The Rs 42,202-crore revival plan for bankrupt Essar Steel from world’s largest steelmaker ArcelorMittal received the formal stamp of approval from a company law tribunal after 584 days of legal twists and turns, even as the existing promoters vowed to fight back.
The National Company Law Tribunal (NCLT) of Ahmedabad approved the plan, which involves Rs 41,987 crore of an upfront cash payment to the financial creditors, representing only a 15 per cent reduction of their outstanding dues of Rs 49,487 crore, as on March 5, 2019.
When the NCLT bench was verbally pronouncing the order on Friday evening, the lawyers representing the Ruias, the existing promoters of Essar, sought a stay on the order. The bench said it would pass a short order on the plea on Monday. The main order is likely to be uploaded over the weekend.
A formal statement from Essar soon thereafter suggests further litigation.
“We continue to believe that our settlement proposal of Rs 54,389 crore is the most compelling one available to Essar Steel creditors and fulfils the IBC’s declared overriding objective of value maximisation, which has been established time and again by courts at all levels.
“We are also confident of the legal validity of our said offer made under section 12A, which provides for the withdrawal from the IBC process by making full payment to the creditors. We are awaiting a copy of the NCLT order, and will take a call on next steps after examining the same,” an Essar spokesperson said.
On January 29, the NCLT had dismissed the settlement proposal put forward by the Essar shareholders, the Ruia family.
When delivering the order on Friday, the bench also suggested the secured financial creditors to consider the pleas of operational creditors whose claim has not been met in the plan and keep 15 per cent aside for them. The AM plan offers Rs 196 crore to the operational creditors, who had an admitted claim of Rs 5,073 crore to Essar.
Even as the Ruias plan a fresh offensive, ArcelorMittal, in partnership with Nippon Steel and Sumitomo Metal Corp, appears to have taken a leaf out of the book of Tata Steel.
The Tatas had paid off the creditors of Bhushan Steel within 72 hours of the approval of the plan and sent its executives to key plants to take charge of the affairs. AM also suggested that it was keen to get into the action.
“We welcome today’s pronouncement by NCLT Ahmedabad. While we will need to review the full order once it becomes available, we hope to complete the transaction as soon as possible,” a spokesperson for Luxembourg-based ArcelorMittal said.
Indian lenders such as the State Bank of India would hope for a fast resolution, which should have been completed within the stipulated 270 days. Lenders are losing Rs 17 crore daily because of the moratorium on loan exposure from August 2, 2017, when the corporate insolvency process started in Essar Steel.
The deal, when consummated in favour of AM, will mark the homecoming of Lakshmi Niwas Mittal, the Indian-born majority shareholder of the company.
The company's keenness to grab a pie of world's fastest growing market was evident when it paid Rs 7,500 crore just to be eligible to put up a resolution plan for Essar.
