Arcelor, VTB hit snag pursuing $6 billion Indian steelmaker

Bloomberg

ArcelorMittal and Russia’s state-controlled VTB Group have hit a fresh snag in their pursuit of Essar Steel India Ltd., an insolvent producer that could fetch at least $6 billion.
Advisers evaluating the offers for Essar Steel are recommending that all the bids be disqualified, according to people with knowledge of the matter. A committee of Essar Steel lenders will meet later this week to discuss the eligibility of the proposals, the people said, asking not to be identified because the information is private.
Legal and accounting advisers expressed concerns to the interim resolution professional overseeing the sale about the eligibility of the offers from both ArcelorMittal and the VTB consortium, the people said. The advisers’ opinion is meant as a guide, and there’s no certainty the bids will be blocked, according to the people. Any final decision will involve the lenders’ committee and India’s National Company Law Tribunal, the people said.
ArcelorMittal, the world’s biggest producer of the alloy, submitted a higher offer than the VTB investor group, which is backed by the son of a billionaire founder of Essar Steel, the people said. There were only two bids for the steel company, which could fetch a valuation of at least $6 billion, people with knowledge of the matter said earlier.
Essar Steel was owned by billionaire brothers Shashi and Ravi Ruia before being brought under a new insolvency resolution process that was designed to clear out distressed companies through asset sales. The two advisers based their opinions on new Indian bankruptcy rules aimed at making it difficult for founders of firms with long-term non-performing loans from bidding for assets in insolvency proceedings.
ArcelorMittal was considered ineligible to bid because it held a stake in Uttam Galva Steels Ltd., which is classified as a delinquent borrower, when it made its offer for Essar Steel, the people said. A unit of ArcelorMittal transferred 29.1 percent stake in the Mumbai-based company to other Uttam Galva founders, according to an exchange filing earlier this month.
The VTB investor group was deemed ineligible because its backers include Rewant Ruia, the son of former Essar Steel owner Ravi Ruia, the people said.
The VTB consortium submitted a bid through a Mauritius-based investment vehicle called Numetal, in which the Russian financial group is the largest shareholder, people familiar with the matter said earlier.