ArcelorMittal's wait to buy Essar Steel, and enter the domestic steel industry, just got longer.
More than a month after the bankruptcy tribunal approved ArcelorMittal's $6 billion bid for Essar Steel, the Supreme Court has stopped the global alloy major from making a payment to lenders to buy the debt-ridden firm, going by a Bloomberg report.
The apex court ruling comes as a response to the pleas of banks in a bankruptcy appeals tribunal, which are battling over the distribution of the proceeds that will come from the sale of the company.
The apex court has directed the bankruptcy appeals tribunal to expeditiously decide on the pleas.
This order is one of the many hurdles that has delayed ArcelorMittal’s plans to purchase the steel manufacturer, which can produce 10 million tonnes of the alloy yearly, and mark its entry into the domestic steel industry.
The purchase will make Arcelor the fourth-biggest player in a nation where it plans to invest trillions of rupees in infrastructure.
While approving ArcelorMittal's bankruptcy resolution plan, the bankruptcy tribunal had suggested a 85:15 distribution between the financial and operational creditors on a pro-rata basis against the 90:10 distribution proposed in the plan approved by the Committee of Creditors (CoC) last year.
Four lenders with the largest exposure, namely Edelweiss ARC, State Bank of India, IDBI Bank and ICICI Bank, are part of the CoC. Standard Chartered, the third-largest secured financial creditor of Essar Steel, is opposing the resolution plan approved by the CoC, contending that it is favours secured creditors.
Going by ArcelorMittal's resolution proposal, operational creditors would get just Rs 214 crore against outstanding dues of Rs 4,976 crore, while financial creditor Standard Chartered will only get Rs 60 crore against its claims of Rs 3,187 crore.
The resolution plan for Essar Steel has been tied up in legal disputes for almost two years and has crossed the mandated 270-day period under the Insolvency and Bankruptcy Code.
Essar Steel was among the top 12 cases in the first list identified by the Reserve Bank of India to be resolved under the Insolvency and Bankruptcy Code.