Essar tightens bond with Russian Bank VTB, raises Rs 12,000 crore to make repayments

Essar Global Fund, the holding company of the group, has repaid another Rs 12,000 crore to its Indian and foreign lenders, taking its total debt repayments to Rs 92,000 crore in the last two years, said the group. The group is believed to have raised the same amount from Russian bank VTB for doing the repayments.

The transaction includes Rs 6,300 crore repayment to three banks -- ICICI Bank, Axis Bank and Standard Chartered -- which is the remaining portion of the Rs 31,500 crore loan raised during 2008-14 period for funding the capital expenditure programme. The repayment is intended to support Essar's case in National Company Law Tribunal (NCLT) against the insolvency proceedings in Essar Steel.

The promoters Ruia family through Essar Steel Asia Holdings (ESAHL) had earlier submitted a proposal in NCLT Ahmedabad for settling the entire debt of Rs 54,389 crore in its steel business. On Monday, the lawyers of committee of creditors (CoC) and the resolution professional argued in the court that Essar's application for debt repayment in steel business can't be maintained under the Insolvency and Bankruptcy Code (IBC). The next hearing will be on January 31.

Essar officials said that Rs 1,37,000 crore of debt has gone off from the balance sheet of the group with the Rs 92,000 crore repayment and the resolution proceedings in Essar Steel, which had a debt of Rs 45,000 crore. "This is more than 80 per cent of its group debt," said the company in a statement. But the company has taken fresh loans from VTB bank for the repayments. The only continuing lender to Essar Global is now VTB, which has been working with Essar Global over the past three years to monetise certain assets, strategically lighten the balance sheet, deleverage the group and reposition it for growth in the future, said the company. "Now the group has loan exposure of Rs 12,000 crore in VTB," said the company sources.

Essar Global has also concluded a settlement with all lenders who had provided debt facilities to erstwhile Essar Steel Minnesota and were beneficiaries of unsecured guarantees from Essar Global. As part of the aforementioned settlement, Essar Global has purchased $260 million face value notes issued by Mesabi Metallics Inc. These notes substantially constitute all of the debt of Mesabi, and paves the way for Essar Global to once again participate in the low-cost iron ore mining and pellet manufacturing project that is under construction at Minnesota in the US, said the company.

The statutory requirement to finish the insolvency case of Essar Steel within 270 days has already passed 500 days. The financial creditors had earlier voted in favour of the resolution plan of ArcelorMittal -- Rs 42,000 crore to lenders and an additional Rs 8,000 crore towards capital expenditure -- on 25 October. But ESAHL then proposed to pay all its lenders, including operational lenders, in full.

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