Will Maharashtra Seamless Limited buy Adhunik Metaliks?

In the latest update on insolvency case of Adhunik Metaliks, the lenders of the company have sought permission from the National Company Law Tribunal (NCLT) to negotiate with the second highest bidder, Maharashtra Seamless Limited.

Citing default in payment by Liberty House Group of the UK, which was chosen as the successful resolution applicant by the committee of creditors (CoC) as well as the NCLT, lenders argued they should be allowed to find a new buyer for Adhunik.

The counsel representing the CoC for Adhunik read out a letter from Maharashtra Seamless, which said that it had cash reserves of INR 500 crore and was a zero-debt firm. Maharashtra Seamless's written offer for Adhunik was more than INR 400 crore whereas Liberty's offer for Adhunik was INR 410 crore.

The events so far

Earlier, in July'18 after Liberty House was chosen as the preferred bidder for Adhunik Metaliks, the former didn't make payment to the creditors within the stipulated time of Oct'18. A source close to Liberty House revealed that the company has purposefully not made payment to the creditors within the stipulated time as it wants a clean asset referring to the case pending at NCLAT (National Company Law Appellate Tribunal) between one of the creditors MSTC and Adhunik Metaliks.

MSTC was listed as an operational creditor having a claim of INR 108.36 crore to Adhunik. The PSU supplying iron ore, coal, and other raw materials to Adhunik objected to Liberty's resolution plan approved by the CoC. Liberty was paying INR 30 crore against a combined claim of INR 273.27 crore by the operational creditors. While clearing the plan, NCLT Kolkata rejected MSTC's application which then moved the appellate tribunal challenging the plan and NCLAT will hear the matter on 30 Jan'19.

However, later on in Nov'18, Liberty House once again offered to make payments in two installments by 15 Jan'19. In Dec'18, the lenders of Adhunik Metaliks rejected Liberty House's offer to pay the outstanding amount of INR 410 crore in two installments by 15 Jan'19. They had also turned down its condition that out of the total amount, it be allowed to deposit `100 crore -- claimed by operational creditor MSTC -- in an escrow account.

Now instead of going for liquidation, as many companies had shown interests in buying the debt-ridden firm under the insolvency resolution process, the lenders decided to negotiate with Maharashtra Seamless Limited, the second highest bidder (H2), to resolve this case of corporate insolvency.

Liberty House has been facing flak from Indian banks as it has overshot the payment schedule in four cases. Liberty had said it would only pay when there were "clean assets" and pointed to successful acquisitions in the US and Europe.

Adhunik Metalaliks is an integrated steelmaker that has a production unit in Chadrihariharpur, near Rourkela, in Odisha. The plant's capacity can be expanded to one million tonne per annum and the company's integrated operations include sponge iron, blast furnace, electric furnaces and downstream rolling of finished steel products. The company is on the second list of 28 loan defaulters that the RBI had asked banks to be taken to the NCLT for the resolution last year.