CarVal to seal Uttam Galva deal next month

Suresh P Iyengar Mumbai | Updated on September 20, 2020 Published on September 20, 2020

It was earlier reported that CarVal Investors may renegotiate its bid   -  bloomberg

Acquisition of distressed units to be completed within 30-day IBC deadline

The consortium led by US-based fund CarVal Investors is expected to complete the acquisition of Uttam Value Steel and Uttam Galva Metallics for about ₹2,600 crore under the insolvency-driven process in October, despite economic uncertainity unleashed by Covid pandemic.

Early this month, the National Company Law Appellate Tribunal cleared the last hurdle for execution of the deal by dismissing the appeal of the operational creditors against the bid.

BusinessLine had earlier reported that CarVal Investors may renegotiate its bid to buy Uttam Value Steel Ltd and Uttam Galva Metallics due to the demand disruption in the steel sector amid the Covid-19 pandemic, which has affected the valuation significantly.

Sources close to the development said that CarVal has now decided to go ahead with the bid and is expected to close the deal by the end of next month, in compliance with the 30-day deadline prescribed in the Insolvency and Bankruptcy Code for making the payment.

However, CarVal did not respond to questions sent by BusinessLine.

Resolution hurdles

Last May, a consortium of lenders led by SBI had initiated insolvency proceedings against two distressed entities of Uttam Galva Steels, which were recommended for corrective action by the RBI in its second list of large defaulters.

The Resolution Professional had admitted claims of ₹4,176 crore of Uttam Galva Metallics and ₹3,014 crore of Uttam Value Steels. The NCLT then approved the CarVal Investors and Nithiya Capital Resources Advisors LLP-led consortium’s resolution plan involving upfront and contingent payment of ₹1,078 crore for Uttam Value Steels and another ₹1,576 crore for Uttam Metallics in May this year.

However, five operational creditors, who had to take a 99 per cent haircut, moved the NCLAT against the NCLT order.

Operational creditors had claimed that CarVal bid was in violation of Section 31(4) of the IBC, which makes CCI approval “mandatory” prior to submission of bids.

They also alleged Johannes Sittard as a Director of Nithia Capital Resources Advisors has resigned from the company in 2018 in contrary to what was mentioned in the revised bids placed on April 19, 2019 and May 15, 2019.

They claimed that he was the only person with technical knowledge to run the plants after takeover.

But earlier this month, a three-member Bench headed by Acting Chairperson Justice BL Bhat upheld the NCLT order approving the CarVal consortium bid.

Regarding the technical expertise, the NCLAT said Sittard was still continuing with the company and the resolution applicant has already been directed to appoint an observer to oversee plant operations.

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Published on September 20, 2020
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