Neo Asset Management has announced plans to acquire ₹300 crore of debt from Steel Exchange of India, a debt previously owed to Edelweiss Alternatives. The move is intended to refinance the existing high-cost debt and fund working capital requirements, according to an announcement made on Tuesday.
The previous loan carried a hefty interest rate of 21.5%. However, the new loan acquired by Neo Asset Management could potentially be cheaper by up to 200 basis points. As part of the acquisition, Neo Asset Management and co-investors will secure 3,828 debentures amounting to a principal of ₹275 crore.
In addition to this transaction, Steel Exchange will issue new Non-Convertible Debentures (NCDs) worth ₹100 crore (INR100 crore = approx. USD12 million). These NCDs carry an 18.75% coupon rate and will feature monthly interest payments along with quarterly principal payments.
The financial performance of Steel Exchange has been significantly affected in recent years due to a variety of factors. These include an unfavorable steel cycle, reduced demand, plummeting prices over the past four to five years, and the impact of the COVID-19 pandemic. These challenges led to the company's account being non-performing since December 2016.
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