Lenders to take control of Monnet Ispat

Lenders to Monnet Ispat and Energy plan to convert their unsecured loans into equity shares, according to a BSE filing

Lenders to Blackstone-backed Monnet Ispat and Energy plan to convert their unsecured loans into equity shares, according to a BSE filing. The move would give the lenders a 51 per cent stake in the Delhi-based steel company.

The lenders will convert outstanding debt of Rs 367.79 crore for a majority stake, Monnet said. After the conversion, the promoters' stake in the company would shrink to 24.06 per cent from 48.59 per cent. The company has scheduled an extraordinary general meeting on December 21 to get approval on the allotment of equity.

"The outstanding amount to the extent of nearly Rs 368 crore payable to such lenders by the company is converted into equity shares of the company resulting in the lenders holding to be 51 per cent of the total share capital of the company," Monnet said in the filing.
 

The company wasn't able to service its maturing liabilities, the filing added. Monnet had total consolidated debt of about Rs 12,500 crore at the end of March, raised mostly for expansion plans.

The lenders can now sell their holdings to a new promoter. They will have up to 18 months to find a buyer for this stake. However, the existing management will continue to run the operations.

Lenders to a company can convert their loans into a majority stake shares under the Reserve Bank's strategic debt restructuring guidelines (SDR) announced in June.

According to a VCCirle report, in July this year, private equity firm CX Partners made its maiden full exit from its portfolio by selling its entire stake in Monnet at a loss. Blackstone remains a shareholder with a 6.9 per cent stake in Monnet Ispat and is sitting on huge loss of value on its original investment. It is also separately an investor in the company's power unit. Earlier this week, lenders to Gammon India decided to convert part of the company's Rs 15,000-crore debt into equity. Lenders to Electrosteel Steels, Lanco Teesta Hydro Power, VISA Steel and Jyoti Structures have also invoked SDR norms, the report said.