NCLT Allows ArcelorMittal To Take Over Essar Steel But...

ArcelorMittal can take over Essar Steel, rules NCLT Ahmedabad. 

A security guard pulls a gate across the logo of the Essar Group. (Photographer: Abhijit Bhatlekar/Bloomberg News)
A security guard pulls a gate across the logo of the Essar Group. (Photographer: Abhijit Bhatlekar/Bloomberg News)

The Ahmedabad bench of the National Company Law Tribunal approved ArcelorMittal’s bid to take over insolvent Essar Steel Ltd.

ArcelorMittal will pay Rs 42,000 crore against financial creditors’ claims of more than Rs 49,000 crore. That translates into a haircut of about 14 percent for the lenders. The bidder will also clear dues of operational creditors to take over the assets.

The committee of creditors for Essar Steel had finalised ArcelorMittal as the winning bidder in October last year despite opposition from the Ruia family, the owners of Essar Group. The erstwhile promoters had offered to repay lenders and vendors in full if the committee of creditors withdrew the steelmaker from insolvency proceedings. The lenders rejected the settlement plan as did the NCLT earlier this year.

Even as the bench delivered its order in the Ahmedabad court on Friday, the Ruias sought to stay the order on grounds that they had already approached the appellate tribunal (NCLAT) to reconsider their settlement offer. ArcelorMittal objected to the Ruias seeking a stay. The judge asked Ruias to wait till Monday when the written order will be made available.

A statement issued by the Ruias soon after, reiterated that their offer was higher than that of ArcelorMittal.

We continue to believe that our settlement proposal of Rs 54,389 crore is the most compelling one available to Essar Steel creditors and fulfills the IBC’s declared overriding objective of value maximisation, which has been established time and again by courts at all levels.
Essar/Ruia Statement (March 8)

The statement said they will take a call on next steps after receiving a copy of the NCLT order on Monday.

Meanwhile ArcelorMittal welcomed the NCLT Ahmedabad order and said it hoped to close the transaction soon.

We welcome today’s pronouncement by the NCLT Ahmedabad. While we will need to review the full written order once it becomes available, we hope to complete the transaction as soon as possible.
ArcelorMittal Statement (March 8)

Essar Steel was one of the 12 large corporate accounts shortlisted for insolvency proceedings by the Reserve Bank of India in June 2017. State Bank of India and Standard Chartered Bank filed insolvency proceedings against the company at the Ahmedabad bench of the NCLT.

IBC: How Much Essar Steel’s Lenders Have Lost Since The Bankruptcy Filing

But repeated litigation by the promoter family, operational creditors and some financial creditors led to a considerable delay in the resolution process. The case has lingered for 583 days compared with the 270-day resolution period prescribed in the Insolvency and Bankruptcy Code.

The NCLT today suggested to the financial creditors that 15 percent of the corpus paid by ArcelorMittal could be used to repay more operational creditors, as the plan only allows for operational creditor repayment of Rs 196 crore.

On Feb. 28, while dismissing pleas submitted by 32 operational creditors, the NCLT had said the resolution plan submitted by ArcelorMittal was being reviewed for final approval. If necessary, the tribunal said it would direct ArcelorMittal to change their repayment plan for operational creditors.

What Essar Steel Brings To The Table For ArcelorMittal