Salient features of resolution plan submitted by ArcelorMittal for Uttam Galva Steels

The National Company Law Tribunal (NCLT) recently approved the resolution plan submitted by ArecelorMittal group for Uttam Galva Steels under the Corporate Insolvency Resolution Process.

The salient features of the resolution plan are given below. The resolution plan contemplates a total resolution amount of INR 4020 crores (Total Cash Payment) bifurcated as follows:

The resolution plan will be valid from the date of submission of the Resolution Plan until the Effective Date. The Total Cash Payment will be made within 60 days from the date on which the resolution plan is approved by the Adjudicating Authority. Identification of cause of default and projected business plan

The Plan identifies the possible causes of default and sets out a detailed business plan for turning around the Corporate Debtor in Section V of the Resolution Plan. The resolution applicant — ArcelorMittal group — proposes to work on a sustainable business model, which focuses on productivity improvement and higher capacity utilization, resulting in higher market share. The key areas of the business plan include, inter alia, infusion of working capital, sourcing of HRC and key consumables, customer development and re-entry in the market, new product development, and asset reconditioning and debottlenecking.

Further, in compliance with the Code, the resolution plan contemplates that the financial creditors who do not vote in favor of the resolution plan shall be paid an amount equivalent to the amount that would have been payable to such class of creditors under section 53(1) of the Code.

The Resolution Applicant proposes to pay an amount of Rs 228 crores to Operational Creditors in the following manner:

• pay 100% (One hundred percent) of Admitted Claims (as defined in the Resolution Plan) of the workmen.;
• pay 100% (One hundred percent) of Admitted Claims of the Operational Creditors who have an Admitted Claim amount of less than or equal to INR 1 crore (excluding any workmen covered under (i) above and any Operational Creditors covered under (iii) below); and (iii) following the payments contemplated in (i) and (ii) above, the remaining amount shall be paid to other Operational Creditors who have Admitted Claims of more than INR 1 crore in proportion to their Admitted Claim amounts.

The Resolution Plan also provides that the amount payable to Operational Creditors shall not be less than the amount payable to the Operational Creditors (as per their class) in the event of liquidation under section 53 of the Code, or the amount that would have been paid to such Operational Creditor, if the amount under the Resolution Plan had been distributed in accordance with priority under section 53(1) of the Code (whichever is higher).

The Insolvency Resolution Process Costs (as quantified, to the extent possible, and approved by the CoC) and Standstill Period Costs (as quantified, to the extent possible, and approved by the Monitoring Agency) shall be funded from the internal accruals and cashflows in priority over other debts of the Corporate Debtor.  If the internal accruals or cashflows of the Corporate Debtor are insufficient to meet the Insolvency Resolution Process Costs and/or the Standstill Period Costs, such costs shall be paid by the Resolution Applicant up to an amount of INR 5 crores (subject to such Insolvency Resolution Process Costs and/or the Standstill Period Costs have being actually and validly incurred by the Corporate Debtor for goods and/or services actually utilized).

No payment is proposed to be made to the existing shareholders of the Corporate Debtor in light of the Capital Reduction more particularly detailed in the forthcoming paragraphs.

Other than the Stakeholders to whom payments have been proposed under the Resolution Plan, no other persons shall be made any payments.

Re-constitution of Share Capital of the Corporate Debtor

The existing paid up share capital of Uttam Galva Steels, whether as equity or preference share shall stand cancelled, extinguished and permanently discharged for ‘nil’ consideration (Capital Reduction). Further, any other equity linked securities convertible into or exchangeable with equity shares of the Uttam Galva Steels and all other Securities (as defined in the resolution plan) of the Corporate Debtor, if any, shall also stand cancelled and extinguished without any payment.

ArcelorMittal Group (along with its nominees (provided such nominee is eligible under section 29A of the Code to be a resolution applicant) shall hold 100% (One hundred per cent) of the share capital of the Corporate Debtor and acquire control of the Corporate Debtor. The Resolution Plan contemplates that the order of this Tribunal approving the Resolution Plan shall be deemed to have approved the Capital Reduction and shall not require any other procedure as required under the Companies Act, 2013 including under section 66 of the Companies Act, 2013 or regulations issued by the Securities and Exchange Board of India (SEBI), other than any corporate authorisations to be approved by the Monitoring Committee (which shall comprise of the representatives of the CoC and the Resolution Applicant) and filings required to be made with the Ministry of Corporate Affairs.

Further, the Resolution Plan provides that nothing in the SEBI (Delisting of Equity Shares) Regulations, 2009 (Delisting Regulations) shall be applicable to the delisting of equity shares of the Corporate Debtor and that SEBI and the relevant stock exchanges shall take all necessary actions to delist the Corporate Debtor with effect from the Effective Date.

Also Read: ArcelorMittal group gets NCLT nod to acquire Uttam Galva Steel