ArcelorMittal offers Rs 45 billion to be eligible for Essar Steel bid

ArcelorMittal has offered to pay around Rs 45 billion as overdue loans of Uttam Galva Steels and KSS Petron to become eligible to bid for Essar Steel, currently going through the insolvency process.

The amount calculated for Uttam Galva is Rs 39.87 billion and for KSS Petron Rs 5.67 billion.

ArcelorMittal declined to comment on the matter.

However, negotiations with lenders on the final amount to be paid are on and were likely to end on Tuesday night, indicated people close to the development.

The offer made by ArcelorMittal to the committee of creditors (CoC), on October 11, includes only the principal and interest. It doesn’t include the penal interest or other charges.

The offer was subject to approval by the board of ArcelorMittal.

Also, the calculation is based on the loan including interest till February 7 for Uttam Galva and February 9 for KSS Petron.

On February 7, ArcelorMittal had sold the shares of Uttam Galva, and on February 9, Fraseli, a company ArcelorMittal promoter L N Mittal owned and managed, had sold its shares in KSS Global, the parent company of KSS Petron, to become eligible for Essar. 

Both Uttam Galva Steels and KSS Petron had been classified as non-performing assets (NPAs) for more than a year, which made ArcelorMittal ineligible for Essar under the Insolvency and Bankruptcy Code (IBC).

On October 4, the Supreme Court gave time to ArcelorMittal and Numetal, under Article 142 of the Constitution, to clear NPA dues to be eligible to bid for Essar Steel.

The deadline for payment is October 18.

In May, when the CoC, basing itself on a National Company Law Tribunal (NCLT) order, had demanded a “no dues” certificate from Arcelor, the global steelmaker had parked Rs 70 billion on account of dues in its current account.

Sources said banks had then indicated an immediate payment of Rs 55 billion on account of Uttam Galva and Rs 15 billion to be paid over three years. For KSS Petron, the payout was to be Rs 10 billion.

The amount is likely to have increased now, some sources indicated. However, all of the debt may not be paid in one go. "The companies could pay the balance over three years," a source said.

After the National Company Law Appellate Tribunal (NCLAT) order, which had directed Arcelor to pay dues within three days, the company had revised its proposal to the Essar CoC.

It had then, in September, indicated a revised proposal of Rs 490 billion to the Essar CoC. It included an upfront payment of Rs 420 billion towards the resolution of the debt of Essar and a commitment to settle the overdue amount on account of Uttam Galva and KSS Petron.

As far as Numetal is concerned, it is not clear whether it has initiated any discussion with lenders on paying dues.

Numetal would have to clear the dues of Essar, and according to the Supreme Court order, it might have to clear the Ruia group companies’ loans that had been classified as NPAs for more than a year before the submission of the resolution plan.

In May, the sum of the principal and interest for Numetal, on account of Essar, was Rs 375.58 billion and penal interest and other charges at Rs 16.85 billion.

Meanwhile at least two companies — Russia's VTB and JSW Steel — want to go solo. VTB has moved an application in the Supreme Court, seeking permission on this. JSW Steel is seeking legal opinion.

While VTB is the major partner in the Numetal consortium, JSW Steel is an investor in its step-down subsidiary. 

Timeline 

>February 12, 2018: ArcelorMittal and Numetal submit bids for Essar Steel

>April 19: NCLT remands 

the first round of bids for reconsideration, renders the second round invalid

>May 16: ArcelorMittal parks Rs 70 billion, makes conditional offer to lenders

>September 7: NCLAT rules Numetal’s second bid eligible, asks Arcelor to clear Uttam Galva, KSS Petron dues by Sep 11

>September 10: Arcelor revises offer to Rs 420 billion and commits to pay dues on account of Uttam Galva and KSS Petron; moves Supreme Court against NCLAT order

>October 4: SC gives Arcelor, Numetal two weeks to clear dues for NPAs