Essar Steel Insolvency: Lenders Accept ArcelorMittal’s Plan That Promises 85% Recovery
ArcelorMittal’s plan for Essar Steel gets nod from lenders.
The committee of creditors of Essar Steel Ltd. has accepted the joint offer made by ArcelorMittal and Japan’s Nippon Steel even as promoters, the Ruias, made a last-ditch effort to retain the steelmaker.
The resolution plan includes an upfront payment of Rs 42,000 crore to the lenders and a Rs 8,000-crore capital injection in Essar Steel to support operational improvement, ArcelorMittal said in a media release on Friday.
Essar Steel is among the first 12 non-performing assets that the Reserve Bank of India had directed banks to take to insolvency resolution in June 2017. The Ruia family-promoted company owes Rs 49,394 crore to its financial creditors and about Rs 5,000 crore to operational creditors.
ArcelorMittal intends to increase Essar Steel’s finished steel shipments to 8.5 million tonnes over the medium term. The long-term plan is to increase finished steel shipments to between 12 and 15 million tonnes through the addition of new iron and steelmaking assets, the media release said.
Meanwhile, Essar Steel’s erstwhile promoters—the Ruia family—has offered Rs 54,389 crore to the creditors saying it will amount to 100 percent recovery of all dues, including those of operational and unsecured creditors. Lawyers told BloombergQuint that this offer cannot be entertained by the committee of creditors.