Essar's lenders concerned over Rosneft transaction

A syndicate of lenders including funds managed by Davidson Kempner Capital Management and several global financial institutions has raised concerns over the Essar-Rosneft deal, the lenders said on Tuesday.
 
“Lenders are deeply concerned by limited disclosure of transaction terms and use of proceeds given Essar’s track-record of failed deals and opaque inter-company transactions,” said a statement issued by the lenders.
 
In October, there were reports that Rosneft, Trafigura, a Singapore-based trading firm, and UCP, a Russian financial investor, would together acquire 97.4 per cent stake for $10.9 billion in Essar Oil’s refining and retail assets and another $2 billion for its Vadinar port and related infrastructure.
 
The syndicate of lenders also indicated a possibility of legal action against the Essar-Rosneft deal. “The lenders are reserving all of their legal rights and will pursue any and all appropriate legal actions against the parties involved in the Transaction to protect their interests,” the statement added.
 
Various entities within the Essar Group, including Essar Global Fund, owe $411 million to the syndicate of lenders together, the statement added.

The Essar Group has, however, said several financial institutions, including Davidson Kempner Capital Management and other lenders, had entered into a loan transaction with the Essar Steel Minnesota LLC (ESML) in September, 2014. ESML had filed for protection under the  United States bankruptcy code and the loans being referred to will be dealt according to court proceedings, the company said in a media statement. 

"The lenders are not a party to any transaction concerning Essar Oil Limited. The transaction, involving Essar Oil Limited with Rosneft PJSC, Trafigura and United Capital Partners, has been entered into on an entirely lawful and proper basis. It is regrettable that the lenders have chosen to make these vague and misleading statements against the Essar Global Fund Limited and other entities within the group. All of those allegations are denied, " added the statement.

Among the concerns raised, the statement said, “The lenders, who are owed $411 million by Essar Group, have repeatedly asked for transaction details that Essar has refused to provide. The lenders’ concerns are amplified by the group’s long-running history of value-destructive financial transactions, and opaque inter-company dealings.”