ArcelorMittal submits a higher bid for bankrupt Essar Steel but on one condition
- ArcelorMittal, the world’s largest steelmaker, has submitted a revised bid of ₹420 billion, which is well above
Numetal’s ₹370 billion offer.
- However, the Luxembourg-based steelmaker has yet to clear the dues owed by its local subsidiaries, Uttam Galva and KSS Petron, which calls into question its eligibility to bid.
- It will only pay the outstanding dues on the condition that its bid is accepted by
Essar Steel’s creditors. The matter is being heard by the Supreme Court.
The two companies were deemed to be ineligible to bid for Essar Steel in the first round. On one hand, two local subsidiaries of ArcelorMittal, Uttam Galva and KSS Petron, had defaulted on their loans. This went against the rules of the Indian
However, last week, the the National Company Law Appellate Tribunal (
Second act drama
On September 10th, ArcelorMittal, which is partnering with Japan’s Nippon Steel & Sumitomo Metal for the bid, submitted a revised offer of ₹420 billion for Essar Steel, which includes an offer to clear the dues of its subsidiaries. This was well above its original offer of ₹310 billion and Numetal’s ₹370 billion bid.
If the bid is accepted, it will mark a significant win for India’s new bankruptcy regime. However, there’s one large hurdle standing in ArcelorMittal’s way.
Despite selling its shares in its local subsidiaries, the Luxembourg-based steelmaker has not yet cleared the dues owed by them, which calls into question its very eligibility to bid as today is the deadline to do so. More importantly, in a letter to sent to Essar Steel’s creditors, it has said it will only pay the outstanding loans of Uttam Galva and KSS Petron if its bid for Essar Steel is accepted.
Third act resolution?
Given the NCLAT’s refusal to recognise its eligibility, ArcelorMittal has now taken the case to the Supreme Court. Essar’s creditors will obviously go for the higher bid, but will want to avoid any further litigation.
Essar, which is India’s fourth-largest steelmaker, has outstanding dues of ₹490 billion. Unless Numetal is able to match ArcelorMittal’s bid, it seems certain that that Essar’s creditors will pick the latter as their secured debt claims will be covered.
However, the final decision rests with the Supreme Court. ArcelorMittal’s appeal will be heard tomorrow. A ruling on the matter is expected soon. The outcome will set an important precedent for Section 29A of the Insolvency and Bankruptcy Code, which determines the eligibility of bidders.