ArcelorMittal, one of the two key contenders for the bankrupt Essar Steel, is understood to have transferred about Rs 7,000 crore into a State Bank of India escrow account towards payment of dues of Uttam Galva and KSS Petron in an attempt to make its bid for Essar Steel eligible, banking sources told FE.
A week ago, Essar Steel’s committee of creditors (CoC) had notified the two bidders, ArcelorMittal and Numetal, that they would be given seven days’ time to clear all outstanding dues of companies in which they were promoters. The deadline for repaying the dues ended on Tuesday, bankers said. Sources said that the offer for the payment of dues contains certain caveats.
“ArcelorMittal can confirm it has written to the CoC for Essar Steel in response to the letter received on May 8. The details of this letter are confidential,” an official spokesperson for ArcelorMittal said.
“However, ArcelorMittal maintains that its offer for Essar Steel, submitted on February 12, is and always has been eligible. Any offer to pay any outstanding loans of companies where we only had a passive stake with no management or governance role would be made without prejudice to demonstrate the seriousness of our commitment to India and Essar Steel,” the spokesperson added.
ArcelorMittal’s first bid for the bankrupt Essar Steel was disqualified by the resolution professional (RP) Satish Kumar Gupta on the ground that it was a promoter of Uttam Galva and KSS Petron, both of which have defaulted on loans. ArcelorMittal held a 29.5% stake in Uttam Galva and was classified as a promoter of the company by the stock exchanges. It sold its stake in February, before submitting the bid for Essar Steel.
Since then, it has also been declassified as a promoter by the stock exchanges. However, bankers argued that merely selling its stake in Uttam Galva did not make it eligible to bid for Essar Steel.
In an order on April 19, the National Company Law Tribunal (NCLT) directed the RP and the CoC to give ArcelorMittal and rival bidder Numetal the opportunity to rectify their bids in the first round, and said that inviting a second round of bids without offering bidders an opportunity to rectify their bids was “prima facie invalid”. ArcelorMittal had bid in the second round as well.
The CoC’s decision to ask both the bidders to clear their dues followed the NCLT’s order. Rival bidder Numetal has challenged the CoC’s decision at the National Company Law Appellate Tribunal (NCLAT). The NCLAT will hear the case again on May 17.