Lenders to debt-laden Essar Steel filed a petition in the Supreme Court on Friday to appeal against the bankruptcy tribunal’s order which said the secured and the unsecured creditors of the company should be treated at par. A supplementary petition will be filed in the court by Monday, sources said.
Bankers’ appeal in the apex court is against the order of the National Company Law Appellate Tribunal (NCLAT), which had given operational creditors to Essar Steel equal status as that of the lenders in the distribution of the ArcelorMittal’s bid amount.
Under the NCLAT order, lenders would have had to take a larger haircut than originally planned. The NCLAT had said that secured creditors would get only 60.7% of their Rs 49,473 crore claims while the rest would go to operational creditors, who were to be treated on par with the financial creditors. The committee of creditors (CoC) had decided that 90% would go to the financial creditors and 10% to the operational creditors.
The bankruptcy court also approved ArcelorMittal’s Rs 42,000 crore bid for the acquisition of Essar Steel after it rejected the Ruias’ (original promoters) plea to establish the eligibility of the bidder.
The grouse of the banks is that the unsecured lenders who lent money without creating any security and a higher rate of interest are now demanding their pound of flesh when all the while the secured creditors created security and lent at lower rates of interest. “Some of the unsecured lenders like Standard Chartered Bank are demanding higher payout. They are not direct lenders. Essar Steel has given a corporate guarantee for a loan that Standard Chartered extended to one of the steel company’s subsidiaries,” said a banker who is part of the consortium.
“NCLAT effectively reduces power of creditors. If there is no distinction between secured and unsecured creditors, then the rate of interest will go up for all loans,” said another banker.
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