ArcelorMittal wins bid to buyout Essar Steel amid Ruias' last-ditch effort to retain control over company

New Delhi: The world's largest steelmaker ArcelorMittal on Friday said it has been chosen by the lenders to takeover debt-laden Essar Steel India Ltd for about Rs 42,000 crore.

In a statement, ArcelorMittal said its resolution plan for Essar Steel, which the lenders auctioned to recover over Rs 49,000 crore of unpaid loans, includes "an upfront payment of Rs 42,000 crore" to settle debt and "a further Rs 8,000 crore of capital injection into the company to support operational improvement, increase production levels and deliver enhanced levels of profitability".

The Committee of Creditors have issued ArcelorMittal and its partner Japan's Nippon Steel & Sumitomo Metal Corp a Letter of Intent (LoI) declaring them as the "successful applicant".

File photo of Lakshmi Mittal of ArcelorMittal. Reuters

File photo of Lakshmi Mittal (left), Chairman and CEO, with son Aditya, president, ArcelorMittal. Reuters

The development comes a day after the promoters of Essar Steel offered to pay lenders Rs 54,389 crore, including Rs 47,507 crore upfront cash payment to clear all dues and pull out the firm from insolvency proceedings.

Ruias offer to pay Rs 54,389-cr dues

Essar Steel promoters, the Ruias , on Thursday offered to pay lenders of Essar Steel Rs 54,389 crore including Rs 47,507 crore upfront cash payment to clear all dues and pull out the firm from insolvency proceedings.

The offer was better than Rs 42,202 crore offered by the world's largest steel producer ArcelorMittal to take over Essar Steel, which lenders are auctioning to recover their unpaid dues of over Rs 49,000 crore.

"The shareholders of Essar Steel have today (Thursday) submitted a proposal to the Committee of Creditors (CoC) for full settlement of the entire admitted claims of the financial creditors, operational creditors, and workmen and employees of Essar Steel India Ltd (ESIL), aggregating Rs 54,389 crore, under Section 12A of the Insolvency and Bankruptcy Code," the company said in a statement.

ArcelorMittal's proposal

Following the 4 October Supreme Court order linking its eligibility to bid for Essar Steel through bankruptcy courts, ArcelorMittal has said it would pay Rs 7,469 crore to the financial creditors Uttam Galva and KSS Petron, the two domestic subsidiaries from which it had claimed to have exited.

The NRI Laxmi Mittal-owned company, which is the world's largest steelmaker, has been on a murky legal battle with other bidders, especially the Russian VTB Bank-promoted NuMetal and had on 2 April submitted a proposal to take over Essar Steel.

Of the Rs 7,469 crore payment, around 80 percent will be used to settle the dues of Uttam Galva and the rest 20 percent for KSS Petron, the company said.

ArcelorMittal has reportedly submitted Rs 42,000 crore to the 10-million-tonne alloy mill in Gujarat, which is one of the newest steel mills set up by Essar Steel, which owes over Rs 45,000 crore to a clutch of lenders.

"Our board believes that Essar Steel represents a unique and compelling opportunity for us to establish a significant footprint, with substantial expansion potential, in the high-growth Indian steel market. Given the significant benefits that Essar Steel would bring to ArcelorMittal, making this payment is an appropriate course of action under the circumstances," ArcelorMittal said in a statement.

As per the Supreme Court ruling, Essar Steel creditors now have an eight-week period to accept what it considers to be the best resolution plan from eligible applicants.

ArcelorMittal had said Numetal, which was initially promoted by Revant Ruia's shell company and subsequently exited and taken over by the Russian lender VTB Bank and some others, have been in a bitter court battle to establish their eligibility to bid for the steel plant.

After losing their case in NCLT and NCLAT, they had moved the Supreme Court, which on 4 October had allowed them to bid provided they cleared their dues to their lenders.

ArcelorMittal is the world's leading steel and mining company, with a presence in 60 countries and an industrial footprint in 18 countries. When it comes to coal mining, it is the fifth largest globally.

In 2017, ArcelorMittal had revenue of $68.7 billion and crude steel production of 93.1 million tonnes, while own iron ore production stood at 57.4 million tonnes.

ArcelorMittal is listed on the stock exchanges of New York, Amsterdam, Paris, Luxembourg apart from the Spanish stock exchanges of Barcelona, Bilbao, Madrid and Valencia.

--With PTI inputs


Updated Date: Oct 26, 2018 15:36 PM

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