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ArcelorMittal repays Essar Steel lenders, Rs 40,000 crore transferred to SBI

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The Indian Telegraphhttps://theindiantelegraph.com.au/
Established in 2007, The Indian Telegraph is a multi award winning digital media company based in Australia.
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An excruciating 863-day wait has finally come to an end for the lenders of Essar Steel, with ArcelorMittal repaying the promised Rs 42,000 crore to them on Friday, banking executives privy to the developments told CNBC-TV18.

ArcelorMittal, the world’s biggest steelmaker, on Friday transferred a sum of about Rs 40,000 crore to the current account of Essar Steel’s lead banker, State Bank of India to take over the debt-ridden company under the new Insolvency and Bankruptcy Code, the executives told CNBC-TV18, requesting anonymity.

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All creditors’ dues will be settled by the top lender by Monday (December 16), according to a senior banking executive who wished to remain anonymous.

Banks are set to recover over 90 percent of their claims against Essar Steel, amounting to over 40,000 crore — the single biggest recovery under IBC for banks so far. The operational creditors are set to get Rs 196 crore proposed by ArcelorMittal, run by billionaire Laxmi Mittal, plus another Rs 1,000 crore later allowed by the creditors’ committee, taking the total repayment to Rs 1,196 crore.

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The repayment comes almost a month after the November 15th Supreme Court verdict, which paved the way for Arcelor to take over Essar Steel and also upheld the primacy of financial creditors over other classes of creditors.What Banks Will Recover

Sl NoBankAdmitted ClaimsCoC Approved Distribution
1SBIRs 13,226 croreRs 12,161 crore
2IDBI BankRs 2,481 croreRs 2,282 crore
3Canara BankRs 3,798 croreRs 3,493 crore
4Edelweiss ARC (HDFC Bank)Rs 602 croreRs 554 crore
5Edelweiss ARC (Federal Bank)Rs 92 croreRs 84 crore
6Edelweiss ARC (ICICI Bank)Rs 1,697 croreRs 1,561 crore
7Edelweiss ARC (Axis Bank)Rs 993 croreRs 913 crore
8Edelweiss ARC (Indian Overseas Bank)Rs 1,966 croreRs 1,808 crore
9Edelweiss ARC (J&K Bank)Rs 554 croreRs 510 crore
10Edelweiss ARC (Laxmi Vilas Bank)Rs 137 croreRs 126 crore
11Edelweiss ARC (Bank of Baroda)Rs 1,237 croreRs 1,171 crore
12Edelweiss ARC (HDFC Ltd )Rs 978 croreRs 900 crore
13Edelweiss ARC (Bank of Baroda)Rs 10 croreRs 9 crore
14Standard Chartered BankRs 3,557 croreRs 60.71 crore
15Bank of BarodaRs 5 croreRs 4.6 crore
16PNBRs 2,936 croreRs 2,701 crore
17Deutsche Bank AGRs 2,829 croreRs 2,603 crore
18ICICI BankRs 2,294 croreRs 2,110 crore
19Union Bank of IndiaRs 2,122 croreRs 1,952 crore
20Bank of IndiaRs 1,985 croreRs 1,826 crore
21Corporation BankRs 1,566 croreRs 1,441 crore
22Syndicate BankRs 967 croreRs 890 crore
23UCO BankRs 582 croreRs 535 crore
24EXIM BankRs 556 croreRs 511 crore
25Central BankRs 510 croreRs 469 crore
26Allahabad BankRs 320 croreRs 294 crore
27SREI Indra FinanceRs 175 croreRs 161 crore

** Banks will collectively have to set aside Rs 1,000 crore in total from the above CoC approved distribution amount for operational creditors

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While ArcelorMittal had kept the entire Rs 42,000 crore amount to be repaid in an escrow account, it did not immediately release it to the lenders after the November 15 Supreme Court order. This is because the European steel-maker had sought immunity for the Essar Steel asset from any ongoing cases against its promoters, the Ruias, and wanted to avoid the situation Jindals had found themselves in after the Bhushan Power takeover, a person familiar with the matter told CNBC-TV18. 

However, the recent amendment to the Insolvency & Bankruptcy Code that ring-fences the successful bidders of stressed assets from any criminal proceedings against offences committed by previous management/promoters gave ArcelorMittal the confidence to go ahead with the transaction, added the person quoted above.

As per the creditors committee approved plan which was upheld by the Supreme Court in its November 15 ruling, SBI will receive the largest chunk at Rs 12,161 crore, IDBI Bank Rs 2,282 crore, Canara Bank Rs 3,493 crore, ICICI Bank Rs 2,110 crore, Union Bank of India Rs 1,952 crore and Bank of India Rs 1,826 crore, said people familiar with the matter. Lenders, however, will set aside a total of Rs 1,000 crore additionally from their kitty for the operational creditors, as agreed by them earlier this year.

In a related development, lenders have also issued a Letter of Intent to ArcelorMittal for Odisha Slurry Pipeline Infra Ltd (OSPIL), a critical asset for Essar Steel plant, which connects its iron ore beneficiation plant in Dabuna with its pellet plant in Paradip, one of the people quoted above-told CNBC-TV18.

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 Ahmedabad bench of the bankruptcy tribunal in June 2017.

Essar Steel was among the first list of the largest 12 stressed accounts that the Reserve Bank of India 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 sets of creditors would be treated differently in any insolvency proceeding. There is no principle 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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