The consortium of lenders led by SBI has asked Uttam Galva Steels to sign a binding agreement with respect to its repayment offer.
Mumbai: Lenders to Uttam Galva Steels Ltd have asked the company to furnish bank guarantees amounting to at least 25% of its outstanding loans, said two people directly aware of the development.
The consortium of lenders led by State Bank of India (SBI) has also asked the company to sign a binding agreement with respect to its repayment offer, which would lay down the repayment schedule in a time-bound manner, the people cited above said on the condition of anonymity.
The development assumes importance because the eligibility of ArcelorMittal to bid for bankrupt steel maker Essar Steel Ltd depends on whether Uttam Galva, in which ArcelorMittal was earlier classified as a promoter, repays all overdue loans to the lenders.
Sources reported on 2 May that lenders to Essar Steel had said ArcelorMittal was liable to repay dues to lenders.
“This has a direct bearing on ArcelorMittal’s eligibility as a bidder for Essar Steel,” said one of the two people cited above.
Spokespersons for ArcelorMittal and Uttam Galva declined to comment.
Uttam Galva, according to the second person cited above, has not responded to the lenders’ offer.
Sources had reported on 16 April that Uttam Galva offered to repay its creditors in full after its previous offer to pay back 51% of its dues was rejected last week.
The steelmaker has sought time to arrange funds. On 12 April, lead lender SBI had rejected the Uttam Galva offer because under the initial proposal, the bank would have had to wait until 2042 for the last instalment.
While making the offer to repay the full amount, Uttam Galva told the Mumbai bench of the National Company Law Tribunal (NCLT) that the company was willing to repay all its debt, but needed additional time to arrange the funds. The firm told the court some overseas investors were willing to invest in Uttam Galva and hence, the company is seeking a small window to arrange the amount.
Uttam Galva features in the second list of 28 accounts issued by the Reserve Bank of India to the banks for being resolved under the insolvency and bankruptcy code.
Sources reported on 2 May that lenders to Essar Steel have asked ArcelorMittal to clear the debt outstanding for two defaulting companies—Uttam Galva and KSS Petron—in which it was a large shareholder until recently.
Loan to KSS Petron, an engineering procurement and construction (EPC) company, was classified as a non-performing asset, in 2015.
According to the second person cited above, Uttam Galva is yet to make a binding offer to repay its debt. “There is uncertainty around the selection of the highest bidder for Essar Steel. The bidders (ArcelorMittal) are worried that their efforts with respect to arrangement of funds for debt repayment may go waste if the asset does not come to them,” he said.
So far, ArcelorMittal has made a presentation to the lenders explaining its eligibility as a resolution applicant during the first round of bidding.
The lenders have given a week’s time to the bidders—ArcelorMittal and Numetal Mauritius to resolve the issues around eligibility.
“The notice has been sent out. Seven days have been given to clear off the dues and implement any other cures that have been prescribed,” a banker with direct knowledge of the development said.
Apart from ArcelorMittal, Numetal Mauritius had submitted a bid for Essar Steel in the first round. The lenders have also asked Numetal to prove its eligibility.
Numetal’s bid was rejected in the first round as Rewant Ruia is the beneficiary of the trust that backs Aurora Enterprises, which in turn holds 25% stake in Numetal.
Rewant Ruia is son of Ravi Ruia, vice-chairman of Essar Group. The lenders have told Numetal that if it wants to become eligible, Rewant Ruia will have to move out.
Source: Livemint, May 8, 2018.