Lenders declare ArcelorMittal highest bidder for Odisha Slurry Pipeline

Lenders pick ArcelorMittal over Thriveni Earthmovers

ArcelorMittal has emerged the preferred bidder for Odisha Slurry Pipeline Infrastructure (OSPIL). At a meeting of the committee of creditors on Friday, lenders declared ArcelorMittal the highest (H1) bidder, according to the head of a public sector bank with exposure to the company.

Lenders favoured ArcelorMittal’s upfront offer for the slurry pipeline. “Arcelor’s offer was better than Thriveni’s,” said the lender. Thriveni Earthmovers made a surprise offer at Rs 4,000 crore recently. It’s not clear whether Arcelor, which had earlier offered Rs 2,350 crore, revised or improved the bid. ArcelorMittal didn’t comment.

Thriveni had sought a waiver from furnishing a letter of commitment and lenders were hesitant to agree on that, a source in the know said. The total admitted claims of OSPIL’s financial creditors were pegged at Rs 2,660 crore. Originally, Thriveni had made a Rs 8 crore upfront offer for the slurry pipeline though its total bid stood at Rs 3,300 crore to be made over a period of time. 

As far as Thriveni’s condition was concerned, one of the lenders explained that a letter of commitment was a definite prerequisite and bidders could not be exempted. “It is a usual practice for banks to ask resolution applicants to provide letter of commitment,” the lender said.

OSPIL — which owns a 253-km pipeline connecting the site of Essar’s iron ore beneficiation plant in Dabuna with the 12-million-tonne pellet plant in Paradip — is a critical asset for Essar Steel. In fact, the Essar Steel resolution professional had petitioned before the National Company Law Tribunal (NCLT) for declaring the pipeline an asset of the steel maker. 

The NCLT, however, in its order dated February 2018, had rejected the prayer, saying the applicant cannot claim ownership of the pipeline. Essar Steel owns about 31 per cent in OSPIL while the balance is held by India Growth Opportunities Fund (IGOF), a scheme of Srei Multiple Asset Investment Trust (SMAIT).

The week began with a quick series of events on the slurry pipeline front. First, IGOF wrote to the CoC and the resolution professional requesting withdrawal from CIRP (corporate insolvency resolution process). 

The pipeline is leased to Essar and the arrangement between the company and OSPIL is captured in the Right to Use Agreement (RTU). According to the IGOF, the usage charge was adequate to repay the entire debt along with interest to lenders, as well as investments made by IGOF while CIRP would result in lower recoveries. 

Then Thriveni came up with a revision in its offer. Finally, lenders have gone ahead and accepted Arcelor's offer. The pipeline, however, is unlikely to be the last stumbling block in Arcelor's plans for Essar Steel as it has other ancillary units like power plants and port that are not included in its assets.

ArcelorMittal has fought a long and protracted battle for Essar Steel for the past two years which finally concluded with the Supreme Court paving the way for the Rs 42,000-crore transaction, which is expected to close by the end of December.