The Supreme Court temporarily put Arcelor-Mittal’s $6.1 billion purchase of Essar Steel India Ltd. on hold, after the mill’s lenders sought to annul a lower court ruling that split sale proceeds proportionately among all creditors.
The apex court on Monday admitted financial lenders’ appeal against a bankruptcy court ruling that put secured creditors like banks at par with operational creditors, or suppliers to the plants. It also said it would resolve issues arising from the Essar verdict expeditiously and fix an early date for hearing the case.
Financial creditors had said the bankruptcy court’s ruling to modify the distribution of proceeds would lead to higher lending rates and increased risk of capital. The ruling will also deter foreign investments into India’s soured debt, Hong Kong-based SC Lowy said.
India is trying to attract foreign capital to its bad loan cleanup, as it battles the worst nonperforming loan ratio among the world’s major economies.
ArcelorMittal has been fighting a legal battle for over a year to enter India, where Prime Minister Narendra Modi’s administration is investing trillions of rupees in infrastructure.
A lower court had earlier approved Arcelor and its partner Nippon Steel Corp.’s offer to pay Rs 42,000 crore in cash to creditors and pump in another Rs 8,000 crore in the country’s fourth-largest steel mill. The payment was halted by Supreme Court in April after a dispute between lenders on the distribution on funds.
Earlier this month, the NCLAT allowed Arcelor’s purchase of Essar Steel, while modifying the distribution of the proceeds. The ruling stated that financial lenders will get 60.7 per cent of their claims, and operational creditors around 60 per cent on a pro-rata basis.
