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25
October 2018
Essar Steel India Ltd (The Total Investment & Insurance Solutions)
The
Ruia owned Essar Steel India Ltd (Essar Steel) which was on the brink of
changing hands, has claimed that it has submitted a proposal to its Committee
of Creditors (CoC) for full settlement of the entire admitted claims of the
financial creditors, operational creditors, and workmen and employees of the
company, aggregating Rs54,389 crore.
"The
plan includes an upfront cash payment of Rs47,507 crore to all creditors,
including Rs45,559 crore to the senior secured financial creditors, i.e. 100%
recovery," the company said in a release on Thursday without revealing how
the promoters and shareholders have suddenly got access to such huge funding.
When
asked, Essar Steel has refused to reply on the source of its sudden riches. The
question is if the money was so easily available, why was the company a
defaulter?
Prashant
Ruia, Director, Essar, said, "Essar Steel got into difficulty because of
external factors. In fact, even after the onset of the insolvency resolution
process, the shareholders of Essar Steel had made offers to settle the debt of
the company, but the lenders did not accept those offers. We believe our
current proposal will provide 100% recovery to secured creditors and lenders,
and maximum recovery for unsecured creditors."
While
the resolution plan currently under the CoC's consideration takes care of only
the secured creditors (i.e. the banks), by offering this settlement, Essar
Steel says its shareholders are ready to pay up the entire dues that will lead
to not only maximum recovery for the lenders, but also for all other classes of
creditors, thus taking the Company out of the corporate insolvency resolution
process under Section 12A of the IBC, which was introduced in June 2018 by way
of an amendment.
"If
the CoC were to accept the resolution plan currently under consideration, it
will have to settle for a sizeable haircut. Moreover, the offer does not
provide for meaningful payment to operational and other unsecured
creditors," it added.
Earlier
in September, the National Company Law Appellate Tribunal (NCLAT) had ruled
that ArcelorMittal must pay its dues to enable consideration of its bid for
Essar Steel along with resolution plans of other contenders, Numetal and
Vedanta Resources.
The
revised bid by the world's largest steelmaker is believed to be Rs42,000 crore
compared with Rs37,000-crore bid submitted in the second round of bidding by
Numetal, a consortium led by Russia's VTB Bank.
The
commitment by ArcelorMittal to pay the outstanding dues of Rs7,000 crore on
Uttam Galva and KSS Petron is learnt to be separate from its bid of Rs42,000
crore. ArcelorMittal was asked to clear its dues of about Rs7,000 crore related
to Uttam Galva and KSS Petron, of which it was a promoter when these turned
non-performing assets (NPA).
While
ArcelorMittal got conditional approval from the NCLAT, Numetal's bid filed in
the second round in March this year was found eligible as by then it had
restructured its shareholding composition by removing the stake of Essar Steel
promoter's son.
The
first bid of both Numetal and ArcelorMittal were rejected by the CoC, the
lenders of Essar Steel, as they violated Section 29A of the IBC, which
disqualifies a promoter of NPA from submitting a resolution plan.The Total Investment & Insurance Solutions
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