MUMBAI (Reuters) - India’s bankruptcy court said on Tuesday creditors could reject a $7.5 billion offer from the owners of debt-stricken Essar Steel to settle the company’s debts, giving a boost to global steel giant ArcelorMittal’s bid to takeover the plant.
The settlement proposal presented to the consortium of lenders by the billionaire Ruia family was not “maintainable”, and it would not be illegal for the banks to reject the offer, the National Company Law Tribunal (NCLT) said, according to television news channels.
An appellate court had asked the NCLT to rule on Essar Steel - one of the biggest defaulters in India’s $150 billion mountain of bad loans - by Jan. 31.
Lawyers said, however, that the actual intent of the ruling could only be understood in its entirety after a copy of the order has been seen, and that based on procedures the Ruia family could potentially appeal the decision.
While any appeal could further draw out the protracted case, the ruling gives a shot in the arm to foreign investors, who had been getting impatient with India’s lengthy bad loan resolution process.
“We hope now for a swift resolution to this case,” ArcelorMittal said in a statement, adding the tribunal ruling was a positive development for India’s bankruptcy process.
The resolution process for Essar Steel has taken more than 500 days so far, well beyond the 270-day limit stipulated under India’s two-and-a-half year-old bankruptcy law.
The bid for Essar Steel’s assets has seen several back and forths in the tribunal courts since it was admitted into bankruptcy, with global and Indian steel majors and financial investors vying for the company.
In October, creditors of Essar Steel, which has a 10 million tonnes steel plant in western India, approved a 420 billion rupees ($5.9 billion) joint bid from ArcelorMittal and Japan’s Nippon & Sumitomo Metal Corp as the final offer for the debt-laden company.
However, Essar Steel made a higher offer of 543.89 billion rupees to creditors to settle their claims.
In a statement after the ruling Essar said its offer was “the most compelling proposal available to Essar Steel creditors”.
($1 = 71.1460 Indian rupees)
Reporting by Promit Mukherjee in Mumbai and Chandini Monnappa in Bengaluru; Editing by James Emmanuel and Mark Potter