The company, also known as Vizag Steel, has about Rs 14,000 crore as term loans and Rs 15,000 crore as fund and non-fund-based limit such as short term loans, guarantees and letter of credit. The default has forced lenders to seek cover through an inter creditor agreement (ICA) signed earlier this month, the people cited earlier told ET.
State Bank of India is the largest lender to Vizag Steel with more than Rs 5,000 crore in term loan, Rs 4,000 as non-fund-based limit, and Rs 1,400 crore as working capital loan. Canara Bank has an exposure of Rs 3,800 crore, while Indian Bank has offered Rs 1,400 crore term loan, industry sources said.
Some of the lenders have already made a 15% provision of their exposure to the company as a precautionary step even if the account is not technically a non-performing asset (NPA). Banks are mandated to make a minimum 15% provision when a loan account turns NPA after 90 days of default.
The company missed payment of Rs 410 crore on June 30. It had a grace period till July 5 to regularise the loan, but the company even failed to do so, people aware of the development said.
An email query sent to RINL remained unanswered.The Reserve Bank of India (RBI) has mandated banks to sign an ICA within a month of default so that immediate action can be taken to revive the distressed company. However, a debt recast plan will be implemented only if 75% of lenders agree to the terms. Lenders have signed an ICA in hope that the government will infuse funds into the company to help it reduce debt.Although the company is government owned, the loans do not carry government guarantee. “The company is working with just about 30% capacity, leading to financial stress. Also, it has not received payments from customers, making the matter worse,” a senior executive with a public sector lender said.
Earlier this month, minister for steel and heavy industries, HD Kumaraswamy, had visited the plant in Vizag and assured all possible assistance. He had assured employees and their representatives that the government would take steps to run the production at full capacity.
It is learnt that the company proposed selling its non-core assets such as land to reduce debt.
Banks will begin work on a debt recast package after all lenders sign ICA, a lender said.
