A steel company is in insolvency resolution. A bidder offers Rs 2,400 crore upfront plus Rs 600 crore deferred over three years. What is the bid really worth, and how might it be shared among secured, unsecured and operational creditors?

The bid is worth about Rs 2,880 crore today, not Rs 3,000 crore, and financial creditors recover about 47% of their claims. Discounting the deferred part costs Rs 120 crore. After process costs and Rs 24 crore to operational creditors, Rs 2,806 crore goes to financial creditors: secured lenders get 56.8% and unsecured 16.8%. The waterfall, the operational creditor floor and the voting threshold should all be confirmed under the current code.

Split it into what arrives now and what arrives later. Rs 2,400 crore is paid on approval. The Rs 600 crore comes as Rs 200 crore a year for three years, and it depends on the new owner being able and willing to pay. At 12%, the deferred part is worth Rs 480.4 crore, so the bid is worth Rs 2,880.4 crore, Rs 120 crore less than the headline. A buyer offering Rs 30 lakh for your flat, Rs 24 lakh now and the rest over three years, is not offering Rs 30 lakh.

Start with the floor for operational creditors. Under the code as amended, a plan must pay them at least what they would get in liquidation, or what they would get if the plan's value were paid out in the liquidation order, whichever is higher. With liquidation value of Rs 1,800 crore against Rs 4,500 crore of secured debt, both measures give operational creditors nothing, so the Rs 24 crore, 3% of their claims, is above the legal floor. For financial creditors, the committee's method gives secured lenders the Rs 1,800 crore they would get in liquidation, then shares the Rs 1006 crore surplus by claim: three quarters to secured, one quarter to unsecured.

Financial creditors vote by the size of their claims. Secured lenders hold 75% of the votes, above the approval threshold, which has been 66% of voting share since the 2019 amendments, so they can pass the plan on their own and the unsecured lenders cannot block it. That is why the distribution method matters so much to the unsecured side. Confirm three things before relying on any of this: the current voting threshold, the current floor for operational and dissenting creditors, and how the code and recent court rulings let a committee reflect security values in its distribution. The rules have been amended several times.

Close with a view. The plan lifts financial creditors from about 30% of their claims in liquidation, the Rs 1,800 crore going to secured lenders alone, to about 47%, so it should be approved, but the committee should push for more upfront: every Rs 100 crore moved from deferred to upfront is worth about Rs 20 crore to creditors at a 12% discount rate, and it removes the risk that the new owner stops paying in year two.