30 March 2019: Lenders to Essar Steel have decided to move the Supreme Court in the event the National Company Law Appellate Tribunal pressures them to pay unsecured financial creditors more than they are inclined to. “It is unfair that CoC (committee of creditors) be repeatedly asked to reconsider commercial decisions which we have taken with all stakeholders’ interest in mind and which, most importantly, has already been approved by the tribunal,” a banker with a state-owned lender said. Banks could approach SC before April 9 with a plea that proceedings in the Essar Steel case be expedited.
The NCLAT has directed lenders to consider a higher payout to unsecured financial creditor Standard Chartered. As of now, the foreign bank is set to receive only Rs 60.71 crore or 1.7% of the admitted claims under the approved ArcelorMittal resolution plan.
Lenders will vote on Saturday on whether to set aside of Rs 1,000 crore from their receipts for operational creditors. Most lenders are understood to be in favour of this move by which the amount will be distributed pro rata to operational creditors on basis of their admitted claims, bankers aware of the development told FE.
The results of the 24-hour electronic voting will be known by Saturday and subsequently presented to the NCLAT.
“Operational creditors’ accepted claims stand at around Rs 5,000 crore and for them the CoC is likely considering setting aside Rs 1,000 crore,” a senior banker said.
When stakeholders were initially invited to submit claims, Standard Chartered had lodged its claim for Rs 3,487.09 crore. The lender was later classified as a secured financial creditor with Rs 2,646.05 crore as principal outstanding. However, the value of `60.71 crore was arrived at based on the value of the security possessed by the applicant and the liquidation value of the assets of the company.
According to the ArcelorMittal resolution plan approved by the National Company Law Tribunal, operational creditors (OCs) and other stakeholders, having a debt value of Rs 1 crore and above, on the basis of their admitted claims, would receive nil amount. There is a provision of Rs 196 crore for those OCs whose outstandings is less than Rs 1 crore.
The plan envisages an upfront payment of Rs 42,000 crore to secured financial creditors. Moreover, unsecured financial creditors are to be paid Rs 17.4 crore while Rs 30.5 lakh is to be paid upfront to unsecured FCs whose admitted claims are less than Rs 10 lakh.
On March 20, the appellate tribunal directed Essar Steel’s resolution professional to call for a fresh bankers’ meet to reconsider distribution of the Rs 42,000-crore upfront payment, under the ArcelorMittal resolution plan, between financial and operational creditors. The NCLAT was hearing an urgent application moved by Standard Charted Bank and is next scheduled to hear the matter on April 9.
The appellate tribunal also reportedly said that the March 8 order of the Ahmedabad-based NCLT bench approving ArcelorMittal plan should be implemented in “letters and spirit”. According to the Ahmedabad bench’s March 8 written order, the two-member bench proposed and advised that of the Rs 42,000 crore to be received from ArcelorMittal as upfront payment to financial creditors, the CoC could allot 85% for distribution on a pro rata basis among all financial creditors, which could address Standard Chartered’s concerns.
The NCLT further suggested that another 15%, amounting to Rs 6,300 crore be distributed among other OCs and other stakeholders, who are going to receive nil amount, i.e. those OCs whose outstandings are more than Rs 1 crore and more so they recover at least 50% of their principal dues.