ArcelorMittal faces hurdle as StanChart files caveat in Essar Steel case

REUTERS/Francois Lenoir

ArcelorMittal Netherlands B.V. faces one more hurdle on its path to acquire Essar Steel India Ltd (ESIL).

Standard Chartered Bank has approached the dedicated bankruptcy court by filing caveat petition in the Essar Steel insolvency case as dissenting financial creditor, so that it can be heard before the tribunal decides on the bid of ArcelorMittal, said two people familiar with the development.

The caveat was filed on Friday, said the first person on condition of anonymity.

“The local subsidiary of British banking major Standard Chartered, which has more than 7.5% weightage in the voting process, has voted against the resolution plan of ArcelorMittal,” said the second person. “Essar Steel owes more than ₹3,400 crore to Standard Chartered Bank,” he said.

Under Section 148(A) of the Civil Procedure Code (CPC), when the committee of creditors (CoC) approaches the National Company Law Tribunal (NCLT) for approval of the resolution plan , the bank will get a chance to be heard as the caveator ahead of tribunal’s final decision.

On Thursday, more than 92% of creditors of Essar Steel voted in favour of handing over the company to ArcelorMittal. On the same day, as a last ditch effort to delay losing possession of Essar Steel, the promoters of Essar Group submitted a proposal to the CoC agreeing to pay a total of ₹54,389 crore to all creditors of Essar Steel. This includes settling claims of the operational creditors as well as of the employees.

The latest proposal by the promoters indicates that they will pay ₹3,487 crore to Standard Chartered, as compared to the ₹61 crore the bank would get under ArcelorMittal’s resolution plan, said the first person quoted above.

Both Essar Group and ArcelorMittal refused to verify the numbers. A Standard Chartered spokesperson also declined to comment on the development.

“ESIL’s resolution professional, on behalf of the CoC, has issued the company with a Letter of Intent stating that the company has been identified as the successful applicant,” ArcelorMittal said on Friday.

The resolution professional for ESIL has submitted ArcelorMittal’s application to NCLT, Ahmedabad, on Friday, a member of ESIL’s CoC said.

The CoC is unlikely to change its mind on awarding the asset to ArcelorMittal, according to lawyers.

“The Supreme Court had given two weeks to repay the dues, which is over, and at this stage I don’t think anything can change,” Shardul Shroff, executive chairman of law firm Shardul Amarchand Mangaldas & Co. said on Thursday. ArcelorMittal had settled its dues with lenders, he said.

ArcelorMittal’s resolution plan includes an upfront payment of ₹42,000 crore towards ESIL’s resolution debt, with a further ₹8,000 crore of capital injection into ESIL to support operational improvement, increase production levels and deliver enhanced profitability.

Mint reported on Thursday that the bankers had voted to approve ArcelorMittal’s offer.

ESIL is an integrated flat steel producer and the largest steel company in western India. Its current level of annualised crude steel production is approximately 6.5 million tonne (mt). ESIL also has iron ore pellet facilities in east India, with an annual capacity of 14 mtpa.

ArcelorMittal said it intends to increase ESIL’s finished steel shipments to 8.5 million tonnes over the medium-term by initially completing ongoing capital expenditure projects and infusing expertise and best practice to deliver efficiency gains, and then through the commissioning of additional assets, while simultaneously improving product quality and grades to realise better margins.

The long-term aspiration is to increase finished steel shipments to 12-15 million tonnes through the addition of new iron and steelmaking assets, so that ESIL can play an active role and fully benefit from the anticipated growth in the Indian steel industry.

The promoters of Essar Group, the Ruias, are likely to contest ArcelorMittal’s resolution plan at the NCLT next week, said the second person quoted above.

If the asset goes to ArcelorMittal, the company will jointly own and operate ESIL in partnership with Nippon Steel & Sumitomo Metal Corporation, Japan’s largest steel producer and the third largest steel producer in the world. ArcelorMittal and NSSMC expect to finance the joint venture through a combination of partnership equity (one-third) and debt (two-thirds), and ArcelorMittal anticipates that its investment in the joint venture will be equity accounted.

This article was first published on livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.