ArcelorMittal to rebid for Essar Steel after failing legal eligibility test

A day after its bid failed the legal eligibility test, ArcelorMittal, confirmed that it would participate in the rebid for Essar Steel.

“We have not yet received any formal notification from resolution professional. But we can confirm it is our intention to participate in a rebid," read a statement from ArcelorMittal. Sources close to Numetal said it had not heard officially from the resolution professional.

On Wednesday, the committee of creditors rejected the two bids that it had received for Essar Steel from ArcelorMittal and Numetal on the grounds of eligibility.

Sources close to ArcelorMittal said the company was focusing on rebid and not considering legal options though it was not entirely ruled out.

The main issue with ArcelorMittal’s bid was that it sold its 29 per cent stake in Uttam Galva Steels, a non-performing asset (NPA) for more than a year, but it did not reflect in the records of the Securities and Exchange Board of India (Sebi) and consequently the stock exchanges. ArcelorMittal has already approached the regulator and stock exchanges for declassification.

Simultaneously, Uttam Galva Steels has approached its 18 lenders for a one-time settlement of dues. It has offered to pay Rs 28.84 billion of a total debt of Rs 56 billion.

Most of the lenders are common to Essar Steel. If Uttam Galva becomes a standard asset ahead of the rebid then it will help ArcelorMittal’s case. Whichever happens earlier, declassification of promoter status or a settlement of Uttam Galva’s dues will make ArcelorMittal eligible to rebid.

An amendment to Section 29A, however, is also expected, which may allow an entity not in control of the management of an NPA to bid for other cases, which again, may solve all of ArcelorMittal's problems.

The rebid date is likely to be set for the first week of April, which will give both ArcelorMittal and Numetal to rework on their technical glitches.

Numetal has already filed an application before the National Company Law Tribunal (NCLT), Ahmedabad Bench, seeking a declaration that Numetal is eligible to submit a resolution plan for Essar Steel India.

The NCLT observed that any decision taken or resolution passed by the committee of creditors at the meeting on Wednesday would be subject to the outcome of the application by Numetal.

Numetal is likely to alter its corporate structure to make itself eligible. Numetal's bid was rejected because 25 per cent of its shares were owned by an offshore trust, with Rewant Ruia, a Ruia family member as a beneficiary. The Ruias are the promoters of Essar Steel that defaulted on bank loans leading to insolvency proceedings. The trust is likely to sell its stake.