The sale proceeds from Essar Steel are likely to flow back to the banks in the first quarter of the new financial year. The procedural delay has dashed the hope of banks to report a good fourth quarter with the help of the sale proceeds.
The committee of creditors (CoC), which met on Saturday, unanimously voted for paying the operational creditors Rs 1,000 crore while not revising the payout to Standard Chartered Bank (SCB).
"Essar Steel gave a guarantee to a loan that SCB gave its Mauritius-based subsidiary, Essar Steel Offshore Ltd. Essar Steel was not a direct debtor nor it did offer any collateral but had defaulted on its guarantee. The company never took a no objection certificate from lenders, so why should we make the sacrifice at this juncture. SCB loan is not connected to Essar Steel," said a banker who is part of the CoC.
"The financial creditors are also getting paid by Essar Steel which is a going concern. In these twenty months that the NCLT case is dragging the operational creditors have been paid their current dues by the company," said a banker.
While National Company Law Tribunal (NCLT) approved a resolution plan that will see an upfront payment of Rs 42,000 crore and Rs 8,000 crore in phases, operational creditors and SCB are fighting for their dues which is delaying the settlement.
Earlier, SCB had moved the National Company Law Appellate Tribunal (NCLAT) against the plan as its counsel contended that the bank was being given only 1.7 % of its total dues to Essar Steel while other financial creditors, forming part of the CoC, were getting over 85% of their dues. The NCLAT said all the operational creditors below Rs 1 crore along with the employees of Essar Steel should get 100% of the dues. Only 90% of Rs 42,000 crore should be allowed to financial creditors.
The 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.
"The NCLT only gave an advisory and it was not a binding order on payments," said another banker who is also part of the 26 member lenders' consortium. "It is only fair that banks which gave the loan get back their money," he added
ArcelorMittal's resolution proposal involves financial creditors getting upfront money of Rs 41,987 crore out of their total dues of Rs 49,395 crore. Operational creditors, under the plan, would get just Rs 214 crore against the outstanding of Rs 4,976 crore.
After the creditors voted overwhelmingly in favour of ArcelorMittal who offered Rs 42,000 crore upfront payment and Rs 8,000 crore of staggered capital infusion, Essar Steel Asia Holding Ltd, the promoter firm of Essar Steel, sprung a surprise in October 2018 by proposing to pay Rs 54,389 crore to clear all the dues of the financial and operational creditors in a last-ditch effort by the Ruias to regain the ownership of their flagship company.
The proposal of the Ruias was sent on a day when the CoC of Essar Steel concluded its e-voting with more than 90% of the votes been cast in favour of ArcelorMittal's bid, which was the only eligible bid. However, the court later rejected Ruia's bid.
DELAYED PAYMENT
The Rs 42,000 crore amount that ArcelorMittal-Nippon consortium has agreed to pay will come only in the first quarter of the new fiscal 2019-20
The Committee of Creditors, which met on Saturday, unanimously voted for paying the operational creditors Rs 1,000 crore while not revising the payout to Standard Chartered Bank (SCB)
Source: DNA