Essar lenders' meet remains inconclusive, CoC to meet on Saturday

Essar Steel’s lenders met on Wednesday to decide on the eligibility of the first round bids by ArcelorMittal and Numetal but the talks remained inconclusive, sources said. 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. 

On Wednesday, lenders debated on whether to go in for a fresh round of bids and invite other players, a source close to the development told Business Standard. A few bankers, who attended the meeting, suggested that lenders could wait till May 17 when the National Company Law Appellate Tribunal (NCLAT) would hear petitions of both the bidders challenging the eligibility criteria.

The lenders also held meetings with representatives of ArcelorMittal, owned by L N Mittal, and Numetal, which is majority-owned by Russia’s VTB Capital, to discuss the initial offers made by both companies.

Both ArcelorMittal and Numetal made their presentations to the committee of creditors (CoC). Last week, the lenders had issued notices to both the companies providing them with a week’s time to discuss their eligibility. The offer from ArcelorMittal was believed to be around Rs 320 billion, while that from Numetal was lower.

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 bank defaulters and weighed heavily against ArcelorMittal’s eligibility.

On the other hand, Rewant Ruia, a member of the Ruia family former promoters of Essar Steel, 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 in Ahmedabad on April 20 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 ~530 billion of Uttam Galva’s debt, if it were declared a winner for Essar Steel.

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 Rs 492 billion and operates a 10-million tonne per annum steel plant at Hazira in Gujarat.