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.

Bhushan Steel is one of the 12 companies that was identified by the Reserve Bank of India (RBI) for having the banking sector’s largest stressed assets in the country, and against which it sought bankruptcy proceedings. It is the first company on the RBI’s list to be resolved successfully under the IBC.

AZB advised Tata Steel on all aspects relating to the transaction, including undertaking legal due diligence of Bhushan Steel, strategizing, drafting a resolution plan, advising on regulatory implications, assisting in regulatory applications to the CCI and RBI, and advising on all litigation aspects. AZB’s team was led by managing partner Zia Mody and included partners Chaudhuri, Samir Gandhi, Rahul Rai, Vijayendra Pratap Singh and Anindita Roychowdhury.

Shardul Amarchand Mangaldas & Co (SAM) advised the committee of creditors (CoC) of Bhushan Steel on the bid process, determination of the highest evaluated resolution applicant (Tata Steel), driving negotiations on behalf of the CoC and drafting the transaction documents. The firm also represented the CoC before the NCLT and National Company Law Appellate Tribunal in the matter. Luthra & Luthra advised the resolution professional.

Executive chairman Shardul Shroff led SAM’s corporate insolvency resolution advisory and transaction team. He was supported by partner Anoop Rawat, senior associates Kushal Sinha, Sagar Dhawan and Saurav Panda. The litigation team comprised partner Misha and associates Vaijayant Paliwal and Ranjeev Khatana.