Essar Steel lenders drive a hard bargain

Last week, the Luxembourg-based company had emerged as the highest or H1 bidder for the debt-laden Essar Steel.

Published: 24th October 2018 07:01 AM  |   Last Updated: 24th October 2018 07:01 AM   |  A+A-

Essar Steel is going through insolvency resolution process. (File Photo | Reuters)

Express News Service

BHUBANESWAR: Lakshmi Mittal-led ArcelorMittal has agreed to sweeten its offer for Essar Steel to foreclose conflicts with bankers, paving the way for the Committee of Creditors (CoC) to electronically vote their preference based on the final offer from the world’s largest steel company.

Last week, the Luxembourg-based company had emerged as the highest or H1 bidder for the debt-laden Essar Steel. Though the Supreme Court ruling made ArcelorMittal’s bid of Rs 35,000 crore for the insolvent asset eligible, the suitor has upped the amount to Rs 42,000 crore to propitiate the committee of creditors, said sources.

Just when the company was about to touch the finishing line after being picked, the CoC had demanded an additional Rs 4,000 crore from the company on Monday. The company will now enter into the final negotiations with the CoC and the final offer is likely to be announced on Wednesday.As per the recently amended Insolvency and Bankruptcy Code, 2016, ArcelorMittal will have to secure 66 per cent of votes in its favour from creditors to be accepted at the NCLT.

Against Essar Steel’s outstanding debt of Rs 49,000 crore, ArcelorMittal had offered Rs 35,000 crore upfront to lenders in the second round of bidding and committed an additional equity infusion of Rs 8,000 crore in the company.

Mittal has already paid Rs 7,649 crore to clear dues of both Uttam Galva Steel and KSS Petron, in which ArcelorMittal was a significant shareholder.Additionally, it may infuse about Rs 2,000 crore to take over Odisha Slurry Pipeline Infrastructure — a separate subsidiary of Essar Steel that supplies raw materials from mines in Odisha to the Hazira-based Essar plant in Gujarat.

Notably, in most of the insolvency cases, potential acquirers generally look for assets that they can acquire at minimal initial investment with gains to be shared on successful turnaround. In contrast, lenders find upfront cash payment as one-time settlement as ideal and feasible over potentially higher equity upside over a longer period.

Others in the ring  

Among other bidders, Anil Agarwal-owned Vedanta also offered I35,000 crore upfront to the creditors, but it offered to infuse I5,000 crore immediately and another I1,000 crore later. Meanwhile, Russia’s VTB Capital has approached the Supreme Court seeking the right to bid for Essar Steel on its own.The matter is likely to come up for hearing this week, putting an end to the fiercely contested battle for the 10 million tonne steel plant.



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