An excruciating 863-day wait has finally come to an end for the lenders of Essar Steel, with ArcelorMittal repaying the promised Rs 42,000 crore to them on Friday, banking executives privy to the developments told CNBC-TV18.
ArcelorMittal, the world’s biggest steelmaker, on Friday transferred a sum of about Rs 40,000 crore to the current account of Essar Steel's lead banker, State Bank of India to take over the debt-ridden company under the new Insolvency and Bankruptcy Code, the executives told CNBC-TV18, requesting anonymity.
Also read: CNBC-TV18 explains: The significance of the Essar Steel verdict by Supreme Court
All creditors’ dues will be settled by the top lender by Monday (December 16), according to a senior banking executive who wished to remain anonymous.
Banks are set to recover over 90 percent of their claims against Essar Steel, amounting to over 40,000 crore — the single biggest recovery under IBC for banks so far. The operational creditors are set to get Rs 196 crore proposed by ArcelorMittal, run by billionaire Laxmi Mittal, plus another Rs 1,000 crore later allowed by the creditors' committee, taking the total repayment to Rs 1,196 crore.
The repayment comes almost a month after the November 15th Supreme Court verdict, which paved the way for Arcelor to take over Essar Steel and also upheld the primacy of financial creditors over other classes of creditors.
What Banks Will Recover
** Banks will collectively have to set aside Rs 1,000 crore in total from the above CoC approved distribution amount for operational creditors
While ArcelorMittal had kept the entire Rs 42,000 crore amount to be repaid in an escrow account, it did not immediately release it to the lenders after the November 15 Supreme Court order. This is because the European steel-maker had sought immunity for the Essar Steel asset from any ongoing cases against its promoters, the Ruias, and wanted to avoid the situation Jindals had found themselves in after the Bhushan Power takeover, a person familiar with the matter told CNBC-TV18.
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However, the recent amendment to the Insolvency & Bankruptcy Code that ring-fences the successful bidders of stressed assets from any criminal proceedings against offences committed by previous management/promoters gave ArcelorMittal the confidence to go ahead with the transaction, added the person quoted above.
As per the creditors committee approved plan which was upheld by the Supreme Court in its November 15 ruling, SBI will receive the largest chunk at Rs 12,161 crore, IDBI Bank Rs 2,282 crore, Canara Bank Rs 3,493 crore, ICICI Bank Rs 2,110 crore, Union Bank of India Rs 1,952 crore and Bank of India Rs 1,826 crore, said people familiar with the matter. Lenders, however, will set aside a total of Rs 1,000 crore additionally from their kitty for the operational creditors, as agreed by them earlier this year.
Also read: NCLT clears ArcelorMittal's resolution plan for Essar Steel
In a related development, lenders have also issued a Letter of Intent to ArcelorMittal for Odisha Slurry Pipeline Infra Ltd (OSPIL), a critical asset for Essar Steel plant, which connects its iron ore beneficiation plant in Dabuna with its pellet plant in Paradip, one of the people quoted above-told CNBC-TV18.
Essar Steel owes around Rs 49,046 crore to the financial creditors. SBI has an exposure of Rs 13,222 crore to the company, excluding the working capital it has been extending to the company during resolution process which is nearing closure after two-and-a-half years since going to the Ahmedabad bench of the bankruptcy tribunal in June 2017.
Essar Steel was among the first list of the largest 12 stressed accounts that the Reserve Bank of India had drawn up in June 2017 and asked banks to refer to the NCLT and the company was formally sent to the tribunal on June 27 2017.
As per the October 2018 resolution plan, secured financial creditors would recover 92 percent or around Rs 42,000 crore of their total exposure of Rs 49,046 crore.
Following this, the Ruias-run Essar Steel Asia Holding made a counter-offer to pay the entire amount in cash to bankers-a whopping Rs 54,389 crore but was rejected the NCLT in January 2019. After this on March 8, the NCLT approved ArcelorMittal's Rs 42000 crore bid.
On November 15, the Supreme Court had set aside the NCLAT order which gave equal rights to both secured and unsecured creditors of Essar Steel and cleared the decks for its takeover by ArcelorMittal.
A three-judge bench of RF Nariman said the two sets of creditors would be treated differently in any insolvency proceeding. There is no principle of equality between secured and unsecured creditors, the bench had said.
The NCLAT had said secured and unsecured creditors would get 60.7 percent of their dues from ArcelorMittal, which was challenged by banks in the apex court.
ArcelorMittal, the world’s biggest steelmaker, on Friday transferred a sum of about Rs 40,000 crore to the current account of Essar Steel's lead banker, State Bank of India to take over the debt-ridden company under the new Insolvency and Bankruptcy Code, the executives told CNBC-TV18, requesting anonymity.
Also read: CNBC-TV18 explains: The significance of the Essar Steel verdict by Supreme Court
All creditors’ dues will be settled by the top lender by Monday (December 16), according to a senior banking executive who wished to remain anonymous.
Banks are set to recover over 90 percent of their claims against Essar Steel, amounting to over 40,000 crore — the single biggest recovery under IBC for banks so far. The operational creditors are set to get Rs 196 crore proposed by ArcelorMittal, run by billionaire Laxmi Mittal, plus another Rs 1,000 crore later allowed by the creditors' committee, taking the total repayment to Rs 1,196 crore.
The repayment comes almost a month after the November 15th Supreme Court verdict, which paved the way for Arcelor to take over Essar Steel and also upheld the primacy of financial creditors over other classes of creditors.
What Banks Will Recover
| Sl No | Bank | Admitted Claims | CoC Approved Distribution |
| 1 | SBI | Rs 13,226 crore | Rs 12,161 crore |
| 2 | IDBI Bank | Rs 2,481 crore | Rs 2,282 crore |
| 3 | Canara Bank | Rs 3,798 crore | Rs 3,493 crore |
| 4 | Edelweiss ARC (HDFC Bank) | Rs 602 crore | Rs 554 crore |
| 5 | Edelweiss ARC (Federal Bank) | Rs 92 crore | Rs 84 crore |
| 6 | Edelweiss ARC (ICICI Bank) | Rs 1,697 crore | Rs 1,561 crore |
| 7 | Edelweiss ARC (Axis Bank) | Rs 993 crore | Rs 913 crore |
| 8 | Edelweiss ARC (Indian Overseas Bank) | Rs 1,966 crore | Rs 1,808 crore |
| 9 | Edelweiss ARC (J&K Bank) | Rs 554 crore | Rs 510 crore |
| 10 | Edelweiss ARC (Laxmi Vilas Bank) | Rs 137 crore | Rs 126 crore |
| 11 | Edelweiss ARC (Bank of Baroda) | Rs 1,237 crore | Rs 1,171 crore |
| 12 | Edelweiss ARC (HDFC Ltd ) | Rs 978 crore | Rs 900 crore |
| 13 | Edelweiss ARC (Bank of Baroda) | Rs 10 crore | Rs 9 crore |
| 14 | Standard Chartered Bank | Rs 3,557 crore | Rs 60.71 crore |
| 15 | Bank of Baroda | Rs 5 crore | Rs 4.6 crore |
| 16 | PNB | Rs 2,936 crore | Rs 2,701 crore |
| 17 | Deutsche Bank AG | Rs 2,829 crore | Rs 2,603 crore |
| 18 | ICICI Bank | Rs 2,294 crore | Rs 2,110 crore |
| 19 | Union Bank of India | Rs 2,122 crore | Rs 1,952 crore |
| 20 | Bank of India | Rs 1,985 crore | Rs 1,826 crore |
| 21 | Corporation Bank | Rs 1,566 crore | Rs 1,441 crore |
| 22 | Syndicate Bank | Rs 967 crore | Rs 890 crore |
| 23 | UCO Bank | Rs 582 crore | Rs 535 crore |
| 24 | EXIM Bank | Rs 556 crore | Rs 511 crore |
| 25 | Central Bank | Rs 510 crore | Rs 469 crore |
| 26 | Allahabad Bank | Rs 320 crore | Rs 294 crore |
| 27 | SREI Indra Finance | Rs 175 crore | Rs 161 crore |
** Banks will collectively have to set aside Rs 1,000 crore in total from the above CoC approved distribution amount for operational creditors
While ArcelorMittal had kept the entire Rs 42,000 crore amount to be repaid in an escrow account, it did not immediately release it to the lenders after the November 15 Supreme Court order. This is because the European steel-maker had sought immunity for the Essar Steel asset from any ongoing cases against its promoters, the Ruias, and wanted to avoid the situation Jindals had found themselves in after the Bhushan Power takeover, a person familiar with the matter told CNBC-TV18.
Also read:
The possible perils of NCLAT's Essar verdict on India's credit market
However, the recent amendment to the Insolvency & Bankruptcy Code that ring-fences the successful bidders of stressed assets from any criminal proceedings against offences committed by previous management/promoters gave ArcelorMittal the confidence to go ahead with the transaction, added the person quoted above.
As per the creditors committee approved plan which was upheld by the Supreme Court in its November 15 ruling, SBI will receive the largest chunk at Rs 12,161 crore, IDBI Bank Rs 2,282 crore, Canara Bank Rs 3,493 crore, ICICI Bank Rs 2,110 crore, Union Bank of India Rs 1,952 crore and Bank of India Rs 1,826 crore, said people familiar with the matter. Lenders, however, will set aside a total of Rs 1,000 crore additionally from their kitty for the operational creditors, as agreed by them earlier this year.
Also read: NCLT clears ArcelorMittal's resolution plan for Essar Steel
In a related development, lenders have also issued a Letter of Intent to ArcelorMittal for Odisha Slurry Pipeline Infra Ltd (OSPIL), a critical asset for Essar Steel plant, which connects its iron ore beneficiation plant in Dabuna with its pellet plant in Paradip, one of the people quoted above-told CNBC-TV18.
Essar Steel owes around Rs 49,046 crore to the financial creditors. SBI has an exposure of Rs 13,222 crore to the company, excluding the working capital it has been extending to the company during resolution process which is nearing closure after two-and-a-half years since going to the Ahmedabad bench of the bankruptcy tribunal in June 2017.
Essar Steel was among the first list of the largest 12 stressed accounts that the Reserve Bank of India had drawn up in June 2017 and asked banks to refer to the NCLT and the company was formally sent to the tribunal on June 27 2017.
As per the October 2018 resolution plan, secured financial creditors would recover 92 percent or around Rs 42,000 crore of their total exposure of Rs 49,046 crore.
Following this, the Ruias-run Essar Steel Asia Holding made a counter-offer to pay the entire amount in cash to bankers-a whopping Rs 54,389 crore but was rejected the NCLT in January 2019. After this on March 8, the NCLT approved ArcelorMittal's Rs 42000 crore bid.
On November 15, the Supreme Court had set aside the NCLAT order which gave equal rights to both secured and unsecured creditors of Essar Steel and cleared the decks for its takeover by ArcelorMittal.
A three-judge bench of RF Nariman said the two sets of creditors would be treated differently in any insolvency proceeding. There is no principle of equality between secured and unsecured creditors, the bench had said.
The NCLAT had said secured and unsecured creditors would get 60.7 percent of their dues from ArcelorMittal, which was challenged by banks in the apex court.
First Published: Dec 13, 2019 8:05 PM IST
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