In response to a National Company Law Appellate Tribunal (NCLAT) order that sought to put different classes of creditors on par in Essar, the government has made changes to the insolvency law that brings clarity to most of the issues holding up the case, what should have been wrapped in 270 days, according to the insolvency law.
On July 4, 2019, the NCLAT approved our resolution plan for the acquisition of Essar Steel
India. Several further appeals have been filed before the Supreme Court (SC) challenging the NCLAT order and are pending a hearing on August 7, 2019, ArcelorMittal
The NCLAT ruling translated into sacrificing a large portion — from 91.99 per cent to 60.7 per cent of ArcelorMittal’s offer of Rs 42,000 crore — by secured financial creditors in one of the prized assets mandated for debt resolution under the IBC by the Reserve Bank of India.
However, the latest amendments to the IBC has rekindled hope of a resolution for Essar as much as it has in the IBC for bankers.
Lenders to Essar now appear confident that the CIRP would be closed by the third quarter. Others rue that they don’t have an exposure in a corporate debtor where secured financial creditors are getting 91.99 per cent of their claim amount.
ArcelorMittal, on its part, is pleased that Essar has performed well and posted record results for the June quarter with an annualised crude steel production of 7.6 million tonnes and Ebitda of $0.2 billion. “We have seen domestic natural gas prices have declined to reach three-year low. This makes the gas-based steel production capacity at Essar, which we had expected to require partial replacement, profitable and, if sustained, more long-term,” ArcelorMittal
While Arcelor was fighting a pitched battle for Essar, the three-year IBC has been tested many a times in the past two years.
Eligibility, related party and treatment of different classes of creditors were some of the issues that stretched the timeline for resolution. Starting next week, the SC will hear appeals against the NCLAT order.
Hopefully, the remaining issues will be settled in the next 60 days since 270 days has been increased to 330 days under the new amendment, said Mohit Saraf, senior partner, L&L Partners. “The law has provided maximum 60 days for judicial scrutiny,” he said.
The story so far
Aug 2, 2017: CIRP application filed by SBI admitted
Feb 12: ArcelorMittal, Numetal submit bids for Essar Steel
Mar 21: ArcelorMittal, Numetal bids found ineligible under Section 29A by the RP
Apr 2: Second round of bids submitted
Apr 19: NCLT remands the first round of bids to RP and CoC for reconsideration, renders the second round invalid
Sept 7: NCLAT rules Numetal's second bid valid, directs ArcelorMittal to clear dues on account of defaulting firms by September 11
Oct 4: Supreme Court grants ArcelorMittal and Numetal time to clear dues for NPAs to be eligible to bid for Essar Steel
Oct 25: Ruias offer to pay Rs 54,389-crore Essar debt; ArcelorMittal declared successful applicant by CoC
Mar 8: NCLT clears ArcelorMittal plan
Jul 4: NCLAT approves ArcelorMittal bid