Lenders accept Arcelor resolution plan for Essar Steel

DEADLINE MISSED Numetal declared ineligible to bid for Essar Steel assets as it failed to clear its dues before the October 19 deadline

MUMBAI: Essar Steel Ltd’s lenders on Friday accepted the resolution plan presented by Arcelormittal, the highest bidder for the debtladen steelmaker with an offer of ₹42,000 crore. The recommendation of Essar Steel’s committee of creditors (COC) will now go to the National Company Law Tribunal for its approval.

The creditors’ decision came after they heard the presentations by Arcelormittal and Vedanta on their respective resolution plans on Friday.

Earlier in the day, the creditors declared Numetal Mauritius ineligible to bid for the beleaguered steel firm as it had not paid its dues before the October 19 deadline.

They gave a clean chit to Arcelormittal Netherlands NV, leaving it in the field along with Vedanta Resources Plc.

Arcelormittal settled ₹7,469 crore outstanding liabilities of Uttam Galva Steels and KSS Petron, two companies in which LN Mittal, a director in Arcelormittal, is a promoter, clearing the barrier for eligibility to bid for Essar Steel. Under Section 29A of the Insolvency and Bankruptcy Code (IBC), bidders cannot be connected to other defaulting entities.

Numetal was required to clear the debt of Essar Steel and other Essar companies, given the “looming presence of Rewant Ruia” in the Numetal consortium. Rewant is part of the Ruia family, the erstwhile promoters of Essar Steel. While the actual amount due is unclear, the lowest possibility was ₹49,000 crore,

Essar Steel’s debts while multiple bankers pegged it at more than ₹1 trillion.

Mint reported on October 18 that Numetal is unlikely to clear its dues and may be declared ineligible. “Arcelormittal cleared its dues on Thursday and the payment proof has been submitted to the COC,” said a person aware of the development.

Meanwhile, VTB Bank of Russia, which is a majority shareholder in the Numetal Mauritius consortium, approached the Supreme Court on October 12 seeking permission to submit a solo bid. The case is yet to come up for hearing.

A person aware of developments at Numetal said that the company may yet try to make a comeback by raking up the outstanding dues of other entities related to Uttam Galva and KSS Petron. Legal action to make some of these dues enforceable on Arcelormittal might be an option for Numetal to explore, he said.

“Numetal can approach the National Company Law Tribunal now to point out that Petron Engineering Construction Ltd, Uttam Galva Metallics and Uttam Value Steel, which are bankrupt and where claims of up to ₹6,500 crore have been filed, are also connected to Arcelormittal,” this person said.

Mint could not independently verify this claim. However, if this is proven in court, it could increase the cost of acquisition for Arcelormittal. Spokespersons for Arcelormittal and Numetal declined to comment on the development.

“Right now, it seems Numetal is out of the reckoning altogether,” said a steel industry expert who did not want to be named. “They might try to stretch this process out further legally, making it difficult for Arcelormittal to go ahead with the acquisition.”

Separately, a banker aware of the proceedings said that there will be no fresh round of bidding.

Initially, Arcelormittal’s submitted a bid of ₹38,000 crore and Vedanta’s bid was valued at around ₹34,000 crore.