The Srei fund seeks an out-of-court solution to avoid the insolvency of OSIPL

Kolkata: India Growth Opportunities Fund (IGOF) of the Srei Multiple Asset Investment Trust has written to the resolution professional (RP) of Odisha Slurry Pipeline Infrastructure (OSIPL), a company that is in the process of insolvency resolution (CIRP), for a judicial settlement. Thriveni Earthmovers, based in ArcelorMittal and Tamil Nadu, are the two bidders for OSIPL in the National Company Law Court (NCLT).

IGOF, the Srei Trust fund, has a nearly 69% stake in OSIPL, which was being built for the Essar Steels facilities near Paradip. The fund managed by Srei Trust has also distributed a copy of the letter to the 13 OSIPL lenders. These are: Allahabad Bank, Central Bank, Edelweiss ARC, ICICI Bank, IOB, Syndicate Bank, Srei Infrastructure, Canara Bank, HDFC Ltd, IDBI Bank and State Bank of India (SBI).

The company operates a 253 km long pipe that supplies iron ore from mines inside the Essar Steel pellet plant in Paradip, Odisha. The pellets are transported to the main facilities of Essar Steel in Hazira in Gujarat, satisfying half of their raw material needs. This infrastructure for the supply of raw material is one of the main advantages of the 10 million-ton Essar Steel plant in Hazira that was awarded to an ArcelorMittal-Nippon Steel harvester by the Supreme Court, after a prolonged legal battle that ended the last month.

The estimated admitted claims of OSIPL financial creditors is Rs 2,660 crore. The company went to NCLT after an IDBI Bank appeal because OSIPL was unable to pay the debt since Essar Steel has not paid the rent under the right to use agreement concluded with OSIPL in 2015. IGOF in its letter has opined that, While lenders may consider that such recovery through CIRP is necessary to protect their interest. (IGOF) believes that the outcome of CIRP in the case of OSPIL would be detrimental to the interest of the lenders and would lead to a lower recovery.

The fund that owns the majority of OSIPL has argued that according to the financial projection, the company can obtain an annual income of Rs 720 crore as income from Essar now owned by ArcelorMittal, while the debt service in its peak year will not be more of Rs 458 crore, considering the repayment of principal and interest.

“Considering the above, we again emphasize that resolving OSPIL's debt under CIRP would lead to a lower recovery. This would be particularly true if any resolution plan is accepted without addressing the total amount of the lenders' claim and the investments made by IGOF, ”he added.