Electrosteel Steels CDR cleared

Written by fe Bureau | New Delhi | Updated: Dec 14 2013, 09:28am hrs
Electrosteel Steels (ESL) will have to pay the first installment of the R6,184-crore loan approved for recast under the Corporate Debt Restructuring (CDR) cell on December, 2015, according to the recast approval letter from lenders.

In a letter of approval of the CDR package by the led-banker State Bank of India, the company needs to pay 5% of the R6,184-crore loan in December, 2015, while in FY17, the company will have to pay 8% of the restructured loan.

ESL has agreed to paying 12% of the loan in FY18 and the same percentage of the loan in FY19. The company will pay the full amount back to the banks by FY23 in 29 installments, according to the letter of approval.

The interest rate on the restructure loan has been decided to be at 10.75% till 2015-16, 11% for the next 4 years and 11.50% for the remaining years of restructuring.

Before restructuring, the loan was attracting an interest rate of about 12.50%.

Due to the discount given, the consortium of lenders is projected to sacrifice a total of Rs 822.39 crore.

According to the terms of the deal, the promoter is required to infuse R217.59 crore as their contribution towards lenders' sacrifice before the implementation of the package, while the company will infuse additional equity of R1,700 crore by FY16 in the form of unsecured loan,

preference shares or by issuing fresh shares through QIP.

Umang Kejriwal, MD of ESL, has also given his personal guarantee.

ESL ran into financial trouble due to a delay in the completion of its 2.51-million tonnes per annum (MTPA) integrated steel and DI pipe mill.

The company cited a change in the visa policy for Chinese workers and lack of adequate funds as the reasons behind the


In 2012-13, the company's net loss nearly doubled to R280 crore as its interest outgo jumped by over 67%.

For the purpose of implementing the CDR package, SBI has been appointed as the monitoring institution and will furnish periodic report on the progress to the CDR cell on a monthly basis. Out of the 27 lender consortium, a monitoring committee comprising representatives from SBI, Punjab National Bank, Oriental Bank of Commerce, Canara Bank and Andhra Bank will be set up to review the performance of the company on a continuous basis.

The company's CDR package was approved on September 30 and lenders had also agreed to give an additional loan of R1,307 crore, out of which R1,107 crore would be used for additional project cost and R200 crore for working capital needs of ESL.

FE had incorrectly reported on December 11 that Electrosteel Steel's CDR had run into a hurdle with six of the consortium banks raising funds over the additional funds infusion.

This was based on a project monitoring group meeting that did not take into account the fact that these banks had agreed to the CDR.

The repayment of the fresh term loan would also be paid in 29 installments in a stepped manner from December 2015 onwards and should be paid back in full by

December, 2022.