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This is because the resolution plan included a provision that requires the money to be returned within two months if the top court were to rule against the transaction.
JSW Steel had acquired BPSL under a corporate insolvency resolution plan valued at ₹19,350 crore, including 50% recovery for operational creditors up to a cap of ₹350 crore in 2021. JSW Steel had agreed to pay ₹19,350 crore to creditors of Bhushan Power & Steel in 2021 through a mix of cash and convertible debentures. With the Supreme Court setting aside the resolution plan, funds already disbursed to creditors may now need to be returned to JSW, subject to further directions from the company.
To protect its position, JSW Steel had insisted on a refund clause, as in an Escrow Agreement dated March 19, 2021.
With the Supreme Court setting aside the resolution plan, funds already disbursed to creditors may now need to be returned to JSW Steel, subject to further directions from the company.
The top court cited a 2020 statement by a counsel for the committee of creditors (CoC), recorded in court, confirming that any funds received would be returned within two months if the appeal against the resolution plan succeeded.The resolution plan also required an equity infusion of ₹8,550 crore-₹100 crore in share capital and ₹8,450 crore through compulsorily convertible debentures (CCDs) issued to Piombino Steel, a group entity that was to merge with BPSL.At the time of plan implementation, JSW infused only ₹100 crore as share capital towards equity contribution. As per the understanding of the lenders of BPSL, the delay of the remaining ₹8,450 crore by way of CCDs was due to the uncertainty created because of the attachment of assets of BPSL by the Enforcement Directorate (ED).
The Supreme Court, however, rejected the claim that delayed CCD issuance complied with the equity infusion clause.
The top court’s May 2 ruling, declaring JSW Steel’s acquisition of BPSL “illegal”, has rattled India’s distressed debt market.
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https://economictimes.indiatimes.com/markets/stocks/news/bpsl-creditors-face-big-clawback-after-sc-rejection-of-plan/articleshow/120883800.cms
