 "Lakshmi Mittal")
Lenders led by State Bank of India have asked L N Mittal, billionaire-promoter of ArcelorMittal, to repay a debt of Rs 13.40 billion taken by KSS Petron, after the company defaulted on its loans in India.
Mittal owns a 33 per cent stake in KazStroyServices (KSS) of Kazakhsthan, an oil infrastructure provider company, in his personal capacity, and KSS owns 100 per cent of KSS Petron, which turned a non-performing asset (NPA) in 2015.
Lenders say Mittal will have to either sell his personal stake in KSS or repay the debt of KSS Petron if ArcelorMittal wants to bid for stressed assets in India.
KSS Petron is a defaulter to private sector banks also, according to an Insolvency and Bankruptcy Code (IBC) notice on its website.
A company spokesperson said there was no legal basis that would prevent ArcelorMittal from participating in the auction process should it decides to do so. “ArcelorMittal has no connection with Petron and does not believe this company has any relevance to the process. ArcelorMittal is a financially sound company with strong expertise in turnaround situations,” the spokesperson said in a statement.
In a desperate attempt to get their money back, the SBI’s Stressed Asset Management Branch in New Delhi had written to Mittal last month to regularise the account, which was referred by SBI’s overseas branch after a default. But, lenders said that despite repeated reminders, they had not received any response from Mittal.
The banks had, in August 2017, decided to send the company to the National Company Law Tribunal (NCLT) for resolution under the IBC, 2016. The company is, however, not part of the Reserve Bank of India’s list of 40 companies identified for rapid debt resolution.
Mittal bought the 33 per cent stake in KSS in 2011 for $300 million. The company is one of the largest engineering, procurement, and construction companies in Kazakhstan. In India, KSS Petron was involved in projects to lay pipelines, and had also executed key projects since July 2007.
With the banks writing directly to Mittal to repay the loans, lenders are putting the onus of the default on Mittal. This could also derail Mittal’s plans to invest in stressed assets in the steel sector. In April last year, rating firm Crisil had warned banks that KSS Petron was not sharing financial information despite several reminders.
Recently, ArcelorMittal decided to sell its 29 per cent stake in Uttam Galva Steels to co-promoters. The shares are to be transferred at Rs 1 a piece. The move was necessitated as Uttam Galva is a bank defaulter and has been referred to the NCLT for debt resolution. Uttam Galva has defaulted on loans worth Rs 62 billion to public sector banks.
Having a stake in defaulting companies is a big hurdle for Mittal as according to Section 29A of the IBC, a person shall not be eligible to submit a resolution plan if such person, or any other person acting jointly with such person, or any person who is a promoter or in management of such person, is an undischarged insolvent, according to lenders. This prohibits promoters or sister concerns of companies with NPAs of more than a year from taking part in auctions.
ArcelorMittal had, however, said IBC regulations were intended to prevent defaulting promoters whose own investments had failed and were insolvent from buying those same assets out of bankruptcy. The company did not make a bid for Bhushan Steel and Bhushan Power and Steel after conducting due diligence. Mittal is expected to make a bid for Essar Steel — provided it is out of the NPA list. The company had recently signed a joint venture with the Steel Authority Of India (SAIL).
