Uttam Galva Steels, a non-performing asset for more than a year, has offered lenders an out-of-court settlement to pay back its entire default amount of Rs 52 billion.
Though Uttam Galva was on the Reserve Bank of India’s second list of defaulting companies that had been referred to the National Company Law Tribunal (NCLT) for insolvency proceedings, it has not been admitted yet.
Legal representatives of the corporate debtor told a special division bench of the NCLT, Mumbai, on Monday that Uttam Galva had proposed a revised offer, taking into account all of its lenders’ interests. The firm sought four to five weeks, stating it planned to bring in a foreign investor. The identity of the foreign investor is, however, not known.
Uttam Galva had earlier made a one-time settlement offer of Rs 28.85 billion. Following this, the lenders sent a loan recall notice last week. On April 10, State Bank of India had told the NCLT bench that the offer was rejected and that it would agree to an out-of-court settlement only if 100 per cent of the defaulted amount was paid.
Earlier, ArcelorMittal was an investor in the company with a 29.05 per cent stake, but it transferred the shares inter se to the promoter group ahead of the bid for Essar Steel in February to make itself eligible.
Uttam Galva was a non-performing asset for more than a year. Under Section 29A of the Insolvency and Bankruptcy Code (IBC), a promoter of a defaulting company was debarred from the bidding process unless it paid the dues. ArcelorMittal sold Uttam Galva shares to terminate the co-promotion agreement even though it did not have management control or board representation.
Whether Uttam Galva’s debt resolution at this point will have any positive bearing on ArcelorMittal’s bid for Essar is not known.
Sources close to the development said Uttam Galva’s dues were around Rs 52 billion and the offer was subject to reconciliation.
Uttam Galva owes Rs 61.92 billion to the lenders as of FY2017, according to the submissions made by the company’s counsel.
The company over time received loans from leading banks like SBI, Union Bank, ICICI Bank, Bank of Baroda, IDBI and Punjab National Bank, in the form of external commercial borrowings, bank guarantees and working-capital loans, in addition to amount lent by a consortium of banks.
In March 2017, India Ratings and Research (Ind-Ra) had affirmed UGSLs’ Long-Term Issuer Rating, and had also rated its bank facilities with an 'IND D' while simultaneously migrating them to the non-cooperating category.
The rating action takes into account ongoing delays in debt servicing, which are likely to persist until a resolution strategy for the recovery of pending dues is agreed upon by its lenders, with consent of the division bench of the NCLT in Mumbai.
UGSL closed at Rs 14.65 on the BSE, 4.64 per cent higher from its previous close.