Steel: Lenders in Debt Trap

Lenders in Debt Trap The restructuring package for the three most heavily indebted steel companies comes at a time when the steel sector is enjoying a cyclical upturn. Steel prices have gone up by over Rs 4,000 per tonne during the current fiscal year after hitting 20-year lows in late 2001. The bottom lines of most steel companies have improved, as have their stock prices. The rise in demand for steel in the first three quarters is put at 7-8 per cent, with continued expectations of good performance in the next few quarters. The debt recast package, finalised under the Corporate Debt Restructuring mechanism, includes waiver of penalty on loan defaults, conversion of a portion of debt into equity and a cut in interest rates. The three steel companies between them owe over Rs 20,000 crore to banks and financial institutions in principal and accumulated interest. The restructuring plan had been held up for over a year as the sector went through a slump.