Essar Ports denied debt refinancing via ECB route

Written by Vaishnavi Bala | Vaishnavi Bala | Updated: Jun 27 2013, 11:29am hrs
Ruias-promoted Essar Ports, which has been trying to raise R1,500 crore through external commercial borrowings (ECBs) to part refinance its debt, has not been given the go-ahead by the Reserve Bank of India (RBI), said company sources.

Essar Port's director-finance, Shailesh Sawa, told FE, "The ECB that we had applied for last year is not taking place."

According to sources, Essar ports did not get an approval from the RBI as it was not earnings any revenues in dollars and there was no natural hedge in place for its proposed foreign currency exposure. The company had approached the RBI in November last year, seeking its nod to raise the money, citing a special case. However, the RBI rejected the request last month.

The company is now looking at other ways to refinance its R5,050-crore debt. Sawa added, "We are looking to refinance some debt through take-out financing from IIFCL for the Vadinar terminal in Gujarat."

Last year, too, Essar Ports accessed the take-out financing scheme of the government through IIFCL and refinanced R405 crore of debt for the Hazira port facility. This has brought down its interest cost by 2.7% for the stated amount.

Along with the group's ports division, Essar Shipping too is finding it tough to refinance debt. The company, which had planned to refinance R800 crore in rupee debt by raising dollar loans, has only been able to refinance R150 crore so far.

"Banks are currently cautious on lending to shipping companies as they want to see long-term contracts on paper," said AR Ramakrishnan, MD, Essar Shipping.

However, last week, another group entity Essar Steel raised $1 billion through ECBs to de-risk its balance sheet. Essar Oil, which exited corporate debt restructuring in January, also plans to raise up to $2.2 billion through external borrowings.

Essar Ports is in the midst of a massive expansion plan that will take its capacity to 158 million tonne per year by 2014-15. Currently, the company has a total capacity of 88 million tonne per year. The company has also bid for a R4,000-crore mega-container terminal in the Chennai Port.