Uttam Galva of­fers to pay back full de­fault amount

Business Standard - - FRONT PAGE - ADVAIT RAO PALEPU & ISHITA AYAN DUTT

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 ~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 one­time set­tle­ment of­fer of ~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 non­per­form­ing 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 ~52 bil­lion and the of­fer was sub­ject to rec­on­cil­i­a­tion.

Uttam Galva owes ~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 work­ing­cap­i­tal loans, in ad­di­tion to amount lent by a con­sor­tium of banks.

In March 2017, In­dia Rat­ings and Re­search (In­dRa) had af­firmed UGSLs’ Long-Term Is­suer Rat­ing, and had also rated its bank fa­cil­i­ties with an 'IND D' while si­mul­ta­ne­ously mi­grat­ing them to the non­co­op­er­at­ing 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 ~14.65 on the BSE, 4.64 per cent higher from its pre­vi­ous close.

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