1. Bankruptcy proceedings: Essar Steel bids to be studied on Wednesday

Bankruptcy proceedings: Essar Steel bids to be studied on Wednesday

CoC meet deferred from Monday as RP yet to get advisers’ advice; Numetal, ArcelorMittal bids ‘legally sound’

By: | New Delhi | Published: March 6, 2018 6:33 AM
Essar Steel, steel industry, steel sector, economy Essar Steel is among the 12 companies that the Reserve Bank of India (RBI) had asked banks to refer to the bankruptcy court.

The committee of creditors (CoC) for Essar Steel is likely to meet on Wednesday to consider the resolution plans worked out by ArcelorMittal and Numetal for the loss-making steelmaker, sources close to the development said.

Lenders will discuss the recommendations put forward by the resolution professional (RP) Satish Kumar Gupta. The CoC comprises, among others, representatives from State Bank of India, Punjab National Bank, Bank of Baroda and Bank of India.

The CoC meet, initially scheduled for Monday, was deferred because the RP was yet to receive recommendations from his advisers on the bids. Consultancy firm Grant Thornton and law firm Cyril Amarchand Mangaldas are understood to be the two advisers to the RP on this matter.

Meanwhile, bankers are understood to be hesitant taking a decision on the bids although both the resolution plans may be legally sound.

“We are uncomfortable with the bidders even though they may be eligible as per the IBC norms,” a banker familiar with the development said.

FE had reported in February the CoC is likely to approach the National Company Law Tribunal regarding the bids received for Essar Steel since both the bidders were facing eligibility issues.

The eligibility of the bids is being questioned in the context of the amendment to the Insolvency and Bankruptcy Code (IBC) which categorically states that promoters of defaulting companies are not allowed to bid unless they repay all pending loans before submitting the resolution plan.

While ArcelorMittal’s bid could face an eligibility test because of a stake that it held in Uttam Galva Steel, a defaulter on banks’ books, Numetal’s bid could run into trouble since one of the persons associated with the company, Rewant Ruia, is related to the promoters of Essar Steel.

ArcelorMittal has sold its stake in Uttam Galva Steel. In response to a query on whether lenders were questioning the ‘spirit’ of the proposals, a spokesperson for Numetal told FE on Monday, “We have not yet received any such information from the Resolution Professional or his legal advisors. However, Numetal is a fully eligible resolution applicant and has submitted its resolution plan for Essar Steel.”

In February, Numetal said in a press release, it has submitted a ‘compelling’ resolution plan for the revival of Essar Steel. The resolution plan includes a detailed turnaround plan to address technological, operational and financial issues in both the short and long term.

In an interview to The Economic Times, Makram Abboud, vice-chairman, international, VTB Capital, said having Rewant Ruia’s Aurora Investments as a minority shareholder of Numetal doesn’t contravene the rule. “If the government says that this again has changed then we are always adaptable,” he said. VTB Capital is the main partner in the consortium that has bid for Essar Steel.

Sources in Numetal told FE that the resolution plan includes a provision where one stakeholder can buy the stake of another shareholder if one of them runs into regulatory hurdles.

An ArcelorMittal spokesperson said, “As we have previously said, we do not believe there is any legal basis under which ArcelorMittal would not be considered eligible to participate in the resolution process. ArcelorMittal was never the promoter of Uttam Galva. We had no board representation and no involvement in the management of the company even before selling our shareholding. ArcelorMittal is an internationally renowned, financially strong credit-worthy investor with an AA rating. We have invested successfully in many countries and developed a reputation for our ability to turn around distressed or under-performing assets. Section 29A of the IBC was not designed to prevent reputed, financially strong businesses, with no prior involvement with the asset in question from participating.”

Last week ArcelorMittal said it has signed a joint venture formation agreement with Nippon Steel & Sumitomo Metal Corporation (NSSMC) in relation to its offer to acquire Essar Steel. The resolution plan submitted by ArcelorMittal India outlined the intention to have NSSMC formally join its bid for Essar Steel, it said.

Essar Steel is among the 12 companies that the Reserve Bank of India (RBI) had asked banks to refer to the bankruptcy court. Essar Steel, which has a steelmaking capacity of 9.7 million tonnes per annum, owes more than Rs 45,000 crore to lenders.

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