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Journalism of Courage
The Committee of Creditors (CoC) of Essar Steel on Tuesday decided to meet again on Friday to consider a fresh round of bids as the meeting proved inconclusive with banks finding the takeover bids submitted by ArcelorMittal and Numetal below the fair value.
Banks have decided to seek a legal opinion on whether to open up the auction of Essar Steel for fresh bids. Lenders are likely to turn down the two bids on financial terms — and not Clause 29 (A) — and then open up the auction for fresh round of bidding. “Banks are not ready to take a big haircut. But opinion was divided on the issue,” said a banking source.
If lenders call for fresh bids, JSW Steel, Vedanta, Tata Steel, ArcelorMittal and Numetal will get another attempt to acquire the debt-laden Essar Steel.
“The fact that lenders did not clear any of the bids on Tuesday indicates that they are not happy with the bids. It also doesn’t mean they rejected the bids outright. If they get legal opinion, they might go for fresh round of bids. Banks want the maximum price. They don’t want to face questions from other agencies about low pricing at a later stage,” said a source.
Earlier this week, the Ahmedabad bench of the National Company Law Tribunal had asked the committee of creditors to reconsider the bids of ArcelorMittal and Numetal for Essar Steel made in the first round. The two competing bidders had also participated in the second round with Numetal teaming up with JSW Steel. The CoC then disqualified ArcelorMittal and Numetal as it believed they were not eligible as per Section 29 A of the IBC, which bars defaulting promoters from bidding for assets at the NCLT.
ArcelorMittal was a promoter in Uttam Galva Steels, which has defaulted on its loans. Numetal’s bid was held to be ineligible since one of the persons associated with the company, Rewant Ruia, is related to the promoters of Essar Steel. The shareholders of Numetal include Russia’s VTB Bank and engineering firm TyazhPromExport, financial investor Aurora Enterprises (in which Ruia has an interest) and commodity trading company Indo International Trading.
Rewant Ruia is one of the ultimate beneficiaries and owners of a shareholder of Numetal — one of Essar Steel’s bidders — through various holding companies and trusts, Essar Steel’s resolution professional Satish Kumar Gupta had told the Ahmedabad Bench of the National Company Law Tribunal (NCLT).
According to the NCLT’s order, in a case filed by Numetal and ArcelorMittal challenging their ineligibility to bid for Essar Steel, the RP has informed the court that Numetal “is nothing but a newly-incorporated joint venture between Aurora Enterprises, Crinium Bay, Indo International Ltd and Tyazhpromexport through which its shareholders have the resolution plan”.
“The applicant has not submitted any agreement or understanding among parties to substantiate the averment that AEL/Rewant Ruia has no management rights, special rights, or the ability to participate in the management of the applicant either currently or going forward,” Gupta said.
