The Miglani family, promoters of Uttam Galva Steels (UGSL), has agreed to repay the 100 per cent dues of the company and its subsidiaries to lenders, thus saving it from going under the hammer in the National Company Law Tribunal under the Insolvency and Bankruptcy Code. The tribunal will hear the offer made by the Miglani family on Wednesday.
UGSL owes Rs 62 billion to 18 banks and has been facing insolvency and bankruptcy proceedings at the NCLT, Mumbai, since last year. However, the firm is not admitted under the Corporate Insolvency Resolution Process yet.
In April, promoters of UGSL had offered lenders a one-time-settlement amount of Rs 28.85 billion, but State Bank of India rejected the offer, stating that it would only agree to an out-of-court settlement if 100 per cent of the default amount was paid. “We would fight against everyone to gain control over the company,” said a source close to the Miglani family. The offer will help the Miglani family to gain control of the company as they had bought back co-promoter ArcelorMittal’s 29 per cent stake in the company for Rs 1 per share in February.
ArcelorMittal, co-promoter of UGSL, had sold its shares in Uttam Galva so as to become eligible to bid for much bigger rival – Essar Steel. But its offer for Essar Steel was rejected by the resolution professional as it owned stake in two bank defaulters in India. While ArcelorMittal held a direct stake in Uttam Galva, ArcelorMittal’s promoter, LN Mittal, personally held a 33 per cent stake in KSS of Kazakhstan. KSS, in turn, held a 33 per cent stake in KSS Petron in India, which is also facing bankruptcy proceedings.
The Miglani offer could also upset ArcelorMittal’s plan to acquire Essar Steel, as the former had made a conditional offer that it would repay UGSL’s dues only if it was announced the winning bidder for Essar Steel. Lenders said post Miglani offer, Mittal’s conditional offer becomes redundant — unless ArcelorMittal joins Miglanis in repaying UGSL dues. “The banks are not enthused at any conditional offer and would prefer to open a second round of bids for Essar Steel in which they are offered Rs 370 billion upfront cash by Numetal,” said a lender.
ArcelorMittal had placed Rs 70 billion in an escrow account of State Bank of India, to repay dues of UGSL and KSS Petron. But the Miglani family has publicly stated it is not aware of any attempt by the UK-based steel maker to repay UGSL’s debt. At the same time, KSS Petron is also under the IRP process and lenders are expecting offers by June-end from prospective buyers. The RP of KSS Petron, said he was not aware of any offer by ArcelorMittal to repay KSS Petron’s debt.
The Essar Steel’s matter is pending with the National Company Law Appellate Tribunal, which will hear the petitions filed by Numetal and ArcelorMittal on July 2. Both bidders were earlier deemed ineligible by the committee of creditors of Essar Steel, owing to both companies violating Section 29 A of the IBC.
