Tuesday, October 16News That Matters

ArcelorMittal’s Proposal Forces Essar Steel Lenders To Hold Back On Making A Decision

After the order from National Company Law Appellate Tribunal on Sept. 7, ArcelorMittal had only till today to repay dues worth Rs 7,000 crore in Uttam Galva Steels Ltd. and KSS Petron Ltd. to become eligible to bid for Essar Steel Ltd. But yesterday, the Luxembourg-based steelmaker sent a letter to Essar Steel creditors, throwing the entire process into a tizzy.

While ArcelorMittal increased the offer to Rs 42,000 crore from its earlier bid of about Rs 31,000 crore, it also approached the Supreme Court challenging the NCLAT order on its eligibility. This is where things get interesting.

In its letter, ArcelorMittal points out that it firmly believes that the company is not liable to pay for the dues of Uttam Galva and KSS Petron.

As per ArcelorMittal’s Letter To Essar Steel’s Committee of Creditors:

“We are not the debtors in relation to the debt of Uttam Galva and KSS Petron and have not obtained any financial or non-financial advantage, and no nominee or representative of AM (ArcelorMittal) has ever been on the board of directors of either company… Please note that the AM proposal must in no way be construed as an admission of the purported ineligibility of any company in the ArcelorMittal group to submit a resolution plan under the IBC or otherwise, nor is it in derogation of our right to avail of appellate remedies against this order.”

The letter to Essar Steel’s creditors does two things: one, it stops them from deciding on the eligible offers available to them; and second, it makes sure that the Lakshmi Mittal-led company is in full control of the eligibility question being raised at the Supreme Court.

The Luxembourg-based steelmaker’s offer is higher than the Rs 37,000-crore bid of its nearest competitor Numetal Mauritius.

As such, at a meeting yesterday, the committee of creditors decided that they will wait for the Supreme Court to take the final decision on the eligibility of both ArcelorMittal and Numetal before they decide on the highest bid, said a person present at the meeting requesting anonymity. The creditors have chosen to stick with the principle of maximisation of value within the parameters of the Insolvency and Bankruptcy Code, and thus, cannot disregard ArcelorMittal’s offer, the person said.

All eyes will be on what the apex court decides. It heard ArcelorMittal’s plea today and said it will hear the matter further tomorrow, without giving any extension to NCLAT’s Sept. 11 deadline to repay Uttam Galva and KSS Petron dues.

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