Quick Edit | Deciphering a bond issue

Quick Edit | Deciphering a bond issue
Comment E-mail Print Share
First Published: Thu, Oct 08 2009. 01 30 AM IST
Updated: Thu, Oct 08 2009. 01 30 AM IST
The Ruias of the Essar Group had shown their bargaining mettle in early 2007 when Hutchison was selling its Indian telecom business to Vodafone. Essar is a partner in that firm.
The Essar Group collected a neat $375 million (Rs1,755 crore today) from Hutchison for “cooperation” in the sale of its telecom stake to Vodafone. And a put option that gave it a right to exit the joint venture at a fixed price four years after Vodafone took control.
We had then cited a study that used the Black-Scholes model to value the put option at $860 million.
The Essar Group this week used the option as collateral to raise up to $1 billion in a sale of bonds maturing in July and December 2011. Reuters cites rating agency Fitch: “...the bonds are backed by receivables under (the) put option”.
One, this means that the value of the put has gone up since March 2007 and is worth at least $1 billion today.
Two, the bonds mature just when Essar can exercise its put option and exit the joint venture. Does this tell us anything?
Comment E-mail Print Share
First Published: Thu, Oct 08 2009. 01 30 AM IST
More Topics: Essar Group | Hutchison | Vodafone | Bond issue | Home |