It is close to 600 days and still counting.

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The inordinate delay in the bankruptcy courts is making it difficult for banks to sell loans extended to Essar Steel. Most of the 17 banks in the consortium are willing to sell off their exposure, but the bidders who once saw some prospects are shying away from buying it. Bankers say the delays are causing uncertainty over the recovery of money.

Last month two banks, Bank of India and Central Bank of India had put their exposures of Rs 1,978 crore and Rs 423 crore, respectively, on sale, but were not able to conclude a deal.

The resolution process, which started from NCLT Ahmedabad and was heard in the Supreme Court twice, is now with the National Company Law Appellate Tribunal (NCLAT). The tribunal is still deciding the distribution of the funds. On April 23, NCLAT requested the banks to offer a better deal to the operational creditors.

"The vendors and the oil companies, which are contesting their claims, have been getting regular payment from the company, which is a going concern, but the bankers' money is stuck without any interest," said a banker, who has also put his loans on sale.

"We were close to concluding the deal with a bidder, but then the issue of payment to the operational creditors cropped up and the bidder walked away," the banker said.

Even State Bank of India (SBI), the lead lender, had put its Rs 15,400 crore of loans on sale in January 2019 despite being the leader of the consortium, but subsequently the bank withdrew the sale.

ArcelorMittal and Sumitomo Corporation of Japan consortium had offered to pay of Rs 42,000 crore and Rs 8,000 crore of equity infusion over an eight-year period, against an admitted claim of Rs 49,350 crore and, This was approved by the committee of creditors (CoC) on October 25, 2018. However, the deal was challenged by the operation creditors and also Standard Chartered, which jumped into the fray to extract their dues. Essar Steel had defaulted on its guarantee for Standard Chartered's loan to its Mauritius-based subsidiary Essar Steel Offshore worth Rs 3,700 crore. The operational creditors are getting Rs 214 crore against their dues of Rs 4,976 crore. Later, the CoC decided to allocate an additional Rs 1,000 crore to operational creditors after NCLT and NCLAT requested to rework on the distribution of funds.

"It is over 600 days since the case was first referred to NCLT. The company featured in the first list of stressed loans that RBI had mandated banks to find a resolution or change the management," said a banker who was unsuccessful in selling his loans to the steel company.

NCLT Ahmedabad has suggested an 85:15 distribution between the financial and operational creditors against the 90:10 distribution between them as proposed in the resolution plan. Creditors told the court that allocation of the funds was being done on the basis of the security held in Essar Steel. As a result, almost all the other members of the CoC held a direct share in Essar Steel's assets worth Rs 45,000 crore. As against this, Standard Chartered's value of security came to around Rs 24 crore in the form of shares pledged by Essar Steel as a guarantee to the bank's loan in its subsidiary Essar Mauritius Offshore, the CoC had told the NCLT bench at Ahmedabad, where the case was first admitted.

IN LIMBO

On the block

  • Rs 1,978 crore – Bank of India put loan on sale  
  • Rs 423 crore – worth Central Bank of India loan on block  
  • Rs 15,400 crore – loans SBI had put on sale, but withdrew it later

The deal

  • Rs 42,000 crore – ArcelorMittal and Sumitomo Corporation of Japan consortium had offered to pay for Essar Steel  
  • Rs 8,000 crore – infusion it plans over eight-year period  
  • Rs 49350 crore – admitted dues of Essar Steel

Operational creditors

  • Rs 214 crore – Operational creditors are getting against their dues of Rs 4,976 crore  
  • Rs 1,000 crore – CoC decided to allocate to operational creditors on request of NCLT