Essar Group repays more than 80% of its total debt

Essar Global Fund Ltd, the holding company of the Essar Group of companies, said on Monday that it has repaid ₹12,000 crore as part of the last tranche of its debt from various Indian and foreign lenders.

Over the past two years, the group has repaid more than ₹1,37,000 crore or roughly $21 billion, to several Indian and foreign lenders including ICICI Bank, Axis Bank, Standard Chartered Bank and others.

The repayments include ₹30,000 crore in August 2017 from the proceeds of the Essar Oil sale to Rosneft, Trafigura and UCP Investment Group. Post the sale of Essar Oil the group had repaid a total of ₹86,000 crore to pare the group’s liabilities, including ₹72,600 crore to banks.

ICICI Bank, Axis Bank and Standard Chartered Bank have been repaid the entire facility of ₹31,500 crore, which they had provided to Essar Global to fund its capital expenditure programme between 2008 and 2014, the group said in a statement.

After the deleveraging programme, under which the Essar Group has pared 80% of its group debt, the only continuing lender for Essar Global is Russia’s VTB Group. The two have been working together 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, the statement added.

According to the Essar Group, not only has all the secured debt been repaid but it has also simultaneously concluded a settlement with all the lenders who had provided debt facilities to erstwhile Essar Steel Minnesota Ltd and were beneficiaries of unsecured guarantees from Essar Global.

“Lenders with whom settlements have been concluded include various Indian banks led by ICICI Bank, State Bank of India, as well as a consortium of international funds led by Davidson Kempner,” the statement from Essar Global said.

As part of the 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 in Minnesota, USA,” the statement added.

“In 2008, Essar had commenced a massive ₹1,20,000 crore investment programme across the sectors of energy, infrastructure, metals & 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. This resulted in a build-up of excessive leverage across the group, even as Essar committed to provide substantial infusion of new equity in its businesses. Over the past two years we committed ourselves to a massive deleveraging programme and have repaid more than ₹1,37,000 crore to our lenders, most of which will go to the Indian bankers and lenders,” said Prashant Ruia, Director, Essar Capital (pictured above) while commenting on the deleveraging programme. Ruia added that the group now looks to reposition itself for growth with a stronger and more sustainable balance sheet.

Apart from the Essar Oil sale, the group has also sold its BPO-arm Aegis to Teleperformance and CSP for ₹6,000 crore and the Equinox Business Parks to Brookfield Asset Management for ₹2,400 crore.

The group has also offered to repay ₹54,389 crore, the entire debt of Essar Steel India. However, with Essar Steel under the Insolvency and Bankruptcy Code mechanism, a legal tussle is on between the Essar Group and ArcelorMittal who have offered to pay ₹42,000 crore for Essar Steel.

Following the completion of its monetisation programme, the Essar Group has revenues of $11.5 billion with a presence in the sectors of energy, infrastructure, metals & mining, and services.