Indian lenders will have access to Rs 70 billion deposited by ArcelorMittal in an escrow account, but only after the L N Mittal-owned company gets approval from the National Company Law Tribunal (NCLT) to take over Essar Steel and all pending litigation against the stressed steel asset are resolved before the acquisition. These are among the conditions set by the global steel giant for lenders, according to a source, as the bidding war for Essar Steel intensifies. ArcelorMittal has also demanded that the committee of creditors (CoC) of both Uttam Galva Steels Ltd and KSS Petron – both defaulters of Indian banks – should approve payment of their respective dues. ArcelorMittal deposited the amount after its offer in the first round of bidding for Essar Steel was rejected by the CoC as ArcelorMittal and its chairman, LN Mittal, had investments in Uttam Galva Steels and KSS Petron, respectively. Both UGSL and KSS Petron are facing bankruptcy proceedings in the NCLT after they failed to repay their loans. ArcelorMittal’s rival Numetal’s offer was also rejected as 25 per cent of its stake was owned by a Trust that had Rewant Ruia, son of Essar Steel promoter, as a beneficiary. ALSO READ: Bidding wars: Numetal reveals Rs 370 billion new offer for Essar Steel According to Section 29A of the Insolvency and Bankruptcy Code (IBC), any company or connected person to promoters which had investments in a defaulting company is barred from participating from bidding for any bankrupt company under the IBC resolution. But, as a goodwill gesture, Mittal deposited Rs 70 billion with the State Bank of India to become eligible to bid for Essar Steel. The lenders have decided to put the offer made by Mittal before the National Company Law Appellate Tribunal (NCLAT) for its approval. When contacted, an ArcelorMittal spokesperson said the company had participated in the resolution process for Essar Steel in good faith from the start. “On February 12, we submitted a competitive offer to creditors which we understand was the superior offer received.
Moreover, while we have always believed our offer was eligible, as a demonstration of our commitment to India and Essar Steel, we have indicated to the committee of creditors our readiness to settle outstanding dues of companies where we only had a passive shareholding. We would hope that this very serious offer would be given appropriate consideration and that we will be identified as the preferred bidder for the asset. In our view, it is critical for the credibility of the IBC that the process is followed fairly and correctly as originally laid out,” he said. ALSO READ: Will be surprised if ArcelorMittal is out of Essar Steel race: LN Mittal Essar Steel was referred to the NCLT by lenders following a recommendation by the Reserve Bank of India (RBI), after the company defaulted on its Rs 450 billion debt. ArcelorMittal and Numetal, backed by VTB Bank of Russia, made the first round of offers for the company. On Thursday, Numetal disclosed in the NCLAT that its bid value in the second round of bidding for Essar Steel was Rs 370 billion, short of double its first offer of Rs 190 billion, and about Rs 70 billion higher than ArcelorMittal's bid in the first round. If the bid values of the two companies are compared, then Numetal’s bid value in the second round, at Rs 430 billion, was higher than ArcelorMittal’s first offer by Rs 45 billion. ArcelorMittal’s bid in the second round, however, is not known. Vedanta has also made an offer for Essar Steel in the second round and wants its bid to be opened by the CoC.