Race begins afresh: Essar steel lenders call for fresh bids

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Mumbai | Published: March 22, 2018 6:07:24 AM

Decision comes after bankers rejected bids by both ArcelorMittal and Numetal since they didn’t meet IBC criteria.

Essar steel, steel sector, steel industry, economyWhile a time frame for the second round of bidding has not yet been finalised, it is likely to happen soon, people involved in the decision-making said. (Reuters)

Essar Steel, which had received resolution bids from ArcelorMittal and the VTB Bank-led Numetal, will soon see a second round of bidding as both the bids have been disqualified by Essar Steel’s committee of creditors (CoC) at a meeting on Wednesday, bankers present in the meeting told FE.

They added that only the resolution applicants who had initially submitted expressions of interest (EOIs) for Essar Steel would be eligible to bid in the second round.

While a time frame for the second round of bidding has not yet been finalised, it is likely to happen soon, people involved in the decision-making said.

“In today’s CoC meeting, it was decided to disqualify both the bids to end the impasse. There will be a fresh round of bidding soon,” a source said. The CoC included, among others, representatives from State Bank of India, Bank of Baroda and Bank of India.

The resolution professional (RP) for Essar Steel Satish Kumar Gupta, his advisers and the CoC had been unable to reach a decision on the bids received from ArcelorMittal and Numetal. 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 Insolvency and Bankruptcy Code (IBC), which categorically states that promoters of defaulting companies cannot bid unless they repay all the outstanding loans before submitting their resolution plan.

While ArcelorMittal’s bid was likely to have been disqualified because of the stake that it held in Uttam Galva Steels, a defaulter in banks’ books, Numetal’s bid was held ineligible since one of the persons associated with the company, Rewant Ruia, is related to the promoters of Essar Steel. The shareholders of Numetal include Russia’s VTB Bank, engineering firm TyazhPromExports of Russia, financial investor Aurora Enterprises (in which Rewant Ruia has an interest) and commodity trading company Indo International Trading.

The other resolution applicants which submitted EOIs include Tata Steel, Vedanta and Sumitomo Corporation. The last date for submitting the expression of interest was October 23, 2017. Since then, Tata Steel has already been recognised as the highest eligible bidder for the loss-making Bhushan Steel, another of the 12 large assets that were first referred to the National Company Law Tribunal (NCLT).

“Given that there has been a price discovery indication from two of the bidders for the company, the potential number in the fresh round of bidding is likely to be higher than the previous bids,” said Anand Bathiya, Partner, Bathiya & Associates LLP.

Both ArcelorMittal and Numetal have been preparing for the second round. While ArcelorMittal is likely to pay almost Rs 3,000 crore to Uttam Galva to help it settle its dues with lenders, VTB Bank is understood to be in advanced talks to buy the stake of Aurora Enterprises in Numetal, to dissociate itself from Rewant Ruia. This could make both the companies eligible to bid for Essar Steel, sources close to the matter said. Meanwhile, Numetal said it has filed an application on March 20 before Ahmedabad bench of the NCLT seeking a declaration that Numetal is eligible to submit a resolution plan for Essar Steel and that any decision of the CoC be subject to the outcome of the company’s application at the NCLT. Sources suggested that even as the rebid process and the NCLT proceedings could run parallelly, a positive outcome at NCLT will enable Numetal to retain its present shareholding structure in the final bid. The matter is listed for hearing on April 4.

Data on Essar Steel’s website show financial creditors had claimed `54,857.22 crore, while claims worth `49,212.56 crore were admitted by the NCLT as on February 23, 2018.

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