Essar Steel re-bidding issue may be taken up on Wednesday

Henrietta Strickland
March 24, 2018

The decision to reject both the bids was taken at a meeting of the committee of creditors (CoC) of Essar Steel which has chose to allow a second round of bidding for the 10-million tonne-asset at Hazira in Gujarat.

Lenders have also set an April 2 deadline for the second round of bidding. The companies that had picked up expressions of interest in the earlier round in February will be allowed to submit bids this time around as well.

This follows a decision by the Committee of Creditors of Essar Steel to reject the bids placed by Numetal (backed by Russia's largest bank VTB) and ArcelorMittal, the world's largest steel company, on grounds that their proposals did not comply with the Insolvency and Bankruptcy Code.

ArcelorMittal and Numetal, an SPV floated by Russia's VTB Capital and Rewant Ruia, will be given a new chance to bid again, banking sources said. The clause states that a person shall not be eligible to submit a resolution plan, if he or any other entity acting jointly or in concert is an "un discharged insolvent" or a willful defaulter in line with the guidelines of the Reserve Bank of India (RBI). ArcelorMittal, on the other hand, did not qualify as it had a stake in Uttam Galva, a loan defaulting company. Numetal's bid, led by VTB Capital, was rejected as Aurora Enterprises, a trust in which Rewant is a beneficiary, was a partner in the consortium. The company was also found ineligible under Section 29 A of the IBC.

Esar Steel is undergoing bankruptcy proceedings after failing to repay Rs49,000 crore to lenders. Senior officials say that although Tatas and Vedanta are not keen on bidding, bankers are likely to persuade them and Nippon Steel to come up with a resolution plan for Essar.

In an earlier interaction with DNA Money, Makram Abboud, vice chairman worldwide, VTB Capital, had said, "We already have it in the bid document that Rewant Ruia or any shareholder can exit if it comes in between winning the bid".

It remains to be seen whether SEBI's and BSE's records are updated at the end of the quarter with regard to the shareholding in Uttam Galva Steels. Rewant's presence in Numetal as a shareholder was the primary reason for the lenders to reject the bid. He is a member of the Ruia family that's the promoter of Essar Steel. "Numetal apprehends that full facts submitted by Numetal for determination of its eligibility to submit a Resolution Plan have not been appropriately assessed".

The NCLT did not halt the insolvency resolution process of Essar Steel but it did observe that "any decision taken or resolution passed by the Committee of Creditors would be subject to the outcome of the Application (Numetal's application to the NCLT)". "The next date of hearing of the application is April 4, 2018, as per the attendance-cum-order sheet of the hearing of Ahmedabad Bench of NCLT", Numetal said.

Other reports by Click Lancashire

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