NCLAT refuses stay on ArcelorMittal's takeover of Essar Steel
1 min read 15 Mar 2019, 06:59 PM ISTNCLAT tells Essar Steel directors their offer will be considered only after they have cleaned up all bad loans on Essar Group's booksNCLAT seeks a fresh plan for the distribution of ArcelorMittal's payout among financial and operational creditors
PremiumNEW DELHI : New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Friday refused to stay a bankruptcy court order approving ArcelorMittal's ₹42,000 crore takeover bid for Essar Steel Ltd, and sought a fresh plan for the distribution of the bid amount among financial and operational creditors of the debt-laden firm.
Essar Steel directors had challenged in NCLAT ArcelorMittal's Essar Steel bid, saying that their offer of ₹54,389 crore was superior as it clears 100% outstanding dues of both financial and operational creditors. NCLAT told them that their offer would be considered only after they clean up all bad loans on Essar Group's books.
Standard Chartered Plc too moved NCLAT against ArcelorMittal's Essar Steel bid. Its counsel contended the bank was being given only 1.7% of its total exposure to Essar Steel, while other lenders—part of the committee of creditors (CoC)—were recovering more than 85% of their dues.
A two-member bench headed by Justice S.J. Mukhopadhaya posted the matter for further hearing on 18 March. It also asked the State Bank of India-led CoC to bring a fresh distribution plan on that day.
"There cannot be any discrimination...all are equal," NCLAT told SBI.
The tribunal said all operatonal creditors with less than ₹1 crore exposure should get 100% of their dues and so should the employees of Essar Steel. Only 90% of ₹42,000 crore being offered should go to financial creditors.
NCLAT is of the view that the CoC cannot reserve 92% of the bid amount for financial creditors and leave just 4% for operational creditors.
The CoC, however, opposed proposal to give 10% to operational creditors, saying they had approved ArcelorMittal's bid for Essar Steel based on the money that secured lenders are able to recover from the insolvency process.
Without the recovery for secured lenders, the CoC wouldn't have approved the plan, the counsel appearing for the committee said, adding that it cannot be a lottery system for operational creditors. Financial creditors would be left with ₹37,800 crore if 10% of the bid amount is given to operational creditors.
ArcelorMittal has offered to pay Essar Steel lenders ₹41,987 crore for their total dues of ₹49,395 crore. Operational creditors would get only ₹214 crore against their outstanding of ₹4,976 crore. Standard Chartered, an operational creditor, will get ₹60 crore against its claims of ₹3,187 crore from Essar Steel.
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