Essar assets headed to ArcelorMittal

Steelmaker says Essar’s creditors have accepted its bid.

Luxembourg-based steelmaker ArcelorMittal has announced the committee of creditors overseeing Essar Steel India Ltd. (ESIL) has voted to approve its acquisition of ESIL. The committee has issued a Letter of Intent (LOI) stating ArcelorMittal has been identified as the “successful applicant,” according to an Oct. 26 ArcelorMittal news release.

A plan agreed to by both parties includes an upfront payment of $5.7 billion towards ESIL’s debt, with a further $1.1 billion of capital injection into ESIL “to support operational improvement, increase production levels and deliver enhanced levels of profitability,” according to ArcelorMittal.

ESIL is an integrated flat steel producer capable of about 6.5 million metric tons of output, all in western India. The company also has iron ore pellet facilities in eastern India, with current annual capacity of 14 million metric tons per year.

ArcelorMittal says its intention is to increase ESIL’s finished steel shipments to 8.5 million metric tons per year after completing “ongoing capital expenditure projects and infusing expertise and best practice to deliver efficiency gains, and then through the commissioning of additional assets, while simultaneously improving product quality and grades to realize better margins,” says the steelmaker.

A longer term goal to increase finished steel shipments to between 12 and 15 million metric tons per year would involve the addition of new iron and steelmaking assets.

To complete the acquisition, ArcelorMittal’s resolution plan will have to be formally accepted by India’s National Company Law Tribunal. That approval is expected before the end of 2018, says ArcelorMittal.

After completion, ArcelorMittal will jointly own and operate ESIL in partnership with Japan-based Nippon Steel & Sumitomo Metal Corp. (NSSMC), in-line with a joint venture formation agreement signed with NSSMC in March 2018. ArcelorMittal and NSSMC expect to finance the joint venture through a combination of partnership equity (one-third) and debt (two-thirds).

Get curated news on YOUR industry.

Enter your email to receive our newsletters.

Loading...