Union Bank held an auction on August 28 after the binding offer by ACRE triggered a Swiss challenge auction. ACRE was declared the successful bidder in the absence of counteroffers at the auction.
The offer of upfront cash of ₹143 crore by ACRE equates to a recovery of 35%. Union Bank of India had lowered the reserve price to ₹143 crore, compared to the previous quarter’s ₹160 crore, after it failed to get any bids at this price.
With this acquisition, ACRE, which has been aggregating Visa Steel loans over the past couple of years, will see its share of debt increase to around 60%. Earlier this year it acquired State Bank of India‘s ₹697 crore loan and held around 46% of the company’s debt.
To exercise control over the debt resolution process in any company undergoing restructuring, an acquirer looks to own a minimum of 66% of the company’s debt. This is crucial as under the Insolvency and Bankruptcy Code, a resolution plan needs a 66% majority vote among lenders to be approved. Both ACRE and Union Bank of India did not respond to requests for comment until Tuesday press time.The recovery rate is similar to previous deals, such as SBI’s sale of a ₹697 crore loan of Visa Steel to ACRE for ₹230 crore, resulting in a 33% recovery. Other major lenders to Visa Steel include Canara Bank and Punjab National Bank. The move to sell their exposure to the steel company comes as banks seek to address recovery delays due to court interventions by the promoters.Visa Steel was admitted into insolvency on an application by Oriental Bank of Commerce (since merged with Punjab National Bank) at the National Company Law Tribunal in November 2022. The company, however, challenged the order in the appellate tribunal and obtained a stay from the Orissa High Court, halting the insolvency process.
