The National Company Law Tribunal (NCLT) has admitted an insolvency case against the debt-ridden Uttam Galva Steels Ltd (UGSL) on Thursday after its financial creditor, State Bank of India, filed a petition against the company, one of the lawyers representing Uttam Galva Steel, said.
UGSL was among the companies in the Reserve Bank of India’s second list of loan defaulters and had been directed to come up with immediate corrective action.
At the beginning of April 2020, UGSL was reported for defaulting on more than Rs 600 crore owed to lenders, as the company said that it was impacted by the viral pandemic. UGSL also shut its plants and operations after the lockdown and said it has an outstanding of Rs 1,008 crore to its creditors. The company reported a net loss of Rs 160 crore during the June quarter.
State Bank of India, Deutsche Bank, Oriental Bank of Commerce, Indian Overseas Bank and Vijaya Bank are the lead lenders to the company. The lenders have proposed Ajay Joshi as the interim resolution professional (IRP) for the insolvency process.
Earlier in January, Deutsche Bank AG had moved an insolvency application against UGSL at the NCLT to recover dues against a $20 million credit facility entered by the company.
In 2018, SBI too had filed an insolvency petition against UGSL, however, the lender withdrew the application after ArcelorMittal, one of the former promoters of UGSL, paid more than Rs 6100 crore to the lenders. A large part of UGCL’s loans were taken over by ArcelorMittal to qualify as a bidder to acquire Essar Steel in 2018.
The loans were taken over by ArcelorMittal, which paid off Rs 4,922 crore to the secured financial lenders of UGSL including SBI, and later, the overdue principal paid was assigned to ArcelorMittal India.
Now, the NCLT will proceed with IRP, who takes over the management of the Uttam Galva. The Resolution Professional may then be continued or removed, contingent on the wishes of the Committee of Creditors (COC). As per the Indian Bankruptcy Code, the resolution should be completed within 180 days from the date of admission of the application, which is extendable by 90 days to a maximum of 270 days.
The company’s other two subsidiaries, Uttam Galva Metallics and Uttam Value Steel are already under a resolution process and a consortium led by CarVal Investors was supposed to finish the deal of acquiring the companies for Rs 2,600 crore.
Source: Economic Times