ArcelorMittal, the world’s largest steel company, has offered to pay the ₹8,500-crore debt of both Uttam Galva Steels and KSS Petron as a “goodwill” gesture if it is selected as the winning bidder for the stressed assets of Essar Steel.
The company has already divested its stake in Uttam Galva, which had defaulted on its debt, in order to make itself eligible to bid for Essar Steel. The Insolvency and Bankruptcy Code (IBC) bars promoters of defaulting companies from bidding for stressed assets.
ArcelorMittal’s bid had been rejected by Essar Steel’s Committee of Creditors (CoC).
The National Company Law Tribunal (NCLT) observed that ArcelorMittal cannot make itself eligible under the IBC by merely selling its stake in the defaulter.
The eligibility test
ArcelorMittal previously owned a 32 per cent stake in KazStroyService in Kazakhstan, which held 100 per cent of KSS Petron, which was classified as an NPA in 2015.
However, ArcelorMittal believes it has done enough to meet the eligibility criteria.
“It is believed that any repayment discussion on any outstanding dues by ArcelorMittal would be a gesture of goodwill, as the company strongly insists that its offer is eligible,” sources told BusinessLine.
This comes even as Russian VTB Bank-promoted Numetal Mauritius, the other major bidder for Essar Steel, has again challenged ArcelorMittal’s eligibility.
Numetal itself faces the eligibility test and its representatives, as well as those of ArcelorMittal, have met the CoC to prove their eligibility.
Stressing on ArcelorMittal’s non-involvement in Uttam Galva, which it had bought into in 2010, Brian Aranha, Executive Vice-President (Strategy, Technology, R&D), ArcelorMittal, said the company had written off $150 million for the investment in 2015.
ArcelorMittal had intended to use Uttam Galva’s facility to process raw steel from its planned greenfield projects in Odisha and Karnataka. However, the projects were stuck in seeking regulatory approvals.
Meanwhile, Uttam Galva got into trouble, with a huge debt pile compounding weak steel demand.
Interestingly, Uttama Galva agreed to pay its entire debt of ₹5,600 crore to a consortium of banks led by SBI after it was dragged to the NCLT.
The company initially offered to pay back 51 per cent of its outstanding debt to wriggle out of the court-led insolvency proceedings.
It later agreed to pay the entire outstanding debt. The case comes up for hearing on May 7.
(The writer is in France at the invitation of ArcelorMittal)