Essar Steel India Ltd, backed by the billionaire Ruia brothers, is seeking to restructure part of its about Rs.38,000 crore ($5.9 billion) in debt, people with knowledge of the matter said.
Essar Steel is asking creditors to extend the tenor of some loans and grant a moratorium on interest payments for a certain period, they said, asking not to be identified as the matter is private. HDFC Bank Ltd classified its loan to the company as bad in the quarter to March and decided against extending new credit to the alloy maker, they said.
The Indian steel industry has been battling record imports, forcing producers to cut prices. State Bank of India, ICICI Bank Ltd, Axis Bank Ltd and HDFC Bank are part of a consortium that had lent to Essar Steel, the people said.
Essar Steel has initiated the process of converting its rupee project loan of about Rs.9,000 crore out of a total term debt of Rs.30,000 crore under the Reserve Bank of India’s so-called 5:25 guidelines, the company said in an e-mailed response.
“We would like to reiterate there’s no restructuring of loans,” Essar said.
India’s central bank started its 5:25 program last year that allows for “flexible structuring” of debt owed by infrastructure and industrial companies. It allows banks to lend for as long as 25 years, which could be refinanced every five to seven years.
New borrowing
Essar Steel is also seeking about Rs.4,000 crore in additional loans, the people said. The amount is for working capital and has been approved by the consortium, Essar said in its e-mail response.
HDFC Bank last quarter sold the bulk of its Essar Steel loans to Edelweiss Asset Reconstruction Co., one of the people said. The steelmaker still has some dollar-denominated loan outstanding, that has also turned bad, with HDFC Bank, the person said.
“They have sold down the rupee loan, including the working capital loan and informed us subsequently,” Essar said in its statement.
HDFC Bank, Edelweiss and Axis Bank declined to comment, while ICICI Bank and State Bank didn’t immediately respond to a request seeking comments.
Essar Steel had for the first time restructured its loans in 2003 and extended the term of the loans, reduced interest charges and converted loans into equity, helping cut liabilities by 20% to Rs.4,300 crore, according to an exchange filing.
Source :Bloomberg
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