Recovery of $580 million against Essar arm’s loan default: ICICI Bank’s Singapore arm moves UK court

In September 2016, ICICI’s Singapore branch had moved the New York Supreme Court seeking $560 million in damages

Written by George Mathew | Mumbai | Published:July 6, 2017 3:27 am

ICICI Bank’s Singapore unit has moved the UK court for recovery of close to $580 million (around Rs 3,700 crore) awarded in damages in the US over a loan default by Essar’s US-based steel making subsidiary — Essar Steel Minnesota LLC (ESML).

According to banking sources, ICICI Bank has moved the London High Court as the facility agent, or lead banker, of a clutch of lenders to recover the loan granted to Essar Global’s US subsidiary — Essar Global Fund. “We are pursuing the recovery as Essar Global Fund was the guarantor for the loan given to Essar Steel Minnesota. Several Indian banks including ICICI Bank, State Bank, Union Bank and Canara Bank have extended the loan,” said an official of a bank with knowledge of the legal move.

While ICICI filed its claim in London’s High Court in May, details came out only this week. The Essar group did not respond to an email, seeking clarification on the development, sent by The Indian Express. ICICI Bank also declined to comment on the issue.

In September 2016, ICICI’s Singapore branch had moved the New York Supreme Court seeking $560 million in damages. It was filed against four Essar group companies which are guarantors to the loan. “The latest proceedings in the London High Court is for the actual recovery of the money. Essar Steel Minnesota has not paid back the loan,” said a banker who is aware of the development.

Essar Global bought Minnesota Steel Industries in 2007 and renamed it Essar Steel Minnesota. However, due to its financial woes, the company shut down construction several times over the years, and Essar Steel filed for bankruptcy in July 2016 after failing to pay contractors, laying off workers and defaulting on $66 million in state infrastructure loans.

After much legal wrangling, Minnesota Governor Mark Dayton ordered state officials to terminate Essar’s mineral leases in the state. The mineral lease termination is being challenged by Essar and also will be decided by the court.

Meanwhile, Essar Steel has filed a petition in the Gujarat High Court challenging Reserve Bank of India’s decision to refer the company to the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy code. The case is likely to come up for hearing on July 7. Some of the companies named by the RBI are upset with the manner in which the central bank has taken the decision to go for bankruptcy. The grouse of the companies is that while the RBI directed banks to refer the 12 cases directly to NCLT, other stressed borrowers were given a six-month period to arrive at a resolution with their lenders.

According to legal sources, some borrowers have pointed out that the cut-off date of March 31, 2016, itself is arbitrary as it does not take into account the subsequent developments in the companies’ performance and turnaround plans. They don’t rule out more companies from the RBI list to move the court against the decision of the RBI and lenders.

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