ArcelorMittal offers to pay off Uttam Galva's dues if it wins Essar Steel bid

03 May 2018

ArcelorMittal may consider paying off the dues of Uttam Galva Steels as a ‘goodwill gesture’ even as it insisted on the eligibility of its bid for Essar Steel’s assets. 

The company’s assertion comes after the Committee of Creditors (CoC) comprising representatives of lenders met representatives of ArcelorMittal and Numetal to decide on the eligibility of their bids.
While the two bidders were responding to queries on their eligibility of the first round bids by ArcelorMittal and Numetal, reports said, the talks remained inconclusive. 
The committee of creditors (CoC) is expected to meet again on Saturday. One of the possibilities could be to give both the bidders a week to cure their bids.
"It is believed that any repayment discussions on any outstanding dues by ArcelorMittal would be a gesture of goodwill as the company strongly insists that its offer is eligible," Moneycontrol quoted Brian Aranha, executive vice president (strategy, technology, R&D), ArcelorMittal, as saying.
Aranha was talking to journalists at ArcelorMittal’s R&D facility in Montataire, France.
Lenders to Essar Steel had earlier objected to ArcelorMittal’s investment in Uttam Galva, which had defaulted on loan repayments. 
ArcelorMittal, until recently, held a 29 per cent share in Uttam Galva Steels and its chairman L N Mittal had a personal stake of 33 per cent in KazStroyService (KSS), which held a 100 per cent stake in an Indian subsidiary, KSS Petron. Uttam Galva Steels and KSS Petron have been termed as loan defaulters, which questioned ArcelorMittal’s eligibility to bid for Essar Steel.
On the other hand, Rewant Ruia, a member of Essar Steel promoter family, was listed as a beneficiary of a trust, which held a 25 per cent stake in Numetal, making its bid ineligible under Section 29A of the Insolvency and Bankruptcy Code. Numetal then offered to drop Rewant Ruia.
In February, just before the first round of bidding for the steel company was opened, ArcelorMittal sold its stake in both Uttam Galva Steels and KSS to be eligible.
But lawyers appearing for the banks and the National Company Law Tribunal (NCLT) in Ahmedabad did not approve.
The resolution professional of Essar Steel had rejected both bids on the grounds that they were ineligible, and in response both Numetal and ArcelorMittal moved the NCLT in Ahmedabad seeking clarity.
The NCLT on 20 April directed ArcelorMittal to repay all its debts, owed by the two defaulting companies, before making an offer for Essar Steel. ArcelorMittal had offered to repay Rs8,000 crore of Uttam Galva’s debt, if it were declared a winner for Essar Steel.
The responses from the two bidders could well decide the future course of action as lenders have the option to call for fresh bids if the eligibility issue continues to cloud submissions from ArcelorMittal and Numetal.
ArcelorMittal had bought into Uttam Galva Steels in 2010. “We had written off the investment of $150 million in 2015. We have no further interest in the investment,” Aranha said.
ArcelorMittal had intended to use Uttam Galva’s facility to process raw steel from its planned greenfield projects in Jharkhand, Odisha and Karnataka. But when these projects got stuck due to delays in getting permissions and on account of the global economic slowdown its interest in Uttam Galva waned.
Aranha added that the company had started the process of declassifying itself as Uttam Galva promoter before submitting its bid for Essar Steel. But an ‘administrative delay’ meant that the declassification came through after the bids were submitted.
ArcelorMittal had also sold back its stake in Uttam Galva to its promoters to clear its bid under the Insolvency & Bankruptcy Code (IBC). Clause 29A of the code prevents promoters of the defaulting company from bidding for stressed assets.
While ArcelorMittal is believed to have bid Rs35,000 crore for Essar Steel, Numetal’s offer stands at Rs19,000 crore. According to bid evaluation norms, 70 per cent weightage will be given to financial terms. The rest will be for the resolution plan.
Essar Steel is one of 12 large stressed asset accounts referred by the Reserve Bank of India to the NCLT for IBC proceedings. The company has an outstanding debt of Rs49,200 crore and operates a 10-million tonne per annum steel plant at Hazira in Gujarat.