Essar Global Clears Overseas Debt; Pays $1.75 Billion To Indian, Foreign Lenders
A security guard pulls a gate across the logo of Hutchison Essar (Photographer: Abhijit Bhatlekar/Bloomberg News)

Essar Global Clears Overseas Debt; Pays $1.75 Billion To Indian, Foreign Lenders

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Essar Global Fund Ltd., the holding company of Essar Group, on Monday said it has repaid all its overseas debt after it paid back the last tranche of Rs 12,000 crore ($1.75 billion) to its various Indian and foreign lenders.

This is in addition to Rs 30,000 crore ($5 billion) repayment made in August 2017 to various lenders from the proceeds from the sale of Essar Oil to Rosneft of Russia, the company said in a statement.

With this, Essar Global has now repaid about Rs 6,300 crore to ICICI Bank Ltd., Axis Bank Ltd., and Standard Chartered Bank. This repays the entire Rs 31,500 crore of loans availed from these banks during 2008-14.

Over the past two years, Essar Group has repaid more than Rs 1.37 lakh crore ($21 billion) of debt, including that of Essar Steel, majority of which are to Indian lenders. "This is more than 80 percent of the group's debt," the statement said.

Russia's VTB is the only continuing lender to Essar Global.

Giving details of the Rs 1.37 lakh crore debt repayment, the group said in 2017, Essar Global repaid about Rs 86,000 crore of liability, including Rs 72,600 crore to banks, from proceeds of sale of Essar Oil to a consortium led by Rosneft and Trafigura.

Additionally, business process outsourcing arm Aegis has been sold for about Rs 6,000 crore and Equinox Business Parks for Rs 2,400 crore. These proceeds have been used to deleverage the group.

"A further Rs 45,000 crore of group debt relating to Essar Steel India is being addressed through the ongoing insolvency and bankruptcy process," it said. "In this regard, lenders have already received an offer from ArcelorMittal offering them cash repayment of Rs 42,000 crore."

A subsidiary of Essar Global has separately offered Rs 54,389 crore to fully pay all outstanding of lenders and operational creditors. In addition, Essar has paid Rs 3,955 crore to minority shareholders of Essar Oil and Rs 1,400 crore to minority shareholders of Essar Ports.

"Over the past two years, we committed ourselves to a massive deleveraging programme and have repaid more than Rs 1,37,000 crore to our lenders, most of which will go to the Indian bankers and lenders,” said Prashant Ruia, director of Essar Capital. "The premium valuations being placed on various assets that have been sold by Essar are a testament to the quality of these assets and businesses we have built over the years.”

"With the deleveraging programme now drawing to a close, and with a much stronger and sustainable balance sheet, we look forward to repositioning ourselves for growth."

In 2008, he said, Essar had commenced a massive Rs 1,20,000 crore investment programme across sectors of energy, infrastructure, metals and mining, and services.

"Adverse regulatory and governmental actions—including cancellation of natural gas supply by the Government of India, and of coal mine allocations between 2010 and 2015, which were both unanticipated and outside of Essar's control—affected some of Essar's businesses,” he said.

"This resulted in a build-up of excessive leverage across the group, even as Essar committed to providing a substantial infusion of new equity in its businesses."

Essar Group's revenues now stand at $11.5 billion and will continue its focus on energy, infrastructure, metals and mining, and services sectors and will evaluate more opportunities in existing, as well as new sectors, the statement said.

Essar said it will continue its relationship with Russia's VTB, which has executed deals over past three years to monetise the group's assets, strategically lighten the balance sheet, deleverage the group and reposition it for growth in the future.

Essar Global had also concluded a settlement with lenders for the debt of Essar Steel Minnesota. The lenders here include Indian banks led by ICICI Bank, State Bank of India Ltd., as well as a consortium of international funds led by Davidson Kempner.

Also, Essar Global had purchased $260 million face value notes issued by Mesabi Metallics Inc, which substantially constitute all of the debt of Mesabi, and enables Essar Global to once again participate in the low-cost iron ore mining and pellet manufacturing project that is under construction in Minnesota, USA.

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