The lenders on Friday morning issued a letter of intent to ArcelorMittal.
ArcelorMittal's bid for Essar Steel has been chosen as the "successful applicant" by the debt-laden steelmaker's bankers. The lenders on October 25 morning issued a letter of intent to ArcelorMittal.
The LN Mittal-company was on October 19 named the preferred bidder.
The company's resolution plan includes an upfront payment of Rs 42,000 crore towards Essar's resolution debt. It will put in a further Rs 8,000 crore as a capital injection to "support operational improvement, increase production levels and deliver enhanced levels of profitability," ArcelorMittal said in a statement.
The latest development adds to the complexity of the auction. Essar Steel promoters had on Thursday submitted a proposal to the Committee of Creditors (CoC), eclipsing that of ArcelorMittal.
The Ruias offer includes a full settlement of the entire admitted claims of the financial creditors, operational creditors, and workmen and employees of Essar Steel India, aggregating Rs 54,389 crore.
A source close to the company said the promoters are waiting to hear from the CoC.
While ArcelorMittal expects the process to get completed before the end of 2018, the final result may still take more time, if the Ruias decide to take their offer to the courts.
Essar Steel currently has a capacity of 6.5 million tons a year. ArcelorMittal intends to increase this to 8.5 million tons a year. "This will be achieved by initially completing ongoing capital expenditure projects and infusing expertise and best practice to deliver efficiency gains, and then through the commissioning of additional assets, while simultaneously improving product quality and grades to realise better margins," it said.
Over the long term, ArcelorMittal wants to increase finished steel shipments to between 12 and 15 million tonnes through the addition of new iron and steelmaking assets.
Essar also has iron ore pellet facilities in the east of India, with a current annual capacity of 14 million tonnes per annum.
According to its resolution plan, ArcelorMittal will jointly own and operate Essar Steel in partnership with Nippon Steel & Sumitomo Metal Corporation, Japan’s largest steel producer and the third largest steel producer in the world.
The two had signed a joint venture agreement on March 2, 2018.The two companies plan to finance the joint venture through a combination of partnership equity (one-third) and debt (two-thirds), ArcelorMittal said.