ArcelorMittal emerged as the sole-bidder for Essar Group firm, EPC Constructions India Ltd, with a bid of ₹500 crore, against outstanding loans of ₹7,268 crore, said two bankers aware of the bid. The first banker, requesting anonymity, said that the company has also promised to bring some equity into EPC Constructions if they win the bid, but lenders were not happy with the offer and want more cash upfront. “A discount of above 90% is not acceptable to them.”
An email sent to ArcelorMittal did not elicit any response till publishing of this story.
This is the second Essar Group company, after Essar Steel, that ArcelorMittal is eager to buy. A wholly-owned subsidiary of Essar Projects Dubai, EPC Constructions (formerly Essar Projects India Ltd) is involved in building infrastructure projects, power plants and refineries, among others.
The second banker, also requesting anonymity, said that the proposal will be discussed by the committee of creditors (CoC), but most banks feel if the bid was not revised, the company might have to head for liquidation. He added that their proposal to bring in equity is not attractive because it will still lead to a meagre recovery for the lenders.
EPC Constructions was referred to the bankruptcy court by IDBI Bank and was admitted under the Insolvency and Bankruptcy Code (IBC) on 20 April.
Banks had declared EPC Constructions a non-performing asset (NPA) on 31 December 2014, and had issued a demand notice on 8 November 2017, shows documents available with the National Company Law Tribunal (NCLT).
The consortium of lenders had then asked EPC Constructions ’s corporate guarantors to repay the loan. The rupee-term loan was guaranteed by Essar Investment Ltd and the working capital loans were guaranteed by Imperial Consultants and Securities Ltd.
According to documents on EPC Constructions’ website, under the insolvency resolution process, the company has received financial creditor claims of ₹7,304 crore, of which the resolution professional has admitted ₹7,268 crore.
Lenders having exposure to EPC Constructions include IDBI Bank (₹1,117 crore), Central Bank of India (₹1,054 crore), UCO Bank (₹1,011 crore), Exim Bank (₹884 crore), Corporation Bank (₹722 crore) and Suraksha Asset Reconstruction Co. (₹642 crore).
The highest claim of ₹1,753 crore was filed by the company’s parent, Essar Projects Ltd, Dubai. The claim is being verified.
Sources had on 30 October reported that ArcelorMittal had completed due diligence on EPC Constructions, using the data room open to bidders, while its officials had also visited the company’s plant in Surat.
ArcelorMittal’s bid for Essar Steel, too, is in limbo following opposition from the steel company’s unsecured and operational creditors. Recently, the Gujarat state utility, Dakshin Gujarat Vij Co. Ltd, had challenged ArcelorMittal’s resolution plan before the Ahmedabad bench of the National Company Law Tribunal.
ArcelorMittal’s resolution plan for Essar Steel proposes an upfront payment of ₹42,000 crore to lenders and an additional ₹8,000 crore towards capital expenditure.
On 25 October, more than 92% of Essar Steel’s creditors had voted in favour of ArcelorMittal’s offer. On 30 October, the resolution professional had submitted ArcelorMittal’s resolution plan before the Ahmedabad bench of the NCLT.
Sources: Livemint, November 30,2018