ArcelorMittal, one of the two key contenders for Essar Steel, is likely to remit Rs 3,000 crore to debt-laden Uttam Galva Steels to allow the company to settle its dues with lenders, sources with direct knowledge of the matter told FE.
This will allow ArcelorMittal to re-bid for Essar Steel, or place a bid for any other stressed company in India, without its resolution plan getting stalled due to regulatory hurdles related to Article 29 A of the Insolvency and Bankruptcy Code (Amendment) Bill 2017, experts aware of the regulations told FE.
The amendment prevents promoters of companies that have been declared as non-performing assets for a year from bidding for assets undergoing resolution under the Insolvency and Bankruptcy Code, 2016 without clearing their dues.
Although ArcelorMittal sold its entire stake of 29.05% in Uttam Galva on February 7, the resolution professional (RP) for Essar Steel, his advisors as well as the committee of creditors (CoC) could not take a decision on the bids received from ArcelorMittal and Numetal because of this amendment. Sources said that the rebidding for Essar Steel is likely to take place soon.
“It does not matter that ArcelorMittal has now sold its stake in Uttam Galva. When the company turned into an NPA, Arcelor Mittal was a promoter shareholder. Merely selling their stake does not absolve them of the responsibility,” one of the sources quoted above said on conditions of anonymity.
As per data on the Bombay Stock Exchange as of December 31, 2017, ArcelorMittal Netherlands BV held 29.05% stake in Uttam Galva, and its shareholding is mentioned in the promoter and promoter group category. “The rebidding for Essar Steel is likely to happen soon, and this is one of the best ways for them (ArcelorMittal) to overcome the regulatory issue,” another source added.
Uttam Galva is one of the 28 companies mentioned in the Reserve Bank of India’s second list of corporate defaulters. It was referred to the National Company Law Tribunal (NCLT) by State Bank of India, the leader of the consortium of bankers. A recent Press Trust of India article said that Uttam Galva Steels has offered to enter into a settlement with its lenders over its dues. As part of the plan, the company has offered to pay 51% of the amount upfront.
As on March 31, 2017, the total debt of Uttam Galva Stood at Rs 5,637.80 crore, data from Bloomberg showed. During the fiscal, it posted a net loss of Rs 437.48 crore on revenues of `5,270.20 crore. Apart from State Bank of India, some of the other lenders of Uttam Galva include Canara Bank, Bank of India, Bank of Baroda and Union Bank.
A source close to ArcelorMittal said, “ArcelorMittal has never been a promoter of Uttam Galva and is no longer a shareholder in the company. Any questions about Uttam Galva’s financial position are for its actual promoters.”
ArcelorMittal and Numetal have maintained that their bids for Essar Steel are eligible under the existing regulations.