Backed by Numetal, Odisha Slurry Pipeline offers to repay loans

Maharashtra Seamless

Odisha Slurry Pipeline infrastructure Limited  - the Essar Steel unit that is in the middle of a dispute over its ownership - has written to its lenders with an offer to repay all the loans.

If accepted by the lenders, the move will strengthen Numetal’s bid for Essar Steel. In early February, the VTB Capital-led company had bought OSPIL from SREI Infrastructure Fund. But the sale was disputed by the company’s lenders, led by SBI, who claimed that SREI is not the rightful owner of the pipeline company.

“We wish to state that we have received in-principle commitment for refinancing  the entire indebtedness of the company and expect to be able to  make repayment of all dues along with dues of all other lenders of the Company on or before 30 April 2018,”  OSPIL’s Director NB Vyas wrote in a letter to the CMD of Canara Bank. The letter was sent on March 28.

Sources said that similar letters have been sent to all other OSPL’s lenders. “There are about 13-14 lenders in total,” the executive close to the development told Moneycontrol.

“You are requested to confirm immediately the amount which would be due to you… and further confirm that immediately upon receipt of such payment, you will release all security interest over the assets of the company,” the letter added.

Sources added that OSPIL owes about Rs 2,200 crore to the bankers.

The banks, till now, had contended that the sale of OSPIL could hamper the auction of Essar Steel and could possibly impact efforts to recover loans.

But with the latest offer from OSPIL, and backed by Numetal, could pave the way for a clearance from the lenders.

The banks had moved the Kolkata High Court against the Srei-Numetal transaction. Sources said that the hearing is in April.

But ArcelorMittal, which is also in the running for Essar Steel, is not amused.

A source close to the company said:  “This is clearly an attempt to put obstacles in the path of ArcelorMittal pursuing Essar.  But it won’t work. Of the two consortia, ArcelorMittal is clearly by far the more experienced operator when it comes to the steel and mining industries. They are not going to be bullied out of the game by these sort of tactics. In the event that they are successful, they are confident that a solution would be found.  The creditors are surely not going to be forced to select a company because they are trying to take control of the pipeline.  Furthermore, it’s not even clear at this point in time that this tactic will work given the matter is subjudice.”

Advantage Numetal?

A green signal from bankers will help Numetal take control of the strategic pipeline. In the February deal, Numetal had agreed to purchase 70 percent of OSPIL’s equity from SREI.

It is the largest slurry pipeline in India and is strategic to the Essar Steel plant in Paradip, as it transports iron ore from mines in Odisha to Paradip port.

Lenders of OSPIL had objected to the sale of this asset to Numetal on the grounds that under their loan agreement, any sale required prior approval, and had issued recall notices.

“This will remove all hindrances for the purchase of pipeline by Numetal, giving them full control over the asset,” said the executive cited above.

Moreover, “It will show Numetal’s intent, backing its bid for Essar Steel,” he added.

The deadline for the second round of bidding for Essar Steel gets over on April 2. While both Numetal and ArcelorMittal - the two bidders whose first-round bids were termed ineligible - will again throw their hats in the race, it’s unclear if they will be joined by other companies. Tata Steel, SAIL and Vedanta Resources had expressed interest in Essar Steel, but hadn’t submitted a bid.