Essar Steel Lenders To Consider Allowing ArcelorMittal, Numetal To Repay Overdue Loans: Exclusive
The committee of creditors to Essar Steel Ltd. will meet on Monday to discuss a proposal to allow Numetal Mauritius and ArcelorMittal India to repay any overdue loans to their respective lenders and become eligible to bid for the insolvent steel company, according to three people in the know.
The committee of creditors will take a final decision based on a vote, said the people quoted above. The voting, which will extend over 24 hours starting Monday morning, will seek the consent of at least 75 percent of the lenders by value to allow both bidders to participate.
If majority lenders approve the proposal, lenders will give both Numetal and ArcelorMittal a certain number of days to clear any pending dues they may have with their respective lenders.
The bidders may choose to comply or challenge the CoC’s decision in court.
In ArcelorMittal’s case, the National Company Law Tribunal had found that the company was liable—as a promoter of KSS Petron and Uttam Galva Steels Ltd.—to repay dues to the lenders of both companies. In Numetal’s case, Essar Group co-founder Ravi Ruia, had issued guarantees to banks in exchange for loans availed by other group companies, which needs to be cleared, for it to become eligible, two of the three people quoted above have confirmed. Ruia’s son was a beneficiary of a trust which held 25 percent equity in Numetal Mauritius when the first bid was submitted.
The bidders will have to get ‘no dues’ certificates from all of their respective lenders and submit in writing that they do not have any pending liabilities to be considered as eligible bidders for Essar Steel. An ‘overdue’ in the context of the Insolvency and Bankruptcy Code is any amount that was due to lenders on a certain date before the bids were submitted and penal interest, if any.
During these meetings, Numetal had offered in writing that they were willing to sever any ties to the Ruia family. The other shareholders including VTB Bank could buy out the equity held by Aurora Trust, where Revant Ruia has been a beneficiary.
The committee of creditors was itself forced to consider this option after the Ahmedabad-bench of the NCLT directed it to do so. The NCLT in its order last month noted that under Section 30(4) of the Insolvency and Bankruptcy Code, any bidder deemed ineligible due to non-repayment of loans must be given a chance to repay their dues and become eligible.
The order was passed after both bidders challenged the committee's decision of deeming them ineligible to bid for Essar Steel in March. Lenders followed the resolution professional's recommendations in the matter, where both bidders were found to be in violation of Section 29(A) of the Insolvency and Bankruptcy Code on many counts, including being promoters of companies that were tagged as non-performing assets for over 12 months, having pending regulatory orders and criminal proceedings. The lenders themselves did not open the bids submitted by Numetal and ArcelorMittal to determine eligibility, which the NCLT noted as a problem.
After the NCLT passed its order, the creditors opened both bids and found that ArcelorMittal’s bid was higher than that of Numetal.
The India arm of the Luxembourg-based steel company had proposed 30-35 percent haircut for the financial creditors of Essar Steel, as compared with a 60-65 percent haircut proposed by Numetal, BloombergQuint reported earlier.
It is not clear as to whether Numetal will be allowed to revise its offer after it clears all pending dues to be eligible to bid.
Meanwhile, both Numetal and ArcelorMittal have independently approached the National Company Law Appellate Tribunal to challenge the orders passed at the NCLT and question the other bidder's eligibility in the case. Both pleas will be heard on May 17. The decisions taken by the lenders and the directions passed by them will be subject to the NCLAT order in the matter.