ArcelorMittal isn’t giving up on its bid for Essar Steel without a fight

• Last month, ArcelorMittal raised its bid for the bankrupt steelmaker from ₹310 billion to ₹420 billion, which included an additional offer to clear the dues of its subsidiaries on the condition that its bid was accepted.
  
• However, on 4 October, the Supreme Court directed the Luxembourg-based steelmaker to clear all its subsidiaries’ outstanding dues in order to be considered eligible for bidding.
  
• In response, ArcelorMittal has offered to pay around ₹45.5 billion, well below its subsidaries’ estimated total dues of ₹70 billion.
  

The bidding process for the Essar Steel - which was one of the first 12 accounts identified by the RBI for resolution last year - has met with another twist.

Last month, ArcelorMittal raised its bid for the bankrupt steelmaker from ₹310 billion to ₹420 billion, which included an additional offer to clear the dues of its subsidiaries. This was well above Numetal’s ₹370 billion offer.

However, ArcelorMittal’s bid was subject to one condition - it said it would only pay the outstanding loans of Uttam Galva and KSS Petron - which are estimated to be around ₹75 billion excluding interest- if its bid for Essar Steel was accepted.

The company took the matter to the Supreme Court, which directed the company earlier this month to clear the loans of its subsidiaries first, despite the fact that it had sold down its stakes in them in February 2018 before the bidding process commenced. The directive extended to Numetal as well, which is also dealing with outstanding dues of its own.

The the Luxembourg-based steelmaker was deemed ineligible to bid for Essar Steel in the first round earlier this year because its two aforementioned subsidiaries had defaulted on their loans. Under the rules of the Indian bankruptcy code, wilful defaulters or entities associated with wilful defaulters cannot bid for bankrupt firm.

Now, as per a letter sent last week to the Essar Steel’s creditors seen by media outlets, ArcelorMittal has agreed to pay a portion of the estimated outstanding dues of its subsidiaries- specifically ₹45.5 billion - based on its own calculations of the principal and interest owed on its subsidiaries’ loans. This includes nearly ₹40 billion worth of loans and external commercial borrowings on Uttam Galva’s books with the rest coming from KSS.

If the proposal, which is still pending the approval of ArcelorMittal’s board, is accepted by the committee of creditors, then the Luxembourg-based steelmaker will no longer have to worry about the eligibility of its bid. However, it is taking a large gamble given the possibility that it could lose the bid to Numetal.

The deadline for the payment of the outstanding dues is 18 October.