for the New Delhi-based steelmaker.