World's largest steelmaker ArcelorMittal has transferred Rs 7,000 crore to SBI to clear bank dues of loan defaulter Uttam Galva Steels so that it becomes eligible to bid for acquisition of Essar Steel, a person with knowledge with the development said.
The move to park about Rs 7,000 crore in an escrow account of State Bank of India (SBI) follows ArcelorMittal's bid for Essar Steel coming in for questioning because of its past shareholding in loan defaulter firm, Uttam Galva Steel. The insolvency and bankruptcy rules bar a delinquent promoter from bidding for a company or asset that is being auctioned to recover bank dues.
The persons said the funds in escrow account could be used to pay off outstanding dues of Uttam Galva Steel as well as KSS Petron. When contacted, ArcelorMittal refused to comment on transferring of about Rs 7,000 crore but said: "Any offer to pay any outstanding loans of companies where we only had a passive stake with no management or governance role, would be made without prejudice to demonstrate the seriousness of our commitment to India and Essar Steel India (ESIL)."
"We continue to believe that a swift resolution is in the best interests of ESIL and its stakeholders, including its employees who deserve a strong and certain future," it said.
ArcelorMittal is locked in a direct fight with Russia's VTB Capital-backed NuMetal in the takeover battle of Essar Steel, which is being auctioned for defaulting on payment of Rs 49,000 crore bank loans.
NuMetal's bid had also come in for questioning as it was 25 per cent owned by Aurora Trust of Ruia familythe promoters of Essar Steel. However, later VTB Bank sought to severe ties with Ruia family by proposing to buy out Aurora Trust's stake in NuMetal.
A committee of Essar Steel lenders had on May 8 given the two bidders one week time to "cure their disability" by paying of dues of the defaulting companies of which they were shareholders or promoters.
ArcelorMittal parking the fund with SBI came as the deadline ended on Tuesday.