Business is Risky: Secured lenders should have exited before insolvency occurred.

The case concerns the country’s most high-profile bankruptcy, Essar Steel India Ltd. Insolvency judges recently ruled that creditors whose claims are backed by collateral won’t get preferential treatment in the $6 billion sale of the company’s plant to ArcelorMittal. Secured creditors will stand in line with unsecured creditors.

India has been attracting foreign distressed-debt specialists to take advantage of $200 billion-plus of bad loans. The ruling, if it survives, may kill that trend.

https://www.business-standard.com/article/companies/if-not-quashed-essar-steel-ruling-can-unravel-india-s-insolvency-reform-119071700140_1.html

Under an agreement with the Essar creditors’ committee, ArcelorMittal’s offer would have made secured financial lenders more than 90 per cent whole. While that’s a good recovery rate, it’s less than 100 per cent, meaning unsecured operational lenders should have had to go empty-handed.

https://www.business-standard.com/article/companies/if-not-quashed-essar-steel-ruling-can-unravel-india-s-insolvency-reform-119071700140_1.html

In the insolvency judges’ view while collateral gives seniority in a liquidation, everyone’s equal in a bankruptcy resolution. Energy companies, power utilities, and even the state tax officer will have the same rank. [ At least the public (or public money will go where it belongs ]

https://www.business-standard.com/article/companies/if-not-quashed-essar-steel-ruling-can-unravel-india-s-insolvency-reform-119071700140_1.html

Hong Kong-based investor SC Lowy also wants to appeal the decision. Global distressed-debt investors have been placing small bets in India, often by standing behind asset reconstruction firms. Now they’ll be unable to price the Indian opportunity.

https://www.business-standard.com/article/companies/if-not-quashed-essar-steel-ruling-can-unravel-india-s-insolvency-reform-119071700140_1.html