ArcelorMittal Named Preferred Bidder by Essar Steel Lenders

Posted on: 20 Oct, 2018

“The company will now enter into further final negotiations with the CoC,” it added. Essar Steel owes Rs 49,000 crore to various banks and was admitted by the National Company Law Tribunal (NCLT) in August last year, led by lead banker State Bank of India.

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The world’s largest steelmaker ArcelorMittal has been declared the preferred bidder by lenders of debt-laden Essar SteelNSE 0.00 % ahead of metals player VedantaNSE 1.51 % Group, bankers said, as the 14-month battle for ownership of the prized asset draws to a close. The committee of creditors (CoC) for Essar Steel met to discuss the bids on Friday, a day after the Supreme Court-mandated two-week deadline ended. 

“ArcelorMittal has been declared the highest, or H1, bidder mainly because of its track record and experience in managing steel companies successfully for years. Both Arcelor-Mittal and Vedanta were very close in terms of the money offered, but we think (Lakshmi) Mittal can do a better job in turning around the company,” a senior banker closely involved in the process told ET. 

If the steelmaking asset located in Hazira, Gujarat, is finally awarded to ArcelorMittal, it will fulfill Mittal’s more than a decade-old ambition to have a beachhead in the country. Mittal has had plans since 2005 to set up greenfield facilities in Jharkhand and Karnataka, but the plans have not progressed.

“ArcelorMittal confirms it has been informed by the CoC for Essar Steel that it has been evaluated to be the H1 Resolution Applicant (the preferred bidder) in the corporate insolvency resolution process for Essar Steel,” said a statement from the global steel behemoth. 

“The company will now enter into further final negotiations with the CoC,” it added. Essar Steel owes Rs 49,000 crore to various banks and was admitted by the National Company Law Tribunal (NCLT) in August last year, led by lead banker State Bank of India.

ArcelorMittal had offered to pay back Rs 7,469 crore of dues owed by Uttam GalvaNSE 4.85 % and KSS Petron in addition to an upfront payment of Rs 35,000 crore for loans due from Essar Steel, pegging its total commitment at more than Rs 42,000 crore. 

Vedanta put in a bid of Rs 34,000 crore in the second round, which was conducted in April 2018. Russian lender VTB had formed a consortium with Numetal and a Rewant Ruia-promoted trust for the first round of bids. This trust was subsequently replaced by JSW Steel. 

However, earlier this month, the Supreme Court said only the first-round bidders would be considered. On October 4, the apex court directed ArcelorMittal and Numetal to pay off dues of companies in which they had stakes to be eligible to bid for Essar Steel. 

Last week, VTB petitioned the Supreme Court, asking it to allow a solo bid. The petition is likely to be heard next week. However, bankers said they have made their preference clear after Friday’s meeting. 

“The final voting on this matter will be held on Monday. We expect most banks to back Arcelor-Mittal,” said the banker cited above. The bids will be opened on Saturday when the final bidding amounts will be known. 

In April, ArcelorMittal had offered Rs 42,000 crore but was disqualified along with Numetal under Section 29 (A) of the Insolvency and Bankruptcy Code, 2016. The process ran a rigorous legal course until it finally reached the Supreme Court. The apex court on October 4 gave ArcelorMittal and Numetal two weeks to clear dues to become eligible to bid. 

Following this, ArcelorMittal on Wednesday announced it will pay Rs 7,469 crore to repay dues owed by Uttam Galva and KSS Petron. The Mittal company owned stakes in the two defaulting firms but sold them before bidding for Essar Steel in July. Numetal was edged out of the race owing to its inability to pay outstanding dues.

Source: The Economic Times

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