Beena Parmar Moneycontrol News
Bankers to Essar Steel hope to recover at least 90 percent of loans to the distressed steelmaker amid uncertainty on its auction.
Bankers are keenly watching the Supreme Court's (SC) verdict on September 12 on an appeal by ArcelorMittal, the highest bidder for Essar, against a National Company Law Appellate Tribunal (NCLAT) order.
While raising its bid to Rs 42,000 crore from Rs 31,000 crore, the Lakshmi Mittal-led ArcelorMittal had moved SC challenging an NCLAT order on its eligibility. On September 7, NCLAT had dismissed ArcelorMittal as ineligible to bid if it fails to repay Rs 7,000 crore dues in Uttam Galva Steels and KSS Petron by September 11.
“Now, it all depends on the (Supreme Court) order. And the challenge in the court will only increase our chances of getting more money. Whether the SC accepts or rejects ArcelorMittal’s plea, we are likely to recover almost 90 percent of the loans,” said a senior official of a large public sector bank.
When the Committee of Creditors (CoC) met a day earlier, ArcelorMittal sent a letter to bankers saying it firmly believes the company is not liable to pay any such dues and that it awaits the SC decision.
The NCLAT order was given on the grounds that ArcelorMittal was classified as a promoter of Uttam Galva and had a stake in KSS Petron’s parent company. Both these companies defaulted on bank loans and under IBC, section 29A doesn’t allow promoters of defaulting firms to participate in the bidding.
However, a senior state-owned bank executive pointed out the SC has not stayed the NCLAT order and hence ArcelorMittal has to repay to be counted as an eligible bidder for the offer made.
Due to lack of precedence of such orders, it remains to be seen if the Luxembourg-based steelmaker will pay to become eligible or wait for the SC order.
“If the apex court rejects ArcelorMittal’s plea, we may have to go for a fresh bidding as the latest process would make ArcelorMittal’s bid null and void,” said another senior bank executive.
Essar Steel’s total debt stands at Rs 49,000 crore. It is one of the 12 large non-performing assets (NPA) directed by the RBI to be referred for resolution under the Insolvency and Bankruptcy Code (IBC).
In the September 10 meeting with the CoC and the insolvency resolution professional (IRP), it was revealed that Numetal Mauritius has offered to pay Rs 37,000 crore, making it the second highest bidder.
As per previous court orders, creditors must stick to the principle of maximisation of value in any transaction within the guidelines of the IBC. “So we cannot rule out any bidder,” the banker quoted above said.
While all the stakeholders will keenly watch the Supreme Court order, bankers are hoping that the final process of Essar Steel is completed before October 11, after which the asset is likely to go for liquidation going by the 270-day deadline.
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