Essar Steel: NuMetal, ArcelorMittal bids may be disqualified
MUMBAI: The bids submitted by ArcelorMittal and NuMetal Mauritius to acquire debt-laden Essar Steel Ltd are likely headed for disqualification, potentially putting a question mark over the distressed steelmaker’s future and whether lenders can recover a significant portion of their money.
The bids, currently under technical evaluation by law firm Cyril Amarchand Mangaldas and advisory firm Grant Thornton, were found to be short of fulfilling the prescribed eligibility criteria under the Insolvency and Bankruptcy Code, according to two people with direct knowledge of the matter.
“The recommendations from the advisers are being considered and a final decision will be taken by the committee of creditors led by State Bank of India (SBI),” said one of the people.
A November 2017 change in the Insolvency and Bankruptcy Code has barred owners and associates of companies, whose loans have been classified as non-performing for more than a year, from bidding for distressed assets when they are sold to raise cash for creditors.
It is still unclear whether the committee of creditors will call for a second round of bidding if
THE BIDS WERE FOUND TO BE SHORT OF FULFILLING THE PRESCRIBED ELIGIBILITY CRITERIA UNDER THE INSOLVENCY AND BANKRUPTCY CODE
the current ones are disqualified. However, a distressed asset that is not resolved within 270 days of admission to the National Company Law Tribunal has to go into liquidation under the Insolvency and Bankruptcy Code.
NuMetal’s bid faced potential disqualification due to the presence of the Ruia family in its consortium, which could be seen as a violation of the recent changes to bankruptcy laws. Essar Steel is promoted by the Ruia family.
While submitting the bid, NuMetal had contended that its bid was legally compliant as the Ruia family has a minority stake in the consortium.
There were questions around the validity of ArcelorMittal’s bid, which had sold its stake in distressed steelmaker Uttam Galva Steels Ltd back to its promoters at a huge discount, possibly as a means to qualify as a bidder for Essar Steel and other distressed assets that are up for sale.