Uttam Group firms' creditors move court over low offer made by Cargill arm

Operational creditors to get Rs 3 crore, against Rs 1,017 crore dues

It’s yet again bad news for the debt resolution of stressed assets. The operational creditors of Uttam Value Steels and Uttam Galva Metalliks are set to move courts, citing the low offer made to them by a consortium led by CarVal, the investment arm of Cargill.  

CarVal has made an offer of Rs 2,541 crore to the banks. Of this, Rs 625 crore will be given to banks as upfront payment, while the rest will be pumped into the company as debt by CarVal at an interest of 15 per cent per annum. This money will then be given to lenders. Another Rs 1,200 crore will flow to the lenders over a period of five years from the internal accruals of the two companies. With this proposal, the lenders will end up taking a 90 per cent haircut.

The operational creditors, on the other hand, have been offered only Rs 3 crore, against their dues of Rs 1,017 crore.  “With even lenders like Bank of Baroda (BoB) opposing CarVal’s bid due to its lower upfront cash offer, the stage is set for yet another court battle, with operational creditors taking the lead,” said a source close to the development.

A similar plan by the committee of creditors of Essar Steel by not giving operational creditors their dues was nixed by the National Company Law Tribunal (NCLT)-Ahmedabad. The NCLT-Ahmedabad had ordered giving 15 per cent of the upfront offer made by ArcelorMittal for Essar Steel to the operational creditors. The operational creditors were earlier offered 5 per cent of their dues, or Rs 214 crore, against their dues of Rs 4,976 crore in Essar Steel. It was later increased by Rs 1,000 crore by the operational creditors, but they rejected it. The matter is now pending in court.

On Tuesday, the resolution professional of both Uttam companies submitted his report to the NCLT in Mumbai, recommending CarVal as the highest bidder. The NCLT will take a final call on the offer.

A late bid of Rs 3,300 crore by SSG Capital Management-led consortium consisting of Synergy Metals and Mining Funds, Art Special Solution Finances, and Investment Opportunities IV Pte was rejected as the offer came in late. The upfront cash offer was Rs 1,000 crore by the consortium.

According to a source, BoB had objected to the CarVal plan, as the upfront cash is lower than the SSG Capital offer. “It’s not only the bidders, but the lenders too are fighting with each other over the resolution process,” said the source.

Interestingly, a State Bank of India’s plan in March 2018 to settle Uttam Galva Steels’ debt with the promoters by offering to take a 50 per cent haircut was rejected.  In the last one year, not only have the two companies lost more value, the recovery too is delayed by another year, said a banker.