Amendment in IBC may trouble ArcelorMittal's bid for steel firms - Report
Published on Tue, 28 Nov 2017
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Business Standard reported that amendments to the Insolvency and Bankruptcy Code have not only practically debarred promoters from reacquiring their own assets but have also put the world’s largest steelmaker ArcelorMittal’s prospective bid for stressed steel assets Bhushan Steel, Bhushan Power & Steel, and Essar Steel in trouble. According to a new Section 29A of the IBC, a person shall not be eligible to submit a resolution plan if such person, or any other person acting jointly with such person, or any person who is a promoter or in the management control of such person, is an undischarged insolvent. This prohibits promoters or sister concerns of companies with non-performing assets of more than a year from bidding for these companies.
In 2009, ArcelorMittal had picked up a stake in Uttam Galva Steels. According to the shareholding pattern filed with the BSE, ArcelorMittal Netherlands BV, which is classified as a promoter group company of Uttam Galva Steels, holds a 29.05% stake in it. However, ArcelorMittal doesn’t have any board or management representation in the company and is a passive shareholder, said sources.
The glitch is that last September, Uttam Galva Steels was classified as an NPA, which means that it’s been more than a year since the account became an NPA. That may raise questions on ArcelorMittal’s eligibility to submit a resolution proposal for the stressed steel assets.
Sources close to the development said Uttam Galva Steels was in the Reserve Bank of India’s second list of NPAs. A restructuring proposal was in the works, and rating agencies ICRA and Crisil had been appointed to vet the proposal. If a resolution is not worked out for Uttam Galva Steels by December 13, then it would head to the National Company Law Tribunal. However, sources indicated that if it was restructured by December 13, then there was a possibility that ArcelorMittal might be able to submit a resolution proposal for the steel assets. A company becomes a standard asset if interest due is paid, some experts said. Other experts said that since ArcelorMittal was a AAA rated company, one could interpret the code in a different manner. They said that “Just because the company is associated with an NPA, their creditworthiness does not get affected.”
Source : Business Standard