ArcelorMittal to clear $1 billion dues to bid for Essar Steel

Mumbai: ArcelorMittal will pay ₹ 7,469 crore to the financial creditors of Uttam Galva Steels Ltd and KSS Petron Pvt. Ltd to become eligible to bid for bankrupt Essar Steel Ltd. The announcement on Wednesday by the Luxembourg-based steelmaker comes days before the Supreme Court-set deadline, which expires this weekend, to comply with its eligibility requirement.

“ArcelorMittal announces that in line with the Indian Supreme Court ruling dated 4 October 2018, it has approved a payment of ₹ 7,469 crore (approximately $1 billion) to the financial creditors of Uttam Galva and KSS Petron to clear overdue debts in order that the offer it submitted for Essar Steel India Ltd (ESIL) on 2 April 2018 is eligible and can be considered by ESIL’s Committee of Creditors (CoC),” the company said.

On 17 October, Mint reported that ArcelorMittal had admitted to a liability of ₹ 4,554 crore to bankers, far below the ₹ 7,469 crore it has now agreed to pay.

Mint’s report had discussed how the outstanding dues of both companies, where Lakshmi Niwas Mittal had, until recently, been listed as a promoter, had both been declared non-performing assets with outstanding debt of ₹ 5,654 crore (Uttam Galva) and ₹ 904 crore (for KSS Petron).

On 4 October, the Supreme Court had granted one final opportunity to ArcelorMittal and Numetal Mauritius—the two frontrunners with bids for Essar Steel—to settle outstanding dues in related companies and submit fresh bids for the stressed asset by the end of this week.

The court allowed this exception to prevent Essar Steel, a much sought-after asset, from going into liquidation where the recoverable value for lenders would be much lower.

In the press statement quoted above, ArcelorMittal said its “board of directors believes that ESIL represents a unique and compelling opportunity for the company to establish a significant footprint, with substantial expansion potential, in the high-growth Indian steel market. It concluded that, given the significant benefits that ESIL would bring to ArcelorMittal, making this payment was an appropriate course of action under the circumstances”.

In May, ArcelorMittal deposited ₹ 7,000 crore in an overseas escrow account of State Bank of India to show its commitment towards settling the dues.

As stipulated in the Supreme Court ruling, the CoC for Essar Steel now has an eight-week period to accept what it considers to be the best resolution plan from eligible applicants. Mint, however, could not verify whether Russia’s VTB Bank-led Numetal Mauritius, the other contender, has taken any steps to cure its bid, which involves paying off lenders of Essar Steel, a liability that could be as high as ₹ 49,000 crore.

Mint reported on 10 September that ArcelorMittal had revised its offer to buy out Essar Steel for ₹ 42,000 crore. This is so far the highest offer for the stressed 10 million tonne plant in Gujarat. Numetal Mauritius is the second highest bidder at ₹ 37,000 crore while Anil Agarwal’s Vedanta comes in third at ₹ 34,000 crore.