In a fresh twist, ArcelorMittal's OSPIL resolution plan challenged

The challenge to the ArcelorMittal resolution plan has come from Srei Infrastructure Finance as a secured financial creditor

There is a fresh twist to the resolution of Odisha Slurry Pipeline Infrastructure (OSPIL).ArcelorMittal’s resolution plan approved by the committee of creditors (CoC) has been challenged by the unsuccessful resolution applicant, Thriveni Earthmovers as well as Srei Infrastructure Finance, a lender.
 
A spokesperson for ArcelorMittal, said, “We cannot comment on details of an ongoing legal matter. We can confirm that the lenders of OSPIL approved ArcelorMittal’s resolution plan for the slurry pipeline unanimously, with a 100 per cent vote in favour of the plan. The plan provides upfront payment with full recovery of the principal amount to all the financial lenders.”
 
Early December, OSPIL’s CoC selected ArcelorMittal’s Rs 2,300 crore upfront payment offer. In the running was Thriveni, which had submitted a Rs 3,300 crore bid with an upfront payment of Rs 8 crore. The total admitted claims of OSIPL is around Rs 3,300 crore.
 
Lenders decided in favour of ArcelorMittal, primarily due to the difference in upfront payment. The fact that Thriveni’s repayment stretched over a period of time, was also an issue.
 
Thriveni has moved an application in the National Company Law Tribunal (NCLT) so that the CoC reconsiders its resolution plan and evaluates it on merit of maximisation of value. The matter will be taken up by the Cuttack Bench of the NCLT early February.
 
Advocate Anand Varma, who is representing Thriveni, said, “Our point is that the Arcelor plan doesn’t maximise value. We had offered principal plus interest repayment in five years in additional to an equity option of Rs 500 crore. But the CoC never negotiated our plan.”
 
“Also, Thriveni’s business plan was oriented towards value maximisation as it changes the usage of the pipeline from captive to non-captive. Thriveni’s business plan seeks to leverage OSPIL’s most critical asset i.e. the right of way, which is available with OSPIL because of land rights given to it by the state of Odisha.
 
Thriveni’s business plan seeks to utilise this valuable right of way for the benefit of the iron ore industry in Odisha, which will also mean an environmentally friendly logistics solution for the state,” he added.
 
As part of its business plan, Thriveni had proposed, on the basis of right of way granted to OSPIL, that it would increase capacity of 12 million tonnes to 24-30 million tonnes by laying an additional pipeline.
 
Having right of way meant that OSPIL would not have to go through the rigours of acquisition under the Petroleum and Minerals Pipeline Act, 1962.
 
In its application filed with the NCLT, Thriveni has alleged that the financial interest of the CoC lies in maximising the value of Essar Steel India – a captive consumer of the slurry pipeline – and not OSPIL.
 
The 253-km slurry pipeline, on the other hand, is a critical ancillary unit of Essar Steel. The pipeline connects the iron ore beneficiation plant in Dabuna with the 12-million-tonne pellet plant in Paradip, Odisha. The pellets, a raw material feed for the steel plant, are shipped to Hazira in Gujarat. 
 

Essar Steel was recently acquired by ArcelorMittal and Nippon Steel in a Rs 42,000-crore deal under India’s insolvency law and has been renamed AM/NS India since.
 
OSIPL’s shareholding is such that India Growth Opportunities Fund (IGOF), a scheme of Srei Multiple Asset Investment Trust (SMAIT), has a 69 per cent equity while the balance is with Essar Steel.
 
The challenge to the ArcelorMittal resolution plan, however, has come from Srei Infrastructure Finance (SIFL) as a secured financial creditor. 
 
SIFL’s contention centres around value maximisation. According to SIFL, the resolution plan fails to take into account that the corporate debtor shall be entitled to receive Rs 1,300 crore from Essar Steel India for usage during the CIRP (corporate insolvency resolution process) period. This is on the basis of the Right to Use Agreement.
 
The pipeline was leased to Essar and the arrangement with OSPIL was captured in the Right to Use Agreement.
 
In addition, SIFL has claimed that it would be recovering 58 per cent of its claims compared to some unsecured financial creditors and secured ones who are getting 72 per cent of claims as per the plan.
 
Moreover, the personal guarantees of the erstwhile promoter group of Essar, in favour of SIFL, was being assigned to ArcelorMittal.