Arcelor bid for Essar Steel: Banks move NCLT for clarity

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Mumbai | Published: May 29, 2018 5:45:39 AM

Lenders to the bankrupt Essar Steel have filed a petition with the Ahmedabad bench of the National Company Law Tribunal (NCLT) seeking clarity on whether ArcelorMittal’s offer to repay the dues of Uttam Galva and KSS Petron makes the company’s bid for Essar Steel eligible.

Arcelor, Essar Steel, NCLT, Uttam Galva, KSS Petron, State Bank of IndiaA section of the committee of creditors (CoC) also feels that the offers received in the second round of bidding should be considered in order to get the best value for the asset. (Reuters)

Lenders to the bankrupt Essar Steel have filed a petition with the Ahmedabad bench of the National Company Law Tribunal (NCLT) seeking clarity on whether ArcelorMittal’s offer to repay the dues of Uttam Galva and KSS Petron makes the company’s bid for Essar Steel eligible. While billionaire LN Mittal-led ArcelorMittal has transferred Rs 7,000 crore into a State Bank of India escrow account for the payment of dues of the two companies, it is understood to have laid down the condition that the money will be released from the escrow account only if its bid for Essar Steel is recognised as the winning bid.

“It is not clear if the offer to repay dues with certain conditions is the same as actually making the payment. The NCLT will have to give a direction on this. Therefore, we have approached the NCLT,” a senior banker told FE. A section of the committee of creditors (CoC) also feels that the offers received in the second round of bidding should be considered in order to get the best value for the asset.

“We should open the second round of bids to know how much have the bidders offered. It could lead to maximisation of value for the creditors,” the banker quoted above said. Russia’s VTB Bank-led Numetal, in which Rewant Ruia, the son of one of the promoters of Essar Steel, originally had a shareholding through Aurora Enterprises that made the bid invalid, has moved the National Company Law Appellate Tribunal (NCLAT) asking for the second round of bids to be considered.

However, the NCLAT will hear the matter again on July 23. It has directed Essar Steel’s resolution professional, the CoC and the adjudicating authority not to pass any order, including liquidation, in the interim period. Numetal doubled its bid in the second round and has agreed to pay Rs 37,000 crore in cash besides investing another Rs 6,000 crore as capital and operational expenditure, sources close to the development said.

On the other hand, ArcelorMittal is understood to have made an upfront offer of Rs 30,500 crore and another Rs 8,000 crore in the form of capital infusion in the company. Essar Steel owes close to Rs 50,000 crore to its financial creditors. Vedanta also placed a bid in the second round, though the value of its bid could not be confirmed. JSW Steel agreed to join hands with Numetal in the second round.

The Ahmedabad bench of the NCLT had said in April that inviting a second round of bids without offering bidders an opportunity to rectify their bids was “prima facie invalid”. It had directed the resolution professional Satish Kumar Gupta to reconsider the bids in the first round. It had also suggested that the two bidders be allowed an opportunity to rectify their bids to make them eligible.

The resolution process for Essar Steel has already surpassed its initial 270-day resolution period on April 28, and will also miss the revised deadline of May 28. “Despite always believing our bid to be eligible, ArcelorMittal demonstrated its commitment to India and to Essar Steel in confirming its intent to settle dues at companies in which we held a passive, minority shareholding,” ArcelorMittal said in a written statement. “We believe we have appropriately addressed the questions the CoC had raised and that there should now be no doubt that we are fully eligible.”

 

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