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Lenders clear ArcelorMittal-Nippon Steel's resolution plan, Essar Steel counters

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Lenders clear ArcelorMittal-Nippon Steel's resolution plan, Essar Steel counters

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ArcelorMittal-Nippon Steel joint venture has offered to pay lenders Rs 39,500 crores upfront, and another Rs 2,500 crores approximately which is retained cash on Essar Steel’s books, taking the total repayment to lenders to Rs 42,000 crores.

After 92 percent of Essar Steel’s committee of creditors (CoC) voted in favour of ArcelorMittal-Nippon Steel’s resolution plan, Mumbai-based steelmaker submitted a proposal for full settlement by paying Rs 54,389 crore to creditors.

"The aforesaid plan includes an upfront cash payment of Rs 47,507 crore to all creditors, including Rs 45,559 crore to the senior secured financial creditors, i.e. 100 percent recovery," Essar Steel said in a statement.
Commenting on the proposal, Prashant Ruia, director, Essar, said the value and quality of the asset can be ascertained from the interest shown and value offered by all the global steel majors.
"We believe our current proposal will provide 100 percent recovery to secured creditors and lenders, and maximum recovery for unsecured creditors. This is well in excess of that offered in the proposal under consideration, and is in line with value maximisation, which is the underlying principle of the Insolvency and Bankruptcy Code (IBC) process,” Ruia said.
ArcelorMittal-Nippon Steel’s offer amounts to over 85 percent recovery for lenders, heads of two large banks told CNBC-TV18 on the condition of anonymity.  ArcelorMittal-Nippon Steel joint venture has offered to pay lenders Rs 39,500 crores upfront, and another Rs 2,500 crores approximately which is retained cash on Essar Steel’s books, taking the total repayment to lenders to Rs 42,000 crores. In addition, ArcelorMittal has also offered to infuse close to Rs 8,000 crores into Essar Steel post-acquisition.
Under the IBC, a resolution plan needs at least 66 percent votes from the CoC to be cleared.
On October 20, CNBC-TV18 had reported that the CoC has declared ArcelorMittal- Nippon Steel as H1 or highest bidder, ahead of Vedanta Group, that had made a very similar offer of repayment to lenders. With the lenders nod in place, the resolution plan will now be placed before the National Company Law Tribunal (NCLT) for the final stamp of approval.
Last week, Lakshmi Mittal-led ArcelorMittal repaid Rs 7,469 crores to lenders of Uttam Galva and KSS Petron to remain eligible to bid for Essar Steel, as per the Supreme Court’s order. By not repaying dues, its rival Numetal Mauritius was disqualified from bidding for Essar Steel, leaving only ArcelorMittal and Vedanta Group in the fray.
If the plan is cleared by the NCLT, it will also mark the Luxembourg-headquartered company’s India entry. Earlier attempts by ArcelorMittal to foray into the Indian market has been failed. The company had announced its plan to set up two plants with a capacity of 12 million tonnes per annum each over a decade back, in Jharkhand and Odisha, but the plans did not materialise.
Essar Steel was one of the first 12 large defaulters to be identified by the Reserve Bank of India (RBI) last year to be sent to NCLT for insolvency proceedings. It is facing claims of over Rs 49,000 crores from creditors, led by State Bank of India and Edelweiss Asset Reconstruction Company.
The acquisition of Essar Steel will set ArcelorMittal up with a 10 million tonne per annum capacity plant in Hazira, Gujarat. The Ruia-promoted steelmaker has a fully-integrated flat steel manufacturing facility, with ore beneficiation, pellet making, iron making, steel making, and downstream facilities, including cold rolling mill, galvanising, pre-coated facility, steel processing facility, extra wide plate mill and a pipe mill.
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