ArcelorMittal and Numetal only bidders for bankrupt Essar Steel
BUSINESS STRATEGY Tata Steel skips bidding; financial bids likely to be opened later this week MUMBAI:
ArcelorMittal and Numetal Mauritius, a firm in which Essar group founders own a stake, are the only companies to have submitted binding financial bids for bankrupt Essar Steel Ltd, said three people aware of the development.
The financial bids are likely to be opened later this week, the three said on condition of anonymity.
At the close of the deadline on Monday, Tata Steel Ltd, considered to be one of the prime contenders for Essar Steel, had not submitted a bid despite undertaking extensive due diligence of Essar Steel’s assets in the run-up to the final bidding.
ArcelorMittal’s Indian unit submitted an offer for Essar Steel, the company said in a regulatory filing to the exchanges soon after submitting its bid.
Japan’s Nippon Steel, which had tied up with ArcelorMittal to jointly bid for Essar Steel, was not named in the statement but the people cited above said that Nippon would likely come on board at a later stage if Arcelor’s bid is accepted.
In a statement, ArcelorMittal India Pvt. Ltd said that it has set out a detailed resolution plan for Essar, aimed at improving its performance and profitability.
The second bid was from Numetal, a special purpose vehicle backed by a consortium of Russia’s VTB Capital and the Ruia family, also the promoters of Essar Steel.
According to the people cited above, Numetal’s bid may face potential disqualification due to the presence of the Ruia family in the consortium, which could be seen as a violation of recent changes to bankruptcy laws that have barred defaulting promoters from bidding for distressed assets.
“While submitting, Numetal has argued that its bid is legally compliant since the Ruia family has a minority stake in the consortium,” said one of the three people. “It remains to be seen whether creditors agree,” the person added.
Requests for comments sent to VTB Capital remained unanswered, while Satish Kumar Gupta of Alvarez and Marsal (A&M), the interim resolution professional for Essar Steel, declined to comment. A spokesperson for Essar Group declined to comment.
In a related development, The Economic Times reported on Monday that banks led by State Bank of India (SBI) plan to approach the courts against last week’s sale of a key raw material pipeline, by Srei Infrastructure Fund to Numetal. The pipeline, the report said, delivers iron ore to Essar Steel’s Odisha plant and is crucial to its operations.
Questions could also be raised over the validity of ArcelorMittal’s bid, which only a few weeks ago hastily sold its stake in distressed steelmaker Uttam Galva Steel back to its promoters at a huge discount, ostensibly to be able to qualify as a bidder for Essar Steel and other distressed assets that are up for sale. Uttam Galva is in the Reserve Bank of India’s second list of corporate defaulters slated to face insolvency proceedings.
According to the latest changes in the Insolvency and Bankruptcy Code (IBC), owners and associates of companies whose loans have been classified as non-performing for more than a year are barred from bidding to buy back the assets when they are sold to raise cash for creditors.
Essar Steel owed lenders around ₹45,000 crore, of which ₹31,671 crore had become nonperforming as of March 31, 2016. The company owes as much as 93% of this amount to a consortium of 22 creditors led by State Bank of India, Mint reported in August.
Essar Steel Hazira is the country’s largest single-location flat steel plant. The complex also houses a 30 million tonne per annum, all-weather, deep draft, dry bulk port and a 515 MW natural gas-operated power plant.