Mumbai: India’s dedicated bankruptcy court Thursday approved a resolution plan for Uttam Galva Metallics and Uttam Value Steels, paving the way for their lenders to get back about Rs 2,700 crore – or nearly 37 per cent of the total claims.
Bids were submitted by US-based CarVal Investors and Nithiya Capital Resources Advisors. The resolution plans involve settlement to financial creditors of Uttam Value Steels with a total upfront and contingent payment of Rs 1,078 crore and Rs 1,576 crore for Uttam Metallics.
“The resolution plans filed against the respective companies by the resolution applicants Carval Investors LLP, New York and Nithiya Capital Resources Advisors LLP…being approved by the respective CoC’s with requisite majority i.e. with 88.9 per cent votes read the order by the National Company Law Tribunal (NCLT).
Lenders to Uttam Galva
NSE -1.17 % Metallics had submitted claims worth Rs 4,263 crore, of which Rs 4,176 crore was admitted by the resolution professional. A total claim of Rs 3,014 crore was admitted against Uttam Value Steels.
The case had been pending in the court for more than a year, while in May 2019 CarVal inched closer to acquiring the distressed companies of Uttam Galva after it paid a performance bank guarantee of Rs 500 crore.
Earlier, State Bank of India too had said that SSG did not submit satisfactory bids and was only being disruptive at this stage by submitting an improved bid after the announcement of CarVal as the sole shortlisted bidder.
The bench on Thursday dismissed the resolution plan submitted by SSG Capital.
Operational creditors, Noble Resources and Jatia Group had objected to the plan by CarVal for accepting 99 per cent haircut it proposed.
“It cannot be seen whether Operational Creditors are receiving money equivalent to the money Financial Creditors getting because operational creditors as a class cannot equate themselves with the financial creditors and ask for more than what they are entitled,” the principal bench comprising, BSV Prakash Kumar said.
A consortium of lenders, led by the State Bank of India, had initiated insolvency proceedings against the two distressed entities of Uttam Galva Steels after the company was categorised under Reserve Bank of India’s second list of loan defaulters and had been directed to come up with immediate corrective action.
MUMBAI: Within days of CarVal Investors securing the support of lenders to Uttam Value and Uttam Galva Metallics, it has been learnt that the bankers to the distressed steel companies had ignored a higher bid from a consortium led by SSG Capital.
The higher offer of Rs 3,300 crore made by SSG Capital Management and Synergy Metals and Mining Fund contained an upfront payment of Rs 1,000 crore against Rs 625 crore offered by CarVal, said two persons in the know. Additionally, the consortium was putting in Rs 250 crore for the operational improvement of the assets against Rs 100 crore committed by Car-Val. It also had a shorter repayment period of 3.5 years against 5 years put down by the winning bidder.
“It throws up an important question — why a higher offer wasn’t chosen by the banks?” wondered one of the persons.
ET had reported last week that CarVal was voted as the successful bidder on April 21 based on the Rs 2,541-crore offer it made along with Nithia Capital Resources, a UK-based metal investment and advisory firm led by Jai Saraf, former Mittal Steel finance director (now ArcelorMittal).
Nithia, a mere £1,000 company in terms of assets, had also named Johannes Sittard (another former ArcelorMittal executive) as part of the management team in the resolution plan that ET has .. reviewed, though he had resigned from the company last year. Sittard could not be reached for comments.
The offer is being executed through a trust set up by Asset Reconstruction Company of India (Arcil) and will cause the banks to take a 60% haircut.
SSG Capital had sweetened its earlier offer of Rs 1,000 crore to Rs 3,300 crore on April 15, but the lenders, primarily State Bank of India that has the maximum exposure to the assets, chose to keep it aside, the persons said
A source close to the companies said that with the extension of the 270 days getting over on April 22, the banks did not want to begin the review of another plan that would have taken more time, risking liquidation in case the court refused any further extension.
Resolution professional Rajiv Chakraborty had presented both the plans as compliant for the banks to consider. Bank of Baroda, including Dena Bank and Vijaya Bank, had abstained from voting on the resolution plan.
On May 6th of 2020, a monitoring agency was formed, in which successful resolution applicants Nithia and CarVal along with two members from the bank and one independent member were made responsible for operating the plants.
“We are making full efforts to close the transaction by the end of this month. Once we close the transaction, our new team will go in,” Jai Saraf, founder of Nithia Capital, said in an interaction with ET. “We have identified senior management personnel and they are ready to go in.”
MUMBAI: Fresh bids are being invited for Uttam Value Steels and Uttam Galva Metallics, after the lenders to the two companies rejected offers from SSG Capital Management and New Zone Intertrade FZE terming them “unsatisfactory”, two people in the know said.
The official appointed by the bankruptcy court to resolve their debt issues has invited fresh expressions of interest (EoI) for the companies that together owe Rs 5,500 crore to a consortium of lenders. The deadline for submitting new EoIs is March 1.
Earlier, a consortium led by SSG Capital Management had offered an upfront payment of Rs 427 crore and another Rs 427 crore over a period of five years for the assets, one of the people said. This offer — at just over the liquidation value of Rs 750 crore set by Duff & Phelps — would have required the lenders to let go of more than 80% of the loans outstanding if they had accepted it.
The offer from the other bidder, a consortium led by New Zone Intertrade FZE, could not be ascertained. The bid was rejected because it was not accompanied by a bank guarantee, the people said.
The twin assets include a 1-million-tonne hot-rolled production capacity of Uttam Value Steels at Wardha in Maharashtra for which it purchases pig iron from Uttam Galva Metallics.
Aperson close to the companies said once acquired, the plants could be brought to their full capacity utilisation within six months. The reason for the lukewarm response during the bidding process could be a fall in operating margins in steel production over last year due to strong iron ore prices, he said Both companies had initially received interest from a number of strategic as well as financial players.