The CoC was supposed to meet on Friday to complete the process and also to deliberate on the Ruias’ offer. However, the process was completed on late Thursday night, and Friday’s meeting was cancelled. “There was no need for a meeting today,” said a lender.
The promoters’ plan included an upfront cash payment of Rs 475.07 billion to all creditors, including Rs 455.59 billion to senior secured financial creditors.
The Essar group said on Friday that it was not the first time that the shareholders and management of Essar Steel had put forward a resolution plan.
The company was continuously approaching the lenders for a restructuring proposal prior to it getting admitted into the NCLT, it said. “After admission into the IBC process also, the shareholders of ESIL made offers to the CoC in April 2018 and July 2018, offering a comprehensive resolution plan for ESIL. Unfortunately, on both the occasions our proposal was declined by the CoC. We are now re-approaching the CoC under 12A with a very compelling offer, which is superior to any other resolution plan that the CoC is considering, with full recovery for lenders and giving maximum realisation for all other stakeholders (primarily operation creditors),” the group said.
Section 12A, brought about as part of an amendment in June 2018, allows a company to exit the bankruptcy process if it offers to repay the dues and 90 per cent of the lenders accept the proposal. However, withdrawal is permissible before publication of notice inviting expressions of interest (EoI).
The resolution plan, as disclosed by Arcelor on Friday, includes an upfront payment of Rs 420 billion towards ESIL’s resolution debt, with a further Rs 80 billion capital injection into ESIL to support operational improvement, increase production levels and deliver enhanced levels of profitability. Essar owes financial creditors Rs 490 billion. After completion, Arcelor would jointly own and operate ESIL in partnership with Nippon Steel & Sumitomo Metal Corporation (NSSMC), Japan’s largest steel producer and the third largest steel producer in the world, in line with the joint venture formation agreement.
Arcelor and NSSMC expect to finance the joint venture through a combination of partnership equity (one-third) and debt (two-thirds) and Arcelor anticipates that its investment in the joint venture will be equity accounted. The majority of the venture would be owned by Arcelor.
As part of the resolution plan, Arcelor plans to increase ESIL’s finished steel shipments to 8.5 million tonnes over the medium term. The long-term aspiration was to increase shipments to 12 and 15 million tonnes through the addition of new iron and steel making assets.
ESIL’s current level of annualised crude steel production is 6.5 million tonnes. It also has iron ore pellet facilities in the east of India with a current annual capacity of 14 million tonnes per annum.
Arcelor said, it expected the NCLT process to complete before the end of 2018, but it's already been a long and protracted legal battle.