Insolvency proceedings: Liquidation deadline looms over Essar Steel resolution

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Mumbai | Updated: March 27, 2018 5:07:44 AM

They have sought bids to be submitted by early next week so that they can try and stitch together a final plan and prevent the company from going into a forced liquidation.

Essar Steel, Essar Steel insolvency proceedings, Essar Steel liquidation deadlineLenders and the resolution professional (RP) are racing against time to ink a turnaround plan for Essat Steel before April 29, the deadline its 270-day insolvency process completion. (Reuters)

Lenders and the resolution professional (RP) are racing against time to ink a turnaround plan for Essat Steel before April 29, the deadline its 270-day insolvency process completion. They have sought bids to be submitted by early next week so that they can try and stitch together a final plan and prevent the company from going into a forced liquidation. What might complicate and delay the process, though, is that two key bidders — ArcelorMittal and Numetal — have both moved the National Company Law Tribunal (NCLT) against their disqualification in the first round. While the two processes are likely to continue simultaneously, a move in favour of the bidders could complicate matters regarding bids in the second round.
According to bankers, the process will definitely have to be sped-up to be able to come to a conclusion before the deadline. One banker pointed out that since the deadline ends on April 29, resolution professional Satish Kumar Gupta and the committee of creditors (CoC) have to select a resolution plan from among the bidders in the second round.

“Once the resolution plan has been finalised, the RP will submit it to the NCLT for approval. As long as the resolution plan has been finalised and approved within 270 days of a company’s admission to the tribunal, it will not go into liquidation,” he said. In the first round, the information memorandum was issued on September 1, 2017; resolution plans were invited on December 24 and the last date for submission of bids was February 12. Meanwhile, lenders had, in a meeting last week, disqualified both bids for not meeting the eligibility criteria under the Insolvency and Bankruptcy Code (IBC). However, the second round of bidding is expected to be wrapped up sooner than the first because only resolution applicants who had initially submitted expressions of interest (EOIs) for Essar Steel are eligible to bid in the second round.

Under IBC, the RP gets 180 days to submit a resolution plan for the company and the timeline can be extended by another 90 days. If the company fails to come up with a solution within the specified time, it has to be liquidated. An email sent to Gupta seeking comments did not elicit any response till the time of going to press. FE had earlier reported that Essar Steel will see a second round of bidding as both the bids have been disqualified by the CoC. Consultancy firm Grant Thornton and law firm Cyril Amarchand Mangaldas were the two advisers to the RP on this matter. The bids were disqualified in the context of the amendment to the IBC, which categorically states that promoters of defaulting companies cannot bid unless they repay all the outstanding loans before submitting their resolution plans.

The other resolution applicants who had earlier submitted EOIs include Tata Steel, Vedanta and Sumitomo Corporation. Since then, Tata Steel has already been recognised as the highest eligible bidder for Bhushan Steel. In August last year, the NCLT had appointed Gupta as the RP for Essar Steel. The company is among the 12 companies which the Reserve Bank of India (RBI) had asked banks to refer to the bankruptcy court. Essar Steel, which has a steel-making capacity of 9.7 MTPA, owes more than `45,000 crore to lenders.

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