Proceeds from the $100 million sought from SBI will go into prepaying some of the existing loans. "As a prudent practice, the company wants to lock in loans with a higher maturity profile," sources said.

According to banking sources, the State Bank has not yet cleared the proposal. The bank is, however, closely looking into the possibility of raising Essar Steel's working capital limit from the existing level of around Rs 800 crore. "The priority is to ensure meeting the working capital requirements," sources said.

Essar Steel is also in the process of securing guarantee from an US-basedexport insurance company on the strength of which it plans to raise a $40 million worth of external currency borrowings (ECB) later this month. "The company has already moved the finance ministry seeking permission for the ECB," sources said. The proceeds of the ECB will be used to redeem a $40 million loan which the company rolled over for three months in April.

Earlier, the SBI rejected an Essar proposal of an export performance guarantee. The company had asked for a $300 million worth of export performance guarantee from the SBI and planned to strike an export securitisation deal with the German steel giant Thyssen on the strength of the guarantee. The companmy wanted to use the proceeds of the securitisation deal to redeem the $250 million floating rate note due on July 13.

Essar Steel had signed an initial draft agreement with Thyssen AG for the eight-year securitisation deal. "It is an open-ended agreement. As and when we are able to get the export performance guarantee we can strike the deal,"sources close to the company said.