Arcelor to Clear $1 Billion in Dues as Essar Deadline Looms
(Bloomberg) -- ArcelorMittal agreed to pay off loans for two group companies in India to be eligible to bid for the indebted Essar Steel India Ltd. as the world’s largest steelmaker seeks to get a foothold in a market that is poised to be second-biggest producer of the alloy.
The company approved payment of 74.69 billion rupees ($1 billion) to creditors of Uttam Galva Steels Ltd. and KSS Petron Pvt., the Luxembourg-based ArcelorMittal said in a statement Wednesday. India’s Supreme Court had asked Arcelor and a rival consortium Numetal Ltd., led by VTB Capital, to clear dues in group companies by Thursday to be deemed eligible bidders for Essar.
Numetal declined to comment on whether it will make payment by the deadline. A failure to clear the dues will make Numetal ineligible, paving the way for Arcelor to emerge as the preferred bidder, unless the lenders call for fresh bids.
Essar’s 10 million metric tons-a-year facility in India “represents a unique and compelling opportunity for the company to establish a significant footprint, with substantial expansion potential, in the high-growth Indian steel market,” Arcelor said in the statement. Given the significant benefits that Essar would bring to ArcelorMittal, the board concluded that making this payment was an appropriate course of action under the circumstances, it said.
ArcelorMittal and Numetal have both offered to pay 420 billion rupees for the mill. India’s Supreme Court has given Essar’s lenders eight weeks to choose the best bid once the dues are cleared.
Essar has emerged as the most sought-after asset in India’s crackdown on delinquent borrowers, one of the so-called “dirty dozen” -- debtors that the central bank ordered be taken through the bankruptcy process in June last year. Anil Agarwal’s Vedanta Ltd. and JSW Steel Ltd. have also expressed interest in acquiring the mill.
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