Union Bank's Rs 411 crore Visa Steel Loan would be purchased by ACRE

30 Aug 2023 , 02:27 PM

After no other bidders entered the Swiss Challenge procedure, Asset Care and Reconstruction Enterprises (ACRE), an Ares Management-backed asset reconstruction company, is expected to acquire a Visa Steel loan from Union Bank of India for 411 crore.

After the Swiss challenge auction was sparked by ACRE’s binding bid, Union Bank staged an auction on August 28. Since there were no counteroffers made during the auction, ACRE was considered the winning bidder.

The 143 crore in cash up front offered by ACRE represents a recovery of 35%. After receiving no bids at its original reserve price of 160 crore for the quarter, Union Bank of India reduced it to 143 crore.

With this transaction, ACRE will see its debt share rise to over 60%. ACRE has been consolidating Visa Steel loans over the previous few years. It purchased the State Bank of India loan for 697 crore earlier this year and controlled roughly 46% of the company’s debt.

An acquirer wants to own a minimum of 66% of the firm’s debt in order to exert control over the debt resolution process in any company going through restructuring. This is significant since a resolution plan must receive the approval of 66% of lenders in order to be approved under the Insolvency and Bankruptcy Code.

The recovery rate is comparable to earlier transactions, including as SBI’s selling of a Visa Steel debt worth 697 crores to ACRE for 230 crores, which led to a 33% recovery. Canara Bank and Punjab National Bank are two more significant lenders to Visa Steel. The decision by the banks to divest their exposure to the steel company comes as they work to resolve recovery delays brought on by the promoters’ legal interventions.

In November 2022, the National Company Law Tribunal granted Visa Steel’s application, following which Oriental Bank of Commerce—which has since merged with Punjab National Bank—was admitted into insolvency. The insolvency procedure was stopped after the company appealed the ruling to the appellate panel and won a stay from the Orissa High Court.

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