India’s Supreme Court has cleared the way for ArcelorMittal to complete its acquisition of bankrupt flat steelmaker Essar Steel.
The court set aside a July National Company Law Appellate Tribunal (NCLAT) ruling that Essar’s operational creditors have to be treated on a par with financial creditors when splitting the proceeds. Essar’s corporate insolvency resolution process (CIRP) was subsequently halted after lenders to the bankrupt steelmaker challenged this ruling in court (see Kallanish passim).
In its latest ruling the Supreme Court says it is up to Essar’s Committee of Creditors to decide how the proceeds are distributed. The court says: Essar’s CIRP “…will take place in accordance with the resolution plan of ArcelorMittal dated 23.10.2018, as amended and accepted by the Committee of Creditors on 27.03.2019, as it has provided for amounts to be paid to different classes of creditors.”
This brings to an end a more-than-year-long legal dispute that has prevented the completion of ArcelorMittal’s acquisition of Essar Steel, which was initially agreed to by the creditors committee in October 2018.
ArcelorMittal plans to operate Essar Steel in partnership with Nippon Steel. The world’s largest steelmaker said last week that, assuming a favourable Supreme Court ruling, it expects to close the transaction for Essar Steel by year-end.
ArcelorMittal and Nippon have said they intend to increase Essar’s finished steel shipments to 8.5 million tonnes/year over the medium term. Over the longer term the aim is to increase finished steel sales to 12m-15m t/y through the addition of new iron and steelmaking assets.
Essar currently produces 6.5m t/y of crude steel in western India and also has 14m t/y of iron ore pelletising capacity in eastern India.