Mumbai: With ArcelorMittal close to taking over Essar Steel Ltd, two Essar Group-owned terminals supplying coal to the bankrupt steel plant have become prized assets. ArcelorMittal has agreed to repay the entire debt owed by these terminals once its Essar Steel acquisition is completed, said two people familiar with the matter, both of whom spoke on condition of anonymity. One of them said the Essar Group has also agreed to settle dues.
Of the two dry bulk coal terminals, the Hazira terminal in Gujarat owes lenders ₹1,364 crore, while the Paradip terminal owes ₹484 crore.
“ArcelorMittal is willing to pay 100 cents to the dollar on the outstanding debt on these assets," the first person said. “These are stressed assets and as of now, the principal amounts are not being serviced. The Essar Group paid interest on this debt last in October, but hasn’t paid any instalments that have been due since then."
The second person, an official from one of the lenders to the terminals, said: “The Essar Group has also told us they will pay the outstanding in full. Let’s see if this comes through. We cannot force a change in management, but we will consider insolvency proceedings if the outstanding is not paid. We are hoping that once there is a final resolution on Essar Steel, there will be a resolution to these loans as well."
A third person said the Essar Group has engaged Moscow-based VTB Bank to scout for financial investors in the Hazira assets.
In February, The Economic Times had reported that ArcelorMittal was in talks with the Essar Group to buy the Hazira power plant and bulk terminal for ₹8,000-10,000 crore. Later, Business Standard reported that the Ruia family, which controls the Essar Group, had rejected ArcelorMittal’s offer.
The dry bulk terminals are majority-owned by Essar Ports, an Essar Group company. The Essar Group’s corporate website says the Hazira port is an all-weather, deep-draft port with 30 million tonnes per annum (mtpa) of dry bulk and break bulk cargo handling capacity, while Paradip has a capacity of 16 mtpa. The terminals are crucial to supply coal for operations to run smoothly at Essar’s 10 mtpa steel plant in Hazira.
While a spokesperson for ArcelorMittal declined to comment, a spokesperson for Essar Group said: “Essar Bulk Terminal Hazira is the sole owner of the licence to operate the deepwater Hazira Bulk Terminal. Essar Steel owns 26% equity of EBTL in accordance with the terms of the licence and the deed of undertaking provided by Essar Steel to relevant state authorities. Other than the 26% equity holding, Essar Steel has no other ownership rights/title in the deepwater jetty and facilities in the Hazira Port owned and operated by EBTL. The licence for the port was provided to the Essar Group and the Essar Group continues to be in control of, and the majority owner of 74% of Essar Bulk Terminal in accordance with the licence agreement.
“The aspersions being cast on the licence conditions of Essar Bulk Terminal seem part of a malicious campaign by certain parties with vested interests. All actions of Essar Bulk Terminal, as in the past, will always be in accordance with the licence agreement with government authorities. Further, we are currently not engaged in discussions with any foreign funds and private equities."
ArcelorMittal’s takeover bid for Essar Steel has been approved by the National Company Law Appellate Tribunal (NCLAT), even as lenders debate how the ₹42,000 crore upfront cash payment offered by the buyer will be split between various parties.
The case will be next heard by NCLAT on 9 April.