Beleagured Bhushan Steel to seek nod to raise Rs 6,000 cr via securities

In an attempt to raise funds even as banks ask it to get rid of non-core assets in order to service their loans, beleaguered steel-maker Bhushan Steel has said that it will be seeking approval from its shareholders to raise $1 billion dollars (approximately Rs 6,000 crore) through a securities issue.

In an announcement to the National Stock Exchange, the steel-maker said that on its annual general body meeting on 20 September itseek shareholder approval to issue redeemable cumulative preference shares.

Aspokesperson for the company was quoted as telling The Hindu BusinessLine that they hadtaken the decision based on the advice of the consortium of bankers.

Under this scheme the company can raise funds through the securities but will have to pay back investors in the scheme first if it reaches financial position where it is able to pay a dividend.

However, as this Moneycontrol report points out , Bhushan may find it difficult to raise money given the slew of downgrades its debt issues have witnessed by rating agencies on account of high debt and operational stress. And even though banks are rating the company’s debt as standard for now, theanalysis notes that it faces an imminent threat of a takeover or have its assets stripped away.

As Firstbiz reported , lenders have also been selling pledged shares by the promoters of Bhushan Steel to make good their losses. The share sale is likely to have helped the financiers raise about Rs 300 crore.

The net debt on the books of Bhushan Steel as of end-March 2014 was Rs 35,142 crore, significantly up from a year-ago. Over the three-month period of April-June, the company’s debt saw a 5,000 crore spike.

The consortium of 51 banks, lead by Punjab National Bank, has ordered a forensic audit into the books of account of the cash-starved company and asked its promoters to infuse more capital to ensure that it remains solvent.