ArcelorMittal deposits Rs7,000 cr with SBI to ensure eligibility for Essar

The world's largest steelmaker ArcelorMittal has transferred Rs7,000 crore to State Bank of India to clear bank dues of loan defaulter Uttam Galva Steels so that it becomes eligible to bid for acquisition of Essar Steel, according to PTI citing a person aware of the development.

In a similar report, The Economic Times citing sources said the money transfer is to clear the dues of two of its associate companies – Uttam Galva and KSS Petron – and the amount has been placed in the escrow account of the London branch of State Bank of India to make it eligible by law to bid for the bankrupt Essar Steel.
The move to park about Rs7,000 crore in an escrow account of SBI follows ArcelorMittal's bid for Essar Steel coming in for questioning because of its past shareholding in loan defaulter Uttam Galva Steel. The insolvency and bankruptcy rules bar a delinquent promoter from bidding for a company or asset that is being auctioned to recover bank dues.
ArcelorMittal refused to comment on the specific transfer but said, "Any offer to pay any outstanding loans of companies where we only had a passive stake with no management or governance role, would be made without prejudice to demonstrate the seriousness of our commitment to India and Essar Steel India Ltd (ESIL).
"We continue to believe that a swift resolution is in the best interests of ESIL and its stakeholders, including its employees who deserve a strong and certain future," it said.
ArcelorMittal is locked in a direct fight with Russia's VTB Capital-backed NuMetal Ltd in the takeover battle for Essar Steel, which is being auctioned for defaulting on payment of Rs49,000 crore in bank loans.
Under Section 29A of the Indian Bankruptcy Code, defaulting companies are not eligible to submit resolution plans for companies facing bankruptcy.  Of the Rs 7,000 crore, around Rs 6,000 crore is to regularise loans of Uttam Galva and the balance is for KSS Petron, the ET report said.
NuMetal's bid had also come in for questioning as it was 25-per cent owned by Aurora Trust of Ruia family — the promoters of Essar Steel. However, later VTB Bank sought to severe ties with the Ruia family by proposing to buy out Aurora Trust's stake in NuMetal.
A committee of Essar Steel lenders had on 8 May given the two bidders one week time to "cure their disability" by paying off dues of the defaulting companies of which they were shareholders or promoters.
ArcelorMittal parking the fund with SBI came as the deadline ended on Tuesday.
On 9 May, the company had written to the Committee of Essar Steel Creditors asking if its 8 May order was to state if the lenders can reject its bid for Essar Steel after the overdue amounts are paid in full.
"It makes no commercial sense for us to pay these amounts and then suffer the same disqualification at the hands of the CoC, it had written in a two-page letter to the Committee of Creditors (CoC), which was reviewed by PTI.
When contacted, the company confirmed it had written to CoC but said "the details of this letter are confidential."
ArcelorMittal said its 12 February bid for Essar Steel is and always has been eligible.