Essar Plans To Pay Off Rs 2,119-cr Foreign Debt With Fresh Loans

Mumbai, January 19: | Updated: Jan 20 2003, 05:30am hrs
Essar Steel Ltd (ESL) has proposed to pay off its floating rate note (FRN) holders and other foreign unsecured loans totalling around Rs 2,119 crore as a part of the current debt restructuring proposal which will be finalised by the corporate debt restructuring committee (CDR) of financial institutions and banks on January 21.

The foreign unsecured lenders are expected to be paid off with new loans of up to about Rs 500 crore which will be syndicated by ESL through Indian banks. The company is hopeful of settling the dues of the foreign lenders at a discount of around 75-80 per cent.

As per the current proposal, ESL has called for the secured lenders to accord super priority status in respect of the repayments of the principal and interest to these unsecured foreign lenders.

Essar group sources told FE that the final figure for the payout to FRN holders could not be estimated immediately.

A firm figure would only be available after assessing the number of FRN holders who had opted to exit rather than stay on. In any case, the Rs 500 crore debt figure is the uppermost cap, sources in the Essar group said.

The company has given two options to the foreign lenders one is to buy back at a deep discount of around 75 per cent to 80 per cent, while the other is participate in the restructuring in line with the secured lenders, where in the repayment will be over a period of 14 to 15 years.

The company has also said that, in case the unsecured lenders do not agree for the repayment at a discount, the secured lenders should agree to defend ESLs position in any legal proceedings against the company.

As per the proposal, the super priority debt which will be raised to pay off these unsecured lenders would be repaid within 48 months and carry interest at the rate of PLR plus four per cent per annum.

ESL has already arranged for loans of Rs 250 crore from Bank of India, and is expected to arrange for the remaining as soon as lenders clear the restructuring proposal at the CDR.

ESL had earlier reached an agreement with the FRN holders in August 2000 to rollover the FRN for a period of five years. The company could not make payments due in January 2001 to the FRN holders as lenders did not agree to finance the buy back of FRN at 69 cents to a dollar. Two FRN holders have also filed winding up petition against ESL in the Ahmedabad High Court.