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The ArcelorMittal-Nippon Steel combine has transferred ₹38,896 crore to lenders for the acquisition of the once-Ruias-owned Essar Steel in an insolvency-driven process. For the lenders, recovery comes over two years after they initiated a corporate insolvency resolution process (CIRP) against the steel-maker. It marks the single biggest recovery made by lenders under a CIRP.
The operational and other creditors will get the remaining ₹3,104 crore of the ₹42,000-crore bid placed by ArcelorMittal to settle Essar Steel’s loan default of ₹49,000 crore.
According to sources, lead lender SBI has received the money, and will distribute it among the banks shortly.
Under the initial plan, the operational creditors were to get ₹196 crore. However, the National Company Law Appellate Tribunal ordered the financial lenders to consider an additional payment. ArcelorMittal’s payment has resulted in a loan recovery of 89.74 per cent. The closure of the deal comes just ahead of the Monday deadline for payment. The winning bidder had to make the payment within a month of the deal’s approval, or shell out interest for the delay. The Supreme Court approved ArcelorMittal’s bid for Essar Steel on November 15.
The new owners then sought immunity from the ongoing investigation against Essar Steel’s original promoters. The government amended the Insolvency and Bankruptcy Code to ring-fence the assets and the new owners from punitive actions, paving the way for ArcelorMittal, the world’s largest steel company, to enter India.
As on October 24, 2018, 65 financial creditor claims totalling ₹55,440 crore, 1,936 operational creditor claims of ₹27,081 crore, employee/workmen claims of about ₹20 crore, and one claim from ‘other creditors’ of about ₹24 crore were received.
The amount admitted in the case of financial creditors was ₹49,473 crore; operational creditors, ₹5,074 crore; and employees, ₹18 crore.
Among the financial creditors, SBI had the highest amount admitted, at ₹13,226 crore. The admitted amount of the other large creditors include: Canara Bank (₹3,798 crore), StanChart Bank (₹3,557 crore), PNB (₹2,936 crore), Deutsche Bank (₹2,830 crore), IDBI Bank (₹2,482 crore), ICICI Bank (₹2,294 crore), Union Bank (₹2,123 crore), Bank of India (₹1,985 crore), EARC TRUST - SC 217 (₹1,698 crore) and Corporation Bank (₹1,567 crore). The recovery is good news for the banks in the third quarter as they may use the proceeds to make provision for their exposure to DHFL and IL&FS, and mark-to-market provisioning towards investment depreciation.
Default to Odisha Slurry
In separate insolvency proceedings, the lenders of Odisha Slurry Pipeline Infra issued a Letter of Intent to ArcelorMittal, which agreed to pay the entire default of ₹2,350 crore. The 253-km pipeline carries iron ore slurry from Dabuna, Odisha, to Paradip, where it is converted into pellets before being shipped to the Essar plant in Hazira, Gujarat.
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