1 April 2019: Majority of lenders to Essar Steel have voted in favour of giving Rs 1,000 crore more to operational creditors as part of the settlement offered by ArcelorMittal, but rejected Standard Chartered’s claims for a higher amount, which may further delay resolution in the 21 month-old insolvency case. Creditors now expect the UK-based lender to challenge the decision of the committee of creditors (CoC) in the Supreme Court.
“Some banks and foreign funds did not want to give more because it will set a wrong example after a resolution has been approved, but the majority wants things to move ahead,” an executive at one of the creditors told ET.
In the CoC vote on Saturday, some creditors like ICICI Bank and distressed funds from abroad opposed the decision to give more to operational creditors, saying it would create a wrong precedence and could lead to more demands from them.
Lenders had to put the proposal to vote after the National Company Law Appellate Tribunal (NCLAT) suggested they consider giving more to operational creditors and Standard Chartered.
NCLAT will hear the matter on April 8 and bankers expect that the matter is headed for the Supreme Court whatever the appellate court decides.
“StanChart will surely oppose this,” said the person cited above. “Then, there is also the chance that operational creditors would want more than what is offered now and will appeal. Whatever it is, only the Supreme Court will decide.”
So far, operational creditors were slated to recover less than 5% or Rs 214 crore out of their Rs 4,976 crore outstanding. That amount will now increase to around Rs 1,214 crore. As a result, the lenders’ recovery will drop by Rs 1,000 crore.
According to the proposal submitted by AreclorMittal, financial creditors led by SBI were to get 92% of their dues, which comes to around Rs 41,987 crore of the total Rs 49,395 crore.