Essar arm NCDs raise Rs 4,280 cr

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Mumbai: ETHL Communications Holdings Ltd, a unit of the $15-billion Essar Group, on Thursday said it had completed raising Rs 4,280 crore by issuing rated, listed, zero-coupon, non-convertible debentures (NCDs) through private placement. The diversified Essar Group, which has a presence in steel, energy, power, communications and shipping, is expected to use the funds for expansion and acquisitions abroad.

The NCD issue was launched as a book build in two separate series of up to Rs 2,250 crore each, aggregating up to Rs 4,500 crore. The base issue size across the two series was fixed at Rs 2,250 crore with a right to retain oversubscription up to an additional Rs 2,250 crore. The two sets of debentures, with an aggregate size of Rs 2,140 crore each and maturities in July and December 2011, are zero-coupon bond-backed receivables under a $923-million put option agreement for 10.97% of Essar’s 33% equity stake in Vodafone Essar.

When Vodafone bought Hutchison Whampoa’s stake in Hutch Essar and rechristened the company Vodafone Essar, it signed an agreement with the Essar Group that included a put option, which allows Essar to sell its 33% stake in Vodafone Essar.

Recently, the Essar Group transferred a 10.97% stake from its Essar Teleholdings to a newly created firm, ETHL Communications Holdings, in order to facilitate the fund raising. “Barclays, together with other lead managers, have done a commendable job in presenting and executing the NCD issue to investors in a timely manner,” said Essar group CFO VG Raghavan. Barclays Capital was the coordinating mandated lead arranger and bookrunner. Deutsche Bank, ICICI Bank, JP Morgan India, Standard Chartered Bank and Yes Bank were the mandated lead arrangers and bookrunners.

“The NCD issue, rated AAA(ind)(SO) by Fitch Ratings, received an overwhelming response, with the book more than three times oversubscribed and comprising orders from over 20 investors across, mutual funds, insurance companies and corporates. As a result, the debentures are priced well inside of the upper end of the book-build pricing band of 8.50%-9.50% pa for Series A and 8.75%-9.75% for Series B. Series A is priced at 9.15% pa and Series B priced at 9.25%,” said a company statement.