Essar Steel CoC may vote against higher payments to StanChart

MUMBAI: The committee of creditors (CoC) in the Essar Steel insolvency case is likely to vote against higher payments to Standard Chartered, but may partly increase the amount operational creditors get as part of the settlement offered by ArcelorMittal, said people with knowledge of the matter.

The CoC doesn’t want the plan changed as suggested by the National Company Law Appellate Tribunal (NCLAT) because this will eat into their own payouts. Lenders could file a caveat in the Supreme Court if the NCLAT doesn’t budge on its proposal, said the people cited above.

The CoC led by State Bank of India (SBI) is slated to meet on Friday to vote on whether operational creditors will get a bigger amount as proposed by the NCLAT. Also on the agenda is a vote on whether Standard Chartered will be given a share on a par with other lenders. “Operational creditors and what to do with Standard Chartered’s dues are two issues in front of the CoC. It is unlikely that lenders will agree to give more because the amount the NCLAT has asked is too much,” said one of the persons cited above. “We may have to file a review in Supreme Court if the NCLAT sticks to its suggestion.”

NCLAT HEARING ON APRIL 9
Four creditors with the largest exposure — SBI, IDBI Bank, ICICI Bank and Edelweiss ARC — have formed a core committee to take a decision on behalf of lenders.

According to the proposal submitted by AreclorMittal, financial creditors led by SBI will get 92% of their dues, which comes to around Rs 41,987 crore of a total Rs 49,395 crore. Operational creditors will get just 5% or Rs 214 crore against the outstanding Rs 4,976 crore.

Unlike the Indian banks, Standard Chartered Bank had not loaned funds to the parent company but its subsidiary and did not have first charge of its assets. It had voted against the CoC resolution, saying that it was discriminatory.

While approving ArcelorMittal’s Rs 42,000-crore resolution plan, the Ahmedabad bench of the National Company Law Tribunal had asked the CoC to consider revising its distribution to pay all financial creditors on a pro-rata basis and use 15% of the Rs 42,000-crore upfront payment to pay operational creditors with dues over Rs 1 crore. Distributing the amount on a pro rata basis would also give Standard Chartered a larger share than 1.7% or Rs 60 crore of its Rs 3,500 crore dues, which is what it would get under the current plan.

“15% of the Rs 42,000 crore is more than Rs 6,000 crore and if we include Standard Chartered also, our share will come down substantially. Not all are agreeing to this proposal,” said the person cited above.