Essar Steel insolvency: Lenders could seek fresh bids in upcoming meeting; bankers may pick Arcelor over Numetal

The committee of creditors (CoC) of bankrupt Essar Steel,  which owes over Rs 45,000 crore to over 31 banks, could meet again this week to decide on whether they should seek fresh bids, for the stressed firm, from ArcelorMittal and Numetal Mauritius.

A decision to seek fresh bids will herald a third-round of bidding. Bids received on 2 April, the second-round, were declared invalid.

Another meeting this week is absolutely necessary because the CoC is running out of time --  insolvency proceedings have to end within the next 94 days. On 24 April, a meeting of the CoC in Mumbai couldn't decide on whether they should re-consider bids received in the first-round, on 12 February, which were rejected on technical grounds.

According to a report in the Business Standard, Arcelor has offered Rs 303 billion to secured lenders, around Rs 2 billion each to unsecured lenders and operational expenses. Arcelor has also committed equity infusion of Rs 80 billion.

The newspaper cited sources close to the development as saying that lenders would have to take a 34 percent haircut if they selected ArcelorMittal’s offer and a bigger one if they chose Numetal's offer.

Representational image. Agencies

Representational image. Agencies

Tuesday's meeting was called after the Ahmedabad bench of the National Company Law Tribunal (NCLT) led by adjudicating members Harihar Prakash Chaturvedi and Manorama Kumari had last Thursday asked the lenders to reconsider the first bids submitted by Numetal and ArcelorMittal on 12 February and declared that the second round of bids put up on 2 April were invalid.

The first round of bids were rejected by the resolution professional and the lenders, citing technical reasons or ownership issues (promoters of these bidders being related to the original defaulting promoters) leading to the re-bids, which had three bidders--Numetal-JSW, ArcelorMittal-Nippon Steel, and Vedanta.

The bankers meeting was to discuss way to wriggle out of the legal complication involving these bidders as section 29A of the IBC bars related parties of the original defaulting promoters from bidding through the IBC process. Essar Steel runs a 10-million tonne plant at Haziara on the west coast of Gujarat.

Numetal Mauritius was set up only last October by the Ruias--four months after the Essar Steel was sent to NCLT. Originally, the company was floated by various entities led by Aurora Trusts controlled by Rewant Ruia, the son of Ravi Ruia, who is a defaulter in Essar Steel.

Later, Rewant sold 75 percent in the company to the PE arm of the largest Russian lender VTB Bank (which took over the group's flagship refinery Essar Oil in Vadinar for close to USD 13 billion last year) and a Russian engineering firm TPE and some other investors.

The company claims that Rewant does not enjoy any managerial position but is only an investor. But Aurora Trusts is in turn fully held by Aurora Enterprises, in which the
ultimate beneficiary is only Rewant, according to the documents furnished by the company at the NCLT.

Numetal had gone public saying if eligibility becomes an issue because of Aurora Trusts, they were ready to buy out the Rewant but nothing to that effect has been done yet.

With inputs from PTI

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Updated Date: Apr 25, 2018 12:49:03 IST

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