Essar Global Fund completes Rs 42,000 crore final debt tranche

Essar Group makes provision for insolvent Essar Steel at Rs 54,389 crore

With the repayment of its last debt tranche, Essar Global Fund, the holding firm of the Essar group of companies, on Monday said it had completed the debt repayment of Rs 42,000 crore, spread over two years.

“Essar Global Fund today (Monday) reached yet another milestone in deleveraging by repaying the last tranche of debt of Rs 12,000 crore ($1.75 billion) to its various Indian and foreign lenders,” it said in a release. This is in addition to the Rs 30,000 crore ($5 billion) repayment made in August 2017 to various lenders from the proceeds of Essar Oil monetisation, it added.

With this, banks have been repaid their facility of Rs 31,500 crore, which they had provided to Essar Global to fund its capital expenditure programme in 2008-14.

The only continuing lender to Essar Global is now VTB, which has been working with the company over the past three years to monetise certain assets, strategically lighten the balance sheet, deleverage the group and reposition it for growth.

In addition to repaying all of its existing secured debt, Essar Global has concluded a settlement with lenders who had provided debt facilities to the erstwhile Essar Steel Minnesota and were beneficiaries of unsecured guarantees from Essar Global. 

As part of the aforementioned settlement, Essar Global has purchased notes at a face value of $260 million, 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 low-cost iron ore mining and a pellet manufacturing project under construction in Minnesota, US. 

Meanwhile, the Essar Group has undertaken a massive deleveraging programme, by the terms of which it has repaid over Rs 1.37 trillion ($21 billion). The deleveraging programme entails the sale of Essar Oil in 2017 to a consortium led by Rosneft and Trafigura. Essar Global, via this sale, had repaid approximately Rs 86,000 crore of group liabilities, including Rs 72,600 crore to banks.

Additional asset sales that have been concluded during the past two years include the sale of Aegis to Teleperformance and CSP for approximately Rs 6,000 crore ($910 million), and the sale of Equinox Business Parks to Brookfield Asset Management for Rs 2,400 crore ($360 million). The proceeds of these sales have also been utilised to further deleverage the group.

Alongside, the company has made a provision of Rs 45,000 crore of group debt relating to Essar Steel India, which is currently going through the resolution process. In this regard, lenders have received an offer from Arcelor Mittal of a cash repayment of Rs 42,000 crore. However, a subsidiary of Essar Global has separately offered Rs 54,389 crore, which provides full repayment to the secured lenders as well as operational creditors. Subject only to the conclusion of the ongoing court process, Indian banks will receive full repayment of their exposure to Essar Steel India.

“In 2008, Essar had commenced a massive Rs 1.20-trillion investment programme across the sectors of energy, infrastructure, metals & mining, and services. Adverse regulatory and governmental actions — including cancelling the 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 a substantial infusion of new equity in its businesses,” Prashant Ruia, director at Essar Capital, was quoted as saying.

Essar Capital is the investment manager for Essar Global Fund and it monitors and manages the entire portfolio of investments owned by the latter.

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

The group will continue its focus on these sectors, and will evaluate more opportunities in existing, as well as new sectors, said the release.