ArcelorMittal sweetens bid for Essar Steel, offers to pay Rs 420 billion

Lenders seek legal opinion on ArcelorMittal's 'commitment'

The world’s largest steelmaker, ArcelorMittal, on Monday increased its offer for Essar Steel to Rs 420 billion, in a bid to trump the Rs 370-billion offer made by Numetal-JSW Steel.

The L N Mittal-owned company also moved the Supreme Court (SC) appealed to stay the National Company Law Appellate Tribunal (NCLAT) order, which asked ArcelorMittal to first pay the dues of two defaulting companies to become an eligible bidder for Essar Steel. The matter will be mentioned Tuesday morning in court; rival bidder Numetal had filed caveats on Friday.

According to sources, the revised offer from Arcelor is about 31 per cent more than its previous one. “ArcelorMittal is offering 100 per cent of the principal amount of Essar’s secured debt,” a source said.

Lenders, who met in Mumbai to discuss the bids, however, have decided to take legal advice on ArcelorMittal’s offer which has made a commitment to pay. According to the NCLAT order, the deadline to pay the dues for the two defaulting firms expires on Tuesday.

The NCLAT has asked Arcelor to first clear the dues of Uttam Galva Steels and KSS Petron, both classified as non-performing assets (NPAs) for more than a year. Only then would it be eligible to bid for Essar Steel.

Section 29A(c) of the Insolvency and Bankruptcy Code (IBC), 2016, bars promoters of NPAs from bidding without paying dues. ArcelorMittal was a co-promoter of Uttam Galva and L N Mittal in control of KSS Petron.

“The NCLAT order is quite clear. ArcelorMittal must first pay dues… and then bid. But they want to win first and then pay. So we need to take legal opinion. Our meeting was inconclusive,” said a source, who attended the lenders’ meeting.

THE STORY SO FAR...

Feb 12: ArcelorMittal, Numetal submit bids for Essar Steel

Mar 20: Numetal moves NCLT Ahmedabad ahead of CoC meeting to reinforce its eligibility

Mar 21: ArcelorMittal, Numetal bids found ineligible by the resolution professional

Apr 2: NCLT directs RP to not open bids till applications are disposed of

Apr 19: NCLT renders the second round invalid

Apr 26: Numetal moves NCLAT against ArcelorMittal's eligibility

May 16: ArcelorMittal parks ~70 billion, makes conditional offer to lenders

May 22: NCLAT asks RP, CoC and adjudicating authority to not pass any order

Sep 7: NCLAT rules Numetal's second bid eligible

A source in Numetal-JSW Steel said the law is quite clear that defaulters cannot bid. “We will also present our side to the SC. The entire IBC law will go for a toss if defaulters are allowed bid with riders.”

ArcelorMittal and Numetal, backed by Russia’s VTB Bank, are the two suitors of Essar Steel. The company was sent to the National Company Law Tribunal by the Reserve Bank of India in June last year. It then owed nearly Rs 450 billion. 

The offer by the third bidder, Anil Agarwal-owned Vedanta, is Rs 340 billion, said a source.

ArcelorMittal released a statement after revising its offer which said, “ArcelorMittal confirms that it has today (Monday) submitted a revised proposal to Essar Steel India’s committee of creditors (CoC) for the acquisition of ESIL. The financial terms of the proposal are confidential, but represent a material increase to the previous offers made by the company.”

It added, “The revised offer, which includes a commitment to pay the entire amount due to the financial creditors of Uttam Galva and KSS Petron, therefore represents unprecedented value to all concerned creditors. Through the revised offer, ArcelorMittal demonstrates its serious commitment to India, creditor banks, and all ESIL’s stakeholders.”

Sources said, ArcelorMittal asked the lenders the dues amount of both Uttam Galva and KSS Petron, so that it could clear the dues.

Earlier, ArcelorMittal had deposited Rs 70 billion with the Indian lenders in a current account of a State Bank of India overseas branch to pay the dues, but with a rider this money will go to lenders only if it is announced the winner of Essar Steel.

The appellate tribunal, however, said on Friday that ArcelorMittal’s deposit did not qualify as payment of the due amount. An offer to repay the debt could not be accepted till it complied with the necessary provisions.

Also, the amount was parked in May on account of Uttam and KSS but there was no moratorium on Uttam Galva.

ArcelorMittal on Monday also sought to know the modalities of payment from lenders. The letter to the CoC had mentioned that ArcelorMittal reserved the right to go to the appellate tribunal.