Big blow to Essel Highways as Goldman Sachs freezes $220 mn in financing

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Mumbai | Published: November 28, 2017 6:25:39 AM

Goldman Sachs is withholding the second tranche of the $220-million financing it had committed to Essel Highways, an arm of Essel Infraprojects, about a year ago.

Goldman Sachs, Essel Highways, Big blow to Essel Highways, Goldman Sachs freezes, Essel Infraprojects, mezzanine finance, National Highways Authority of IndiaGoldman Sachs is withholding the second tranche of the 0-million financing it had committed to Essel Highways, an arm of Essel Infraprojects, about a year ago. (Image: Reuters)

Goldman Sachs is withholding the second tranche of the $220-million financing it had committed to Essel Highways, an arm of Essel Infraprojects, about a year ago. According to people aware of the development that FE spoke to, the investment bank is unhappy with the progress on the ground. In August 2016, Essel Highways received the first tranche of $85 million as mezzanine finance as part of the deal. The remaining money was to be provided on achievement of certain milestones, which the company has been unable to meet. The problem arose when the National Highways Authority of India published a list in October naming Essel Infraprojects among a clutch of developers it debarred from bidding for future projects, citing breach and/or default in previous contracts.

After the list was made public, Goldman Sachs officials decided to visit the project sites to review the progress on ground first-hand. One of the persons FE spoke to said on condition of anonymity, “The officials took umbrage as they felt that the the progress on the ground didn’t match the outcome expected from the first instalment of $85 million, and subsequently, they have delayed the next tranche of payment until Essel provides them with an explanation. Essel has written two letters to them till now but they are still not convinced.”

Moreover, Essel Highways has given the construction work on an engineering, procurement and construction (EPC) model to its parent company Essel Infraprojects, raising question marks over the utilisation of funds. Essel Infraprojects in an emailed statement to FE said, “Our company keeps on evaluating multiple fund raising opportunities and based on the market interest rate and other factors, we would strategically decide whether to opt or not for the second tranche from Goldman Sachs.”

However, Essel declined to comment on whether Goldman Sachs officials had taken objection to the progress on the ground and whether or not it had awarded the EPC contract to Essel Infraprojects. Goldman Sachs declined to comment on the subject. Essel Highways was set up in 2007. According to information on its website, the company has an order book of about Rs 10,000 crore. It has bagged 14 projects, out of which eight state highways and two national highway projects are operational — these 10 projects add up to more than 4,400 km of roads across six states. The remaining three national highway projects and one state highway project are under construction.

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