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Day after Ruias' offer, Essar Steel creditors choose ArcelorMittal-led joint bid
Photo Credit: Reuters

Japan’s Nippon Steel & Sumitomo Metal Corp. and alloy giant ArcelorMittal said on Friday the lenders of Essar Steel India Ltd have approved their bankruptcy resolution plan through voting.
The plan comprises of an upfront payment of Rs 42,000 crore ($5.7 billion) towards debt, and a capital injection of Rs 8,000 crore ($1.1 billion).

Essar Steel is among the 12 large non-performing assets identified by the Reserve Bank of India last year in its first list under the Insolvency and Bankruptcy Code. The company, with a debt of over Rs 49,000 crore, was dragged into the bankruptcy tribunal last year.

Now, the bankruptcy resolution plan has to be approved by the tribunal and other authorities.

The deal, laid out by the plan, is expected to close before the end of 2018.

In March, ArcelorMittal and Nippon had entered into an agreement to jointly acquire and manage Essar Steel. The steel giants have been jointly managing three steel companies in the United States (US).

Nippon and ArcelorMittal’s announcement comes a day after Essar Steel shareholders, primarily the Ruia family, offered to pay Rs 54,389 crore ($7.4 billion) to creditors for bankruptcy resolution. The plan offered to retire all secured loans.

Apart from ArcelorMittal, London-based mining group Vedanta Resources and NuMetal, a company led by Russian lender VTB, were also in the race to acquire Essar Steel. The Ruia family was initially part of NuMetal but exited the consortium to be eligible to bid for Essar Steel.

On 4 October, the Supreme Court had directed ArcelorMittal and NuMetal to clear their dues classified as non-performing assets in related companies in order to become eligible for Essar Steel bidding.

On 17 October, ArcelorMittal said it had approved a payment of Rs 7,469 crore ($1 billion) to the creditors of Uttam Galva and KSS Petron in order to comply with the order and become eligible to bid for Essar Steel.

Essar Steel is one of several steelmakers that have been pushed into bankruptcy, leading to a churn in the Indian steel industry.

Essar Steel is producing 6.5 million tonnes of crude steel per year at its Hazira plant in Gujarat. The firm has iron-ore pellet facilities in Visakhapatnam and Paradip having total current capacity of 14 million tonnes per year.

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