Exclusive: Five Metal Giants Express Interest In Essar Steel
Five large metal firms, promoters submit expressions of interest for Essar Steel debt resolution plan.
Debt-laden Essar Steel Ltd. has attracted initial interest from five large metal firms as part of its resolution under the Insolvency and Bankruptcy Code.
ArcelorMittal, Sumitomo Corporation, Vedanta Resources Plc, Tata Steel Ltd. and Steel Authority of India Ltd. have submitted expressions of interest for a resolution plan, three people close to the development told BloombergQuint requesting anonymity. The Ruias, who are the promoters of Essar Steel, have also shown interest, the people said.
Interest from large strategic investors for Essar Steel will be a relief for lenders who have been trying to resolve the case for nearly two years now. The steelmaker, which owes banks nearly Rs 45,000 crore, was among the first dozen large stressed companies identified for insolvency action by the Reserve Bank of India. The steel sector is one of the biggest contributors to Indian banks’ bad loans, which stood at Rs 8 lakh crore at the end of June.
Satish Kumar Gupta, the resolution professional in Essar Steel, had placed an advertisement in the newspapers this month, seeking EOIs to formulate a resolution plan for Essar Steel. October 23 was the deadline to submit expressions.
A potential strategic investor needed at least Rs 3,000 crore in “tangible net worth” at the group level to submit an EOI, according to the eligibility criteria set by the resolution professional.
Financial investors, non-banking finance companies and asset reconstruction companies needed minimum assets under management of Rs 3,000 crore in the previous financial year. Financial investors were also required to have minimum committed funds of Rs 2,000 crore available for investment in India in the preceding financial year.
While ArcelorMittal, Sumitomo Corporation, Vedanta and SAIL didn’t respond to BloombergQuint’s queries, Essar Steel and Gupta declined to comment.
A spokesperson for Tata Steel said that the company evaluates and assesses various strategic opportunities as part of its business and “this is an ongoing process”.
An expression of interest is only the first step. Essentially, the investors have stated that they are keen on taking up the opportunity and have the credentials to do so. Over the next few weeks, they will work on their resolution plans and meet the committee of creditors over valuations.
Typically, there is an information memorandum circulated among the bidders, which allows them to look at the company’s financials and also find a liquidation value, if no resolution plan is in place. The committee of creditors is yet to finalise the memorandum for Essar Steel, the first of the three people quoted above said.
The final bidders are expected to submit a plan, after all the deliberations, by mid-December. The committee of creditors would then approve the proposal best suited to their valuations, and send it to the National Company Law Tribunal for approval. The entire process has to be completed within 270 days of the case being admitted for insolvency proceedings.
Essar Steel’s lenders, led by State Bank of India, had filed an insolvency petition in July and the NCLT admitted the case in August.
They have been trying to find a resolution for two years. In November 2015, the banks appointed SBI Capital Markets and ICICI Securities Ltd. to find buyers for the steelmaker, but were unsuccessful. The lenders then tried various restructuring schemes but the results were not encouraging.