Lakshmi Mittal-owned ArcelorMittal, along with partner Nippon Steel and Sumitomo Metal Corp, is set to gain control of Essar Steel with the Committee of Creditors, after prolonged deliberations, approving their Rs 50,000 crore resolution plan.
The plan, which garnered 95% of the votes of the CoC members, includes an upfront payment of Rs 42,000 crore towards Essar Steel resolution debt plus Rs 8,000 crore of capital to be injected into the company to support operational improvement, increase production levels and improve profitability, ArcelorMittal said in a statement.
"In line with Essar Steel's insolvency process, the resolution plan must now be formally accepted by National Company Law Tribunal before completion, which is expected before the end of 2018," it said.
ArcelorMittal will jointly own and operate the company in partnership with Nippon Steel & Sumitomo Metal Corp, in line with the joint venture agreement signed with Japan's largest steelmaker earlier in March.
"ArcelorMittal and NSSMC expect to finance the joint venture through a combination of one-third partnership equity and two-thirds debt and ArcelorMittal anticipates its investment in the joint venture will be equity accounted," the release said.
"India is one of the most promising markets in the world with significant growth potential in the medium- and long-term and where domestically produced steel products have a superior position," the Japanese firm said.
The development comes a day after Essar's erstwhile promoters, the Ruias offered to take back ownership by paying Rs 54,389 crore to creditors of all classes, financial as well as operational and taking the company out of the insolvency process.
"The CoC is empowered to consider and approve this settlement plan with the requisite voting share, on the basis of which the corporate insolvency resolution process may be withdrawn," said Prashant Ruia on Thursday.
Essar group claimed that while ArcelorMittal's plan takes care of only secured creditors, the promoters claimed they are ready to pay up the entire dues leading to maximum recovery for the lenders and other creditors as well.
With the lenders finally approving the ArcelorMittal deal, the fate of Ruia's offer now appears doomed although the Essar group might explore other avenues including legal steps.
WHY ESSAR?
- Essar steel is indeed the best opportunity for Mittal to plant his foot in India.
- He had earlier had a frustrating experience with red tape and policy paralysis when he tried to set up greenfield projects in India.
- Since 2005, ArcelorMittal has been in vain trying to set up greenfield capacities, first in Jharkhand, then Orissa and then in Karnataka.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Lakshmi Mittal")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}