Hitting back at billionaire Sajjan Jindal's remark that erstwhile promoters should be given a chance to bid for insolvent Essar Steel Ltd. as they are ready to repay debt in full, ArcelorMittal, the highest bidder selected by lenders, said it appears certain parties in India would like that bankruptcy proceedings are not implemented by the law.
“The IBC [Insolvency and Bankruptcy Code] was introduced for a very serious reason— to address a major problem with bad loans,” a spokesperson for billionaire Lakshmi Mittal-led ArcelorMittal said in a statement. “If the law is not implemented correctly and the rules are flouted, as suggested by some, this sends a negative signal about the certainty of India as an investment destination.”
Jindal, chairman of India's largest steelmaker JSW Steel Ltd., which unsuccessfully tried to bid to Essar Steel, told BloombergQuint on the sidelines of the World Economic Forum in Davos, Switzerland that the Ruias should be a given a “fair chance” to take control of insolvent Essar Steel despite legal restrictions as they are offering to repay the entire debt.
The committee of creditors for Essar Steel had approved a Rs 42,000-crore bid by ArcelorMittal when the Ruias came back with an offer to fully repay Essar Steel's debt of more than Rs 54,000 crore. But a provision in the Insolvency and Bankruptcy Code bars erstwhile promoters of insolvent firms from participating in bidding.
Jindal said he had been a proponent of Section 29(A) of the code that bars defaulting promoters from bidding. “If the promoter, even if delayed, is paying 100 percent back then what is the problem? he asked. “The process is still not over, it is still going on,” he said, hinting at the prospect of a partnership with the Ruias for Essar Steel.
ArelorMittal was not amused. The opportunity to make an offer for the assets in the insolvency process has been very transparent, the company said. No company should expect to come in at a late stage without providing financing details, it said.
Here's ArcelorMittal's full statement:
It appears there are certain parties in India who would like that the IBC not be implemented according to the law. The IBC was introduced for a very serious reason - to address a major problem with bad loans. If the law is not implemented correctly and the rules are flouted, as suggested by some, this sends a negative signal about the certainty of India as an investment destination. The opportunity to make an offer for the assets in the IBC process has been very transparent. No company or individual can say they were not aware of the process and therefore should not expect to come in at a late stage, providing no details as to the financing of their offer after a decision has been taken by the Committee of Creditors. In the case of Essar Steel, opportunities have been provided to bidders for nearly a year to first be eligible and second, to make a compelling offer. ArcelorMittal has followed the process from the start. We fully expect the process to continue to be implemented correctly and as per the law and that statements attempting to convince otherwise not be given any credibility.
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