6 February 2019: Contrary to its allegation, Standard Chartered Bank has not been discriminated and has been allotted its valid share in ArcelorMittal’s takeover bid for Essar Steel, the committee of creditors (CoC) to the stressed steelmaker told the Ahmedabad Bench of National Law Company Tribunal (NCLT) on Wednesday.
The CoC’s legal counsel told the two-member Ahmedabad Bench that Standard Chartered was actually getting two times its share.
The allocation among creditors has been made on the basis of value of security held by them with Essar Steel. As a result, almost all the other members of the CoC held a direct share in Essar Steel India’s assets worth Rs 45,000 crore. As against this, Standard Chartered’s value of security came to around Rs 24 crore in form of shares pledged by Essar Steel as a guarantee to the bank’s loan in its subsidiary Essar Mauritius Offshore, the CoC told NCLT.
Essar Steel had defaulted on its guarantee for Standard Chartered’s loan to its Mauritius-based subsidiary Essar Steel Offshore worth Rs 3,700 crore. “The fair value of Essar Steel shares in Essar Mauritius Offshore, which it has pledged with Standard Chartered is Rs 24 crore unlike other creditors who have a direct security worth Rs 45,000 crore in the former’s assets. SCB now wants to dip into the assets of Essar Steel, which belong to rest of the members of the Standard Chartered. We don’t have any objection of Standard Chartered being secured financial creditors but only to the extent of the value of their security which it cannot dip into others’ security,” the CoC told the NCLT.
“As against a security value of Rs 24 crore, Standard Chartered is getting over Rs 60 crore under the resolution plan,” the CoC’s counsel further stated. The CoC’s arguments came on the back of Standard Chartered’s submission made in the tribunal on Tuesday to be treated equally with other members of the CoC.
The L N Mittal-led ArcelorMittal’s resolution plan worth Rs 42,000 crore to takeover Essar Steel has been approved by the CoC with a 92 per cent vote and has been placed in the NCLT, with Standard Chartered and operational creditors (OCs) challenging the same.
On Wednesday, the CoC also responded to Standard Chartered’s other argument of CoC arbitrarily deciding upon the allocation of the amount to be paid by ArcelorMittal as part of its takeover bid of Essar Steel. It told the tribunal that there was no provision in the Insolvency and Bankruptcy Code (IBC) on who gets the decisive powers over allocation under the resolution plan.
Further, the CoC also countered Standard Chartered’s claims that creditors’ dues in terms of upfront cash payments were reduced from Rs 42,000 crore to Rs 39,500 crore by ArcelorMittal through “secret negotiations”.
The CoC told NCLT that ArcelorMittal was instead committed to pay Rs 42,000 crore. Also, the company was committed to pay working capital adjustments to the tune of Rs 2,500 crore or more based on an independent accounting firm’s audit at the time of closing of the deal.
In addition, any earnings before interest, tax, depreciation, and amortization earned by Essar Steel till the time of acquisition would also be paid to the creditors by ArcelorMittal if its plan is approved, the CoC told the tribunal.