Bhushan Steel IBC’s first big win

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The legal team advising Tata Steel in its acquisition of Bhushan Steel faced significant challenges while carrying out a limited due diligence on the target.

“The due diligence process was very complex, as the information needed to be analysed from the standpoint of an [Insolvency and Bankruptcy Code, 2016 (IBC)] transaction,” said Shameek Chaudhuri, a partner at AZB & Partners, which advised Tata Steel.

“We faced several challenges in negotiating with multiple stakeholders. This [resolution] is unlike a standard M&A transaction, where the sellers/promoters of the target company assist the purchaser in acquiring the company including providing transition support and post-closing indemnities,” Chaudhuri told India Business Law Journal.

AZB carried out a limited legal due diligence of Bhushan Steel prior to the acquisition with the documents provided by Deloitte Touche Tohmatsu India, the advisers to resolution professional Vijay Iyer, who managed the affairs of Bhushan Steel in place of its management. The firm also filed applications under the Right to Information Act and used other methods to gather information in order to understand the legal issues facing Bhushan Steel.

The National Company Law Tribunal (NCLT) and Competition Commission of India (CCI) had approved Tata Steel subsidiary Bamnipal Steel (BNPL) to acquire a controlling stake of 72.65% in Bhushan Steel. The acquisition is in accordance with an approved resolution plan under the IBC’s corporate insolvency resolution process. As part of the settlement, BNPL will pay ₹352 billion (US$5.2 billion) to Bhushan Steel’s financial creditors, as well as ₹12 billion to the operational creditors over 12 months.

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