Mumbai/Nagpur: In a notable development, Nagpur-based steelmaker Jayaswal Neco Industries’ management is engaged in discussions with special situations and private credit funds, notably including Kotak Special Situations Fund and Edelweiss Special Situations Funds. The primary objective of these talks is to secure debt refinancing, specifically aimed at reducing the burden of their existing debt of Rs 3,200 crore.
According to a recent media report, the proposed debt refinancing deal would entail a high-yield loan priced at an estimated 18-20%. This interest rate would be substantially lower than their current borrowing rate, with a difference of 600 basis points.
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According to the media report, in 2021, the company’s debt underwent an out-of-court restructuring with Ares SSG Capital-backed asset reconstruction company, Assets Care & Reconstruction Enterprise (ACRE), and Bank of America. During the period from December 2018 to April 2021, ACRE acquired Jayaswal Neco’s debt from its lenders, and subsequently got a 32% equity stake in the company. This acquisition was made jointly with Bank of America at a discounted rate of nearly 30%.
As part of the restructuring agreement, ACRE’s debt was required to be refinanced by March 31, 2023, with a possible extension until December 15, 2023. The exit payout of Rs 23 crore per month from April 2023 till the refinancing date was also included in the terms.
“The loan was then priced at upwards of 24% for a period of 2-2.5 years,” said the reports. “Since the company has been servicing the loan on time, the company management is looking to refinance it with lower borrowing cost,” the report added
The assignment of debt by the lenders to ACRE and the restructuring of debt by ACRE, effective from May 23, 2022, with a cut-off date of March 31, 2020, significantly improved Jayaswal Neco’s financial risk profile, Care Ratings said in a rating note. Since the cut-off date of March 31, 2020, the company has diligently met its debt obligations as per the restructuring plan.
As of March 2023, Jayaswal Neco has a debt of Rs 3,265 crore. The company, with manufacturing plants located in Nagpur and Raipur, specialises in producing alloy steels, wire rods, bars, bright bars, steel billets, pig iron/DRI, sponge iron, pellets, and iron & steel castings. The company generates power from its 54.5 MW-captive power plants, which cater to about 60-70% of its annual power requirements.
