Mumbai: Essar Global Fund Ltd, the holding company of Essar Group, on Monday said it has repaid all its overseas debt after paying the last tranche of ₹ 12,000 crore to its various Indian and foreign lenders. The ₹ 12,000-crore repayment is over and above the ₹ 30,000-crore paid to lenders in 2017, Essar said.
Over the past two years, the Essar Group has repaid more than ₹ 1.37 trillion of its debt, most of it to the Indian banking system. Essar Steel India, which alone has a debt of ₹ 45,000 crore, is under the Insolvency and Bankruptcy Code (IBC).
Of the ₹ 12,000 crore, an amount of ₹ 6,300 crore went toward repaying loans from ICICI Bank Ltd, Axis Bank and Standard Chartered Bank. The rest was paid to Davidson Kempner Capital Management LP, a global institutional investment management firm. “With this, these banks have been repaid their entire facility of ₹ 31,500 crore, which they had provided to Essar Global to fund its capital expenditure programme in 2008-14," Essar Global said.
The only continuing lender to Essar Global is VTB, which has been working with Essar Global over the past three years to monetize certain assets, strategically lighten the balance sheet and deleverage the group. Essar Global owes ₹ 12,000 crore to VTB.
“I think the Essar Group is trying to make a statement that it is capable of repaying lenders. But I believe their attempt is misplaced. Nobody is saying that they are unable to pay back lenders of Essar Steel if they choose to," said Anand Bhageria, Partner, Singhi Advisors. “I don’t think the current announcement will cut much ice with lenders or the NCLT. These are just tactics to confuse the court," he added.
The firm said in addition to repaying existing secured debt, Essar Global has also simultaneously concluded a settlement with lenders who provided debt facilities to erstwhile Essar Steel Minnesota Ltd and were beneficiaries of unsecured guarantees from Essar Global.
“As part of aforementioned settlement, Essar Global has purchased $260 million face value notes issued by Mesabi Metallics Inc. These 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 pellet manufacturing project that is under construction in Minnesota, USA," the company said.
Over the past two years, Essar has been selling its assets to deleverage the group. In 2017, through the sale of Essar Oil Ltd to a consortium led by Russian oil-major Rosneft and Trafigura Group Pte. Ltd, a multinational commodity trading company, Essar Global repaid around ₹ 86,000 crore of group liabilities, including ₹ 72,600 crore to banks.
Additionally it sold Aegis, Essar Group’s privately held business process outsourcing business, to Global outsourcing giant Teleperformance and private equity firm Capital Square Partners (CSP) for ₹ 6,000 crore. Equinox Business Parks, Essar Group’s commercial property in Mumbai’s Bandra-Kurla Complex, was sold to Brookfield Asset Management for ₹ 2,400 crore.
Essar had in 2008 undertaken a ₹ 1.2 trillion investment programme across energy, infrastructure, metals and mining, and services.
“A further ₹ 45,000 crore of group debt relating to Essar Steel India is being addressed through ongoing IBC. In this regard, lenders have received an offer from ArcelorMittal offering them cash repayment of ₹ 42,000 crore. A subsidiary of Essar Global has separately offered ₹ 54,389 crore, which provides a full repayment to secured lenders as well as the operational creditors. Subject only to conclusion of ongoing court process, Indian banks will receive full repayment of their entire exposure to Essar Steel India," the company added.
In addition, Essar has paid ₹ 3,955 crore to minority shareholders of Essar Oil and ₹ 1,400 crore to minority shareholders of Essar Ports.