Stemcor Said to Agree With ICICI on Asset Sales: Corporate India

Stemcor Holdings Ltd., a U.K. steel trader restructuring $1.25 billion of debt, reached an agreement with ICICI Bank Ltd. (ICICIBC) that will pave the way for the sale of its Indian iron and manganese ore units, said five people familiar with the situation.

Stemcor, which was restrained by an Indian court in September from selling the local assets after a petition from ICICI Bank, now has been told by the Mumbai-based lender it doesn’t oppose a sale, four of the people said, asking not to be identified before an official announcement.

London-based Stemcor, which posted a loss of 20 million pounds ($32.7 million) in 2012, failed to repay an $850 million international credit line in May because of a decline in sales and has until the end of this month to reorganize its $1.25 billion debt. A delay in selling the Indian businesses may have jeopardized its restructuring plans with lenders including ABN Amro Bank NV, HSBC Holdings Plc and Societe Generale SA.

“The Stemcor assets should be very attractive for any steelmaker as they give ready access to iron ore, something which is difficult to find these days,” Rahul Jain, a Mumbai-based analyst with CIMB Securities India Pvt., said yesterday. “The company’s assets appear to be sound with all approvals in place.”

Jindal Steel & Power Ltd. (JSP), India’s third-largest producer by market value, JSW Steel Ltd. (JSTL), the nation’s third-biggest producer by volume, are among the potential buyers of the Indian assets, three of the people said. One bidder estimates the enterprise value of the Indian units, including the iron-ore mines, at about $1.5 billion, one of the people said.

Shares of Jindal Steel rose 0.7 percent to 284.05 rupees as of 10:15 a.m. in Mumbai, while JSW Steel fell 0.2 percent to 930.5 rupees. ICICI Bank’s declined 0.7 percent to 1,128 rupees.

Jan. 6 Deadline

The competing bidders also may seek to acquire stakes held by the Saraf family, a minority shareholder in Stemcor’s Indian ventures, two people said.

The short-listed bidders must submit binding offers along with financing details by Jan. 6, three of the people said.

“Discussions relating to our Indian assets are continuing to make good progress,” Charles Armitstead, a London-based external spokesman for Stemcor, said in an e-mail yesterday. Manish Mallick, a spokesman for JSW Steel; Naman Saraf, a member of the Saraf family; and ICICI Bank spokesman Sujit Ganguli didn’t respond to e-mail and text messages seeking comments.

“We will put in our bids in the second round for sure,” Jindal Steel’s Managing Director Ravi Uppal said in a telephone interview yesterday. He declined to comment on whether his company would buy the Saraf family stake.

JSW was shortlisted for the Stemcor assets, JSW Chief Financial Officer Seshagiri Rao said on Oct. 29.

Mines, Pellets

The Calcutta High Court in September issued an order saying Stemcor’s Indian assets are among the collateral for a 5.87 billion-rupee ($95 million) loan extended by ICICI, in response to a petition by the second-largest Indian bank.

Closely held Stemcor owns the Indian ore mines and a pellet plant through majority holdings in Aryan Mining & Trading Corp. and Brahmani River Pellets Ltd., according to a company presentation. Stemcor also owns a slurry pipeline connecting the mine to the factory.

Stemcor has a 73 percent stake in Aryan Mining, which owns iron ore and manganese ore mines, while the Kolkata-based Saraf family own the rest of the stake, according to Armitstead. Aryan Mining owns 100 percent of Brahmani River, according to him.

The mines, situated in the eastern state of Odisha, can produce 3 million metric tons of iron ore a year, while the pellet plant has an annual capacity of 4 million tons.

The bidders are attracted by the ready availability of the steelmaking raw material, whose output in India fell 15 percent to about 135 million tons in the fiscal year that ended March 31, following government and court-led restrictions to check illegal mining.

To contact the reporters on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net

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