16 March 2019: Bankers are likely to consider a suggestion by the National Company Law Appellate Tribunal to increase the share of operational creditors in the proceeds from ArcelorMittal’s resolution plan for Essar Steel.
The committee of creditors (CoC) is likely to meet over the weekend to discuss their next course of action.
The decision will be placed before the court in the next hearing on Monday.
“The comments of the judge which we have seen on the TV seem to suggest that operational creditors should get 10% of the total amount received from ArcelorMittal from the 5% suggested by us. We will have to consider it. But it is unlikely that we will agree.
The only hitch is that banks would like the money to come before the month-end and they may be under pressure to close it soon even if it is at a slightly lower value,” said a banker with knowledge of the CoC’s deliberations.
According to the proposal submitted by ArcelorMittal, financial creditors led by State Bank of India will get 92% of their dues which comes to around Rs 41,987 crore.
Operational creditors, under the plan, would have got just about 5%, or Rs 214 crore, against the outstanding dues of Rs 4,976 crore.
The two-judge bench of NCLAT has asked the CoC to consider giving operational creditors 10% of the total proceeds. If this suggestion is accepted, the total amount received by financial creditors would drop to Rs 37,800 crore.
The counsel representing the CoC opposed the proposal, saying they had approved the Arcelor-Mittal bid for Essar Steel based on the money they would be able to recover from the insolvency process.
The judge also favoured giving Standard Chartered more of the dues than what is proposed now, suggesting that a pro rata formula be applied for all financial creditors.
Such a decision would reduce the total amount that financial creditors will get to 85.6% of their dues from 92%.
Standard Chartered was to get just 1.7%, or Rs 60 crore of its Rs 3,500 crore dues, because unlike Indian banks, it had not lent to the parent company but its subsidiary and did not have first charge of its assets. The bench’s proposal is to ensure that all operational creditors with dues of below Rs 1 crore get 100% of their money.