Millennium Post

Essar Steel: Finally bankers expect money next month

Mumbai: Following the recent Supreme Court ruling on Essar Steel resolution plan of ArcelorMittal, the lenders are expecting their money to start flowing in from the Lakshmi Mittal-led company next month.

On November 15, the apex court paved the way for ArcelorMittal to take over Essar Steel for Rs 42,000 crore, giving primacy to secured creditors in any bankruptcy resolution plan. The apex court over-ruled the appellate tribunal NCLAT which asked the banks to share the proceeds equally with the unsecured creditors as well.

"The work is in progress. The money should come in soon. We expect it will come by this quarter-end, which is December," Arijit Basu who heads the commercial client group and IT as a managing director at the State Bank told reporters on the sidelines of an event on Thursday.

"The money should come in the second week of December," head of another state-run bank told PTI.

After the Supreme Court ruling, ArcelorMittal had said it expected to complete the deal this year itself.

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 Ahamedabad bench of the bankruptcy tribunal in June 2017.

SBI chairman Rajnish Kumar in a statement had said that the SC judgement should significantly reduce the scope for long-drawn litigations under IBC and would eventually lead to faster resolutions of all stressed assets.

Many banks were hoping for a resolution of Essar Steel case for the past many quarters, which could have given a boost to their profitability.

Essar Steel was among the first list of the largest 12

stressed accounts that the Reserve Bank 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 set of creditors would be treated differently in any insolvency proceeding. There is no principal 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.

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