According to Mining News Pro -In the latest update in Essar Steel’s insolvency case, the NCLAT (National Company Law Tribunal) has allowed lenders to consider the second round of bids submitted by Numetal and Arcelor Mittal thus moving a step ahead in the case which was put on hold in the month of May’18. In doing so, the NCLAT upheld the resolution professional’s (RP) view that the first round of bids submitted in February was ineligible.
The twist here is that although NCLAT has said that both Numetal and Arcelor Mittal are eligible to bid for Essar Steel, Arcelor Mittal has been given just three days (i.e. till 11 Sep’18) to clear its dues in order to become a standard asset to bid for Essar Steel. The market sources suggest that Arcelor Mittal needs to clear pending dues for Uttam Galva and KSS Petron, which add up to about INR 7,000 crore.
The events in the past
Numetal and Lakshmi Mittal’s ArcelorMittal had first submitted resolution plans in Feb’18 after lenders to Essar Steel had sought bids. Later, the Committee of Creditors (CoC) had disqualified both bids as it felt that they were ineligible under Section 29A of the Insolvency and Bankruptcy Code which bars a promoter of a non-performing asset for more than a year from submitting a resolution plan.
Following this, the lenders had called for the second round of bidding. While both bidders submitted revised bids, they also approached the Ahmedabad bench of the NCLT (National Company Law Tribunal) challenging the disqualification from CoC.
In Apr’18, the Ahmedabad bench of NCLT declared the invitation for the company’s second round of bidding as invalid and asked the lenders and RP of bankrupt Essar Steel to reconsider the first bids submitted by original bidders Arcelor Mittal and Numetal.
However, it did ask the CoC to take another look at the bids before disqualifying them. The tribunal had also asked the CoC to give the bidders a time period of 30 days to cure any default that may disqualify them under Section 29A of IBC.
Post-NCLT’s decision ArcelorMittal offered to repay any outstanding loans owed by Uttam Galva Steels Ltd., where it held promoter stake. The steelmaker had placed INR 7,000 crore in an escrow account, with the condition that lenders disqualify Numetal’s bid.
On its part, Numetal offered to take out Rewant Ruia from the company’s shareholding, as he is part of the promoter family that owns Essar Steel. Ruia is a direct beneficiary of a trust that holds a minority stake in Numetal. The bidder also restructured the shareholding of its India arm, getting in JSW Steel Ltd. to buy a stake and offer technical know-how on managing a steel plant.
Numetal wanted the second round of bidding while Arcelor Mittal yearned for the First round
While both Numetal and Arcelor Mittal submitted revised bids, Numetal moved to NCLAT against NCLT order to allow ArcelorMittal to bid for Essar Steel by paying up dues within 30 days, ArcelorMittal filed a separate appeal against being disqualified to bid for Essar Steel.
As informed by market sources, Numetal wanted the second round of bids to be considered as its bid amount in the second round was higher at INR 37,000 crore against Arcelor Mittal’s bid amount of INR 30,000 crore whereas Arcelor Mittal wanted first round of bids to be considered by rejecting Numetal.
However, with NCLAT’s decision to go for second round of bidding, the confirmation of the bids amount will come when CoC will open the second round of bids in coming days. But it is unclear whether the committee has the leeway to ask the bidders to revise their bids again or invite fresh bids. The clock on the resolution process for Essar Steel will also begin again unless any of the parties choose to appeal today’s NCLAT decision.
Essar Steel, a flagship company of Ruia’s family, is one of the dozen companies against which RBI (Reserve Bank of India) had initiated bankruptcy proceedings last year in Jun’17. According to data published on company’s website, Essar Steel owes INR 49,212 crores to 34 banks, financial institutions, trusts, and other corporate entities, INR 2,581 crore to the creditors, and INR 18 crores to the employees. The company has an integrated steel plant with a capacity of 10 MnT in Gujarat.