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    Essar Steel: ArcelorMittal to Pay Rs 7,469 crore dues of Uttam Galva, KSS Petron

    Synopsis

    The announcement comes a day before the two-week deadline given to the two companies ArcelorMittal and Numetal to clear dues associated with affiliated companies expires.

    Essar-Steel-agenciesAgencies
    Of the Rs 7,469 crore payment, around 80 per cent will be used to settle the dues of Uttam Galva and the rest 20 per cent for KSS Petron, the company said.
    ArcelorMittal on Wednesday announced that in-line with the Supreme Court ruling dated October 4, 2018, it has decided to make a payment of Rs 7,469 crore (approx $1 billion) to financial creditors of Uttam Galva and KSS Petron to clear overdue debts of the two companies.

    The announcement comes a day before the two-week deadline given to the two companies ArcelorMittal and Numetal to clear dues associated with affiliated companies expires.

    The apex court in its ruling on October 4 had said that in order to become eligible to bid for Essar Steel under section 29(A) of the insolvency code, both companies need to clear dues that associated companies owed to banks.

    “The company is of the view that Essar Steel will add significant strategic value to ArcelorMittal’s business. It has therefore concluded that, based on an assessment of the probability of its offer to acquire Essar Steel succeeding, paying off Uttam Galva and KSS Petron’s debts was an appropriate course of action under the circumstances,” ArcelorMittal said in a release.

    ArcelorMittal had acquired 29.05% of Uttam Galva’s stake in 2009 and has since been classified as a promoter. However, it had sold its stake to other promoters in February this year to become eligible to bid for the debt-ridden steelmaker. In case of KSS Petron, Fraseli, LN Mittal’s Luxembourg-based trust held 32.22% stake in KSS Global which in turn held 100% share capital in KSS Petron. Mittal had sold this stake too before bidding. However, SC had observed that since the stake in both companies was sold three days before the submission of the resolution plan, it was done with the “sole object of avoiding the consequence mentioned in the provision to section 29A(c)” which bars promoters of defaulting companies to bid for assets under the law.

    ArcelorMittal has said, however, that even though the company did not have a stake in KSS Petron, it is the company and not Mittal himself, that will be footing the payment. “The beneficiary of this decision is ArcelorMittal; there would have been no economic or financial benefit to Mittal, and nor does he have any contingent liability/responsibility to settle KSS Petron dues. If ArcelorMittal was not bidding for ESIL, Mittal would have no liability on this account,” a spokesperson of ArcelorMittal said in an emailed response.

    The committee of creditors (CoC) will now have eight weeks to evaluate the two bids. To be sure, even with one day left for the deadline to expire, Numetal has not announced its willingness to pay off the dues. Also, VTB Capital, the state-owned Russian bank that forms the consortium bidding for Essar Steel with Numetal had petitioned the Supreme Court last Friday asking to be allowed to bid alone as chances of Numetal paying off dues appear bleak. The Numetal consortium had offered Rs 37,000 crore for the asset. Essar Steel owes Rs 49,000 crore to various lenders.


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    ( Originally published on Oct 17, 2018 )
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