AM/NS completed the transaction, which also involved the lead creditor State Bank of India (SBI), earlier this month, said one of the people cited above.
It took charge of the claims of banks after no other buyer came forward to place a competing bid in a Swiss challenge auction, these people said.
“Banks had claims attached to the personal guarantees issued by the Essar promoters which was linked to the Essar Steel resolution. AM/NS’ plan had made specific provisions to pay off these liabilities too, but there were some legal issues which are now resolved, allowing banks and AM/NS to complete this deal,” said a person familiar with the details.
Banks clear RBI stress test, but NPAs tick up in tough scenarios
An AM/NS spokesperson did not reply to an email seeking comment.
A consortium of banks led by SBI had invited bids for personal guarantees of Essar Group promoters Prashant and Ravi Ruia at a reserve price of Rs 200 crore for the Rs 13,751 crore of residual liabilities payable from the group after adjusting for the recovery from Essar Steel’s resolution plan completed in 2019, ET had reported in its May 26 edition.IBBI seeks to streamline real estate insolvency regulations with focus on homebuyers
The total amount of Rs 13,751 crore was calculated after taking into account the residual recoveries from Essar Steel including accumulated interest post the ArcelorMittal deal. Bankers had put these claims up for sale which also included corporate guarantees by companies like Essar Investments, Essar Steel Mauritius, Essar Steel Asia and Essar Steel Ltd along with personal guarantees from the Ruia family. An Essar spokesperson did not reply to an email seeking comment.
“Banks had put these up for sale under a process for ‘assignment of claims’ on an ‘as-is basis’ without recourse. AM/NS’s bid was accepted after a due process and checking the legal position. The debt has been assigned to AM/NS and money already received by banks,” said a second person aware of the details. Process advisor BoB Capital Markets did not reply to an email seeking comment.
AM/NS’ takeover of these dues were part of the company’s resolution plan for Essar Steel in 2019. Lenders led by SBI had recovered close to 90% of their more than Rs 49,000 crore dues from the company when the bankruptcy process was completed after a Supreme Court order in 2019.
Banks moved to recover the residual Rs 7,000 crore to Rs 9,000 crore from guarantees which compounded to Rs 13,751 crore with interest. Personal guarantees were brought under the bankruptcy purview in December 2019, allowing lenders to initiate recoveries against promoter guarantees separately while also pursuing corporate repossessions.