Essar Steel lenders set to back ArcelorMittal
Creditors favour ArcelorMittal as it has agreed to clear Uttam Galva’s debt
Mumbai: Lenders to Essar Steel Ltd plan to name ArcelorMittal Netherlands NV the top bidder for the beleaguered steel maker after it agreed to clear debts owed by Uttam Galva Steels Ltd and KSS Petron Pvt. Ltd where it once held stakes, two people aware of the development said.
On Tuesday, a banker involved directly in the resolution proceedings told Mint that ArcelorMittal will be transferring Rs7,000 crore into an escrow account with the State Bank of India, the largest lender to Essar Steel to settle the debt. This will go to settle all of the debt owed by Uttam Galva and KSS.
“Most lenders are in favour of ArcelorMittal as they have agreed to pay up all the outstanding dues for Uttam Galva and KSS,” one of the two people cited earlier said on condition of anonymity.
Essar Steel’s committee of creditors (CoC) plan to submit their choice of ArcelorMittal to the National Company Law Appellate Tribunal on 17 May, a banker involved in the proceedings, second person aware of the matter said.
On 10 May, Essar Steel’s other suitor Numetal Mauritius had moved the appellate tribunal seeking a second round of bidding, the person said. ArcelorMittal had submitted a higher bid than Numetal in the first round. The next hearing of the matter is slated for 17 May, when the lenders also plan to submit their decision.
The banker mentioned said ArcelorMittal is paying lenders more than the amount due from Uttam Galva and KSS.
“The total amount due on these accounts is around Rs6,300 crore. ArcelorMittal has agreed to pay Rs7,000 crore to the lenders,” he said.
On 8 May, the Hindu Business Line had reported that the firm was willing to pay up around Rs8500 crore to settle the debt of Uttam Galva and KSS Petron. Paying the dues would “cure” the European steelmaker’s bid for Essar Steel, a condition that the CoC had insisted upon.
The lenders had asked ArcelorMittal to settle the debt for Uttam Galva and KSS Petron to become eligible as a resolution applicant. The firm was earlier classified as a promoter of Uttam Galva which features in the second list of non-performing accounts referred by the Reserve Bank of India for resolution under the Insolvency and Bankruptcy Code. It also owned 32% stake in KazStroyService in Kazakhstan which owned KSS Petron. KSS Petron was classified as an NPA in 2015.
A spokesperson for ArcelorMittal said the company has replied to a letter it received from the CoC on 8 May.
“The details of this letter are confidential. However ArcelorMittal maintains that its offer for Essar Steel, submitted on 12th February, is and always has been eligible. Any offer to pay any outstanding loans of companies where we only had a passive stake with no management or governance role, would be made without prejudice to demonstrate the seriousness of our commitment to India and ESIL (Essar Steel India Ltd). We continue to believe that a swift resolution is in the best interests of ESIL and its stakeholders, including its employees who deserve a strong and certain future.”
Essar Steel owes lenders about Rs45,000 crore. ArcelorMittal’s bid for the stressed company is about Rs32,000 crore while VTB Bank-led Numetal consortium, the only other bidder in the first round of bids, offered to buy out the company for Rs18,000 crore.
However, both bidders failed the eligibility criteria for what the bankruptcy court defines a valid bid because of their links to other companies that have defaulted on loans.
A statement from Numetal on Tuesday said it has informed the CoC that it is a fully eligible resolution applicant as per the Insolvency and Bankruptcy Code. “Neither Numetal nor its shareholders have any loans overdue with any creditors in India. Aurora, which had minority shareholder interest with 25% equity in Numetal, neither had management role nor any right to directorship in the company. Neither Aurora nor its beneficiary has any loan irregularities with Indian lenders and banks.
“In any event, Numetal and other shareholders have already bought out Aurora’s shareholding in the company. Numetal has pleaded before NCLAT on its eligibility and the matter has been posted for hearing on 17 May.
Numetal had rectified its bid in the second round, by removing the contentious Aurora stake and replacing it with JSW Steel as an investor in the Indian subsidiary of Numetal. ArcelorMittal bid in the second round in partnership with Nippon Steel while Vedanta Resources came in as a surprise third bidder in round two.
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