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In a move that will smoothen the way for ArcelorMittal to acquire Essar Steel, debt-ladden Uttam Galva has made an offer to repay its entire outstanding debt of about ₹5,600 crore by roping in a foreign investor. Uttam Galva’s debt was one of the key hurdles hindering ArcelorMittal’s eligibility to bid for Essar Steel.
The offer by Uttam Galva was made to State Bank of India, which is the largest lender in the consortium of 18 banks with exposure to the company. The company’s fresh offer comes after the banks rejected its offer to repay 51 per cent of its debt if the lenders desisted from dragging it to the NCLT.
The company has asked for some time to firm up its repayment plans as it is on the verge of striking a deal with a foreign investor, said a banking source. The consortium of banks will soon meet and take a call on the offer, the source added.
Uttam Galva officials did not respond to calls from BusinessLine seeking to confirm the development.
Thumbs up for Arcelor
The company’s attempt to pay off its entire debt has come as a blessing in disguise for ArcelorMittal, which had to sell its entire stake in Uttam Galva to prove its eligibility to bid for Essar Steel. The divestment was necessary due to an amendment in the Insolvency and Bankruptcy Code that bars promoters of defaulting companies from bidding for stressed assets. ArcelorMittal exited Uttam Galva and got itself classified as a non-promoter by exchanges in order to be able to bid for Essar Steel.
However, even after selling its stake, questions were raised on ArcelorMittal’s non-disposal agreement with lenders, signed in 2011, to help Uttam Galva raise ₹1,400 crore.
The multinational maintains that it has had nothing to do with Uttam Galva after its stake sale. The disqualification of ArcelorMittal in the first round of the Essar Steel bidding was technical in nature and had nothing to do with the non-disposal agreement, said ArcelorMittal.
Meanwhile, some minority shareholders of Uttam Galva have written to the lenders seeking to know whether permission was granted to ArcelorMittal to divest its stake in the company.
“Arcelor was permitted to sell its shares to the other sponsors only if no event of default had occurred,” the minority shareholders said in their letter. “The company agreed that it would not recognise or register any transfer of the shares held by ArcelorMittal without the approval of State Bank of India,” the letter added.
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