The Export-Import Bank of India (India Exim) has filed a lawsuit in the London High Court against a Dubai-based steelmaker, alleging the company still owes US$14mn under a pair of financing agreements.
Essar Steel Middle East entered into a US$25mn term loan arrangement with the bank’s UK branch in early 2013 and separately took out a standby letter of credit (LC) from India Exim for an amount equivalent to the commitment.
Under the deal, the standby LC was to act as security for the original facility and was to be issued by the lender’s Mumbai office.
But according to court documents, the UAE-based company failed to make its first payments for the facility in 2016 and then ignored requests for repayment under the standby LC when those became due the following year.
In a letter sent in July 2017, India Exim demanded Essar Steel India (ESIL), the main subsidiary of the company and which acted as guarantor on the standby LC, cover the costs which by that point had risen to over US$26mn.
But ESIL failed to pay immediately and was itself caught up in another court case around that time, after the National Company Law Tribunal in India initiated insolvency proceedings against the embattled steelmaker.
The case comes roughly four years after Luxembourg-based company ArcelorMittal acquired ESIL in a deal worth over US$7bn and subsequently created a joint venture with Japanese company Nippon Steel to own and operate the new company, AM/NS India.
Essar Steel was a key industrial asset within the wider Essar Group, a conglomerate owned by brothers Shashi and Ravi Ruia, which also held assets in several other sectors including power, oil refining and telecoms.
ESIL owned iron ore plants and a steel factory in Hazira, as well as processing facilities in India, while the wider Essar Steel company also operated a subsidiary in Indonesia and ran a distribution chain for steel products across Asia and the Middle East.
But the Ruia family was forced to sell the steelmaking unit following the introduction of a strict new bankruptcy system in India in 2017, which led to the establishment of the National Company Law Tribunal. Not long after being created, the legal body took swift action against a dozen industrial Indian companies – including ESIL – for defaulting on loans from state-owned institutions such as the State Bank of India.
India Exim ultimately clawed back a portion of the unpaid money in 2019, court filings show, but the financial institution says it is still seeking US$0.8mn for the term loan facility and nearly US$13.5mn under the standby LC agreement.
India Exim has brought the case against the Dubai-incorporated ArcelorMittal Nippon Steel Middle East. AM/NS did not respond to a request for comment.
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