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infrastructure | IST

Essar Steel lenders may give more funds to operational creditors but unwilling to pay StanChart more

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Essar Steel’s committee of creditor (CoC) members may reconsider apportionment of dues, and pay Rs 1,000 crore more to operational creditors, sources in the know told CNBC-TV18. The State Bank of India (SBI) led consortium of lenders is set to vote on the proposal to allot more funds out of Rs 42,000 crore offered by ArcelorMittal to operational creditors on Friday.

Essar Steel’s committee of creditor (CoC) members may reconsider apportionment of dues, and pay Rs 1,000 crore more to operational creditors, sources in the know told CNBC-TV18.
The State Bank of India (SBI) led consortium of lenders is set to vote on the proposal to allot more funds out of Rs 42,000 crore offered by ArcelorMittal to operational creditors on Friday. The voting will take place over 24 hours, and conclude on Saturday evening, said people familiar with the matter.
The lender's decision comes after the National Company Law Appellate Tribunal (NCLAT) asked the lenders to re-look at the apportionment of dues to Standard Chartered Bank and operational creditors, and consider the 85:15 formula suggested by NCLT Ahmedabad for distribution of Rs 42,000 crore offered by ArcelorMittal.
The NCLT bench had suggested that secured financial creditors be paid 85 percent of their dues, and the remaining 15 percent or Rs 6,300 crore be paid to operational creditors and other stakeholders. ArcelorMittal has offered to repay Rs 196 crore to operational creditors against their claims of over Rs 4,700 crore. The NCLAT will study the outcome of the CoC meeting in its next hearing scheduled for April 9.
Sources told CNBC-TV18 that lenders may agree to give additional Rs 1,000 crore to operational creditors, over and above Rs 196 crore allotted in the original resolution plan approved by the CoC in October last year.
This, said sources, would come from the Working Capital Adjustment, which is now higher than the Rs 2,500 crore estimated at the time of approval of the resolution plan. This would ensure that secured financial creditors still make approximately 92 percent recovery, and operational creditors can be paid Rs 1,196 crore.
However, as far as equal payment to private lender Standard Chartered Bank is concerned, the CoC members are almost unanimously against a higher payout, and seek to curtail the payment to the private lender at Rs 60.71 crore as originally envisaged, sources in the know told CNBC-TV18.
The CoC members may move the Supreme Court over payment of dues to Standard Chartered Bank, arguing that Essar Steel was neither a direct corporate debtor of the private lender nor did it offer any collateral, and therefore it would only be paid in accordance with the security it had against its admitted claims of Rs 3,487 crore.
Essar Steel owns a 10-million-tonne steel mill at Hazira in Gujarat, an is facing claims of over Rs 49,000 crore from financial creditors.
It was among the first twelve cases selected by the Reserve Bank of India to be resolved under the Insolvency and Bankruptcy Code (IBC) but has faced multiple litigation-related delays since it was admitted into NCLT in August of 2017.