Essar To Buy Back FRN Worth $250 M

London, May 22: | Updated: May 23 2003, 05:30am hrs
In a major boost to its finances, Essar Group has succeeded in clinching a deal for buying back its floating rate notes (FRN) worth $250 million at a massive discount of 76 per cent.

Essar Steel, which was among the first Indian companies to have defaulted on repayment of foreign loans due to a major cash crunch following a downturn in the steel industry, will now buy the $1,000 note at a discounted price of $240, which will help the company bring down unsecured liability on this count from $250 million to one fourth of its face value.

When contacted, J Mehra, resident director of Essar Group in Delhi said that a resolution was passed at a meeting of FRN-holders on May 20 in London for buyback at 24 cents to a dollar.

JP Morgan are the trustees for the deal, sources involved in the deal said adding that 70 per cent of the FRN-holders have agreed to the buyback arrangement.

Out of the remaining, 15 per cent FRN-holders have agreed for rollover of the notes for a 15-year period at 25 basis points above the London Interbank Offered Rates (libor), they said. Others were given the option of Indian notes at a converted rate against the dollar denomination in the original notes which carried an interest of 250 basis points above libor.

The buyback of FRN comes close on the Corporate Debt Restructuring package offered to Essar Steel by the finanical institutions as part of a relief package to the steel producers including Ispat and Jindal Steel.

Sources said that the company had secured a loan of about Rs 250 crore from Bank of India for FRN and added that talks were in advance stages for another Rs 100 crore credit from Punjab National Bank. However, the credit from Bank of India will be enough for the purpose, they added.