ArcelorMittal rebuffs VTB, says bid eligible
ArcelorMittal said on Monday its bid for the debt-laden Essar Steel was eligible, a day after VTB Capital Vice- Chairman Makram Abboud raised questions about it. The two bidders have entered into a war of words even before Cyril Amarchand Mangaldas, the firm advising Essar Steel’s resolution professional for insolvency proceedings on the eligibility of the two bids, comes out with its opinion.
“We are confident about the integrity of the process, which will be adjudicated by the resolution professional. We continue to believe our bid is eligible and that as the world’s leading steel company in partnership with Nippon Steel and Sumitomo Metals, we have unrivalled industry expertise and a demonstrable track record that is very relevant for Essar Steel,” a statement from ArcelorMittal said.
Sources close to the world’s largest steelmaker said Numetal was not the only company that was armed with legal opinion and that ArcelorMittal’s legal advisors had said its bid was eligible. The retort was in response to the statements made by Abboud that despite ArcelorMittal’s lobbying with the Indian government, its “ineligible bid” should not be cleared as it did not meet the eligibility criteria set out in the Insolvency and Bankruptcy Code (IBC).
Abboud had said that Numetal had taken legal opinion from three law firms and they were all of the opinion that ArcelorMittal and its promoters’ investments in two companies whose loans had turned into non-performing assets (NPAs) for banks would debar it from bidding.
“Why should Numetal be questioning ArcelorMittal’s eligibility?” sources close to ArcelorMittal asked.
The issue with ArcelorMittal is that it held a 29.05 per cent stake as a co-promoter in Uttam Galva Steels, a company that had failed to repay bank loans. On February 7, ArcelorMittal transferred its entire shareholding to Sainath Trading Company as an inter se transfer at ~1 a share. Consequently, the co-promotion agreement with the Miglani family stood terminated.
ArcelorMittal’s arguments are that it never had board representation or management control of Uttam Galva Steels and was not responsible for the company. However, lawyers to Numetal say that ArcelorMittal had been promoter of a corporate debtor (Uttam Galva Steels) for over one year prior to the commencement of the resolution process for Essar Steel and the only way the person who is a promoter of a corporate debtor becomes eligible is if he or she pays all overdue amounts with interest.
Apart from that, L N Mittal, chairman and CEO of ArcelorMittal, had a personal shareholding in KazStroy Services of Kazakhstan, an oil infrastructure provider company, which in turn had a 100 per cent stake in KSS Petron whose debt turned into a NPA in 2015.
But Mittal sold his shares in KSS before submission of the bid for Essar Steel. Some of the lenders had raised questions on the promoter status at the time of the company’s debt turning into a NPA and not the sale of shares, but sources close to ArcelorMittal said the drafting of Section 29A was in the present tense.
In order to debar promoters of companies whose debts were in default from bidding, the government had amended the IBC last year and introduced Section 29A. Questions about Numetal’s eligibility are largely based on the association of Rewant Ruia, son of Ravi Ruia, who co-founded the Essar group. Numetal is 40 per cent owned by the VTB group and 25 per cent by an offshore trust where Rewant Ruia is a trustee.
Abboud said he was open to discussions on Ruia’s interest, though it was in accordance with the IBC. Sources close to ArcelorMittal, however, asked whether the shareholding of a bidding entity could be changed after submission of bids.
Meanwhile, a PTI report quoting sources said on Monday that the meeting between Essar Steel’s committee of creditors and the resolution professional has been deferred to Wednesday. Also, ArcelorMittal said Aditya Mittal had been appointed as president of the company. “Aditya Mittal, Group CFO and CEO of ArcelorMittal Europe, has been appointed as President, ArcelorMittal, in addition to his current responsibilities,” the company said.