Essar To Offer Fresh Proposal On Frns

Essar Steel Ltd has decided to approach the bond holders of its $250 million floating rate notes with a fresh redemption proposal in June, since the earlier proposal has become legally invalid after January 31 this year.

The earlier proposal was finalised jointly by the company, the bond trustees and bond holders. The date of the meeting to draw up a the fresh proposal will be decided shortly, a senior official in the Essar group said.

For this, the company is in consultation with Bank of America Securities (BAS), which is an advisor to the FRN issue, the company official told Business Standard on Friday.

 

According to the earlier proposal, the company was supposed to pay a 31 per cent discount on the cash redemption portion of the FRN issue, besides 61 per cent of the principal amount and eight per cent interest.

The other two options of the three-pronged strategy were a five-year unsecured rollover and a 12-year secured rollover.

The new proposal is likely to ask creditors to roll over the foreign bonds and loans in exchange for new notes and bank loans on equal repayment and economic terms to any and all of its participating foreign creditors, an industry source said.

The options under review include "equity kickers" in the form of warrants with a strike price to a high premium to the existing market price, sources said. The company is also planning to pay in cash accrued interest to any creditor and lender participating in the debt roll over.

ESL could not keep its commitment with the FRN holders after the domestic financial institutions backed out after promising them the financial aid to bail out the FRN.