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Essar Steel plans to roll over payment on FRNs

Essar Steel Ltd today notified holders of the US $250 million five-year floating rate notes that it plans to roll over payment on the instrument and is thinking of refinancing the loan through external sources.

The company intends to present a comprehensive plan within 90 days from the redemption date of July 20 to the FRN-holders.

ESL has sent a notice to the FRN-holders through the trustees explaining its future course of action.

The company proposes to pay interest due on the FRN shortly.

Earlier, the board of directors of ESL in a meeting in Bombay on July 16, deliberated on the consequences of the refusal of financial assistance by banks and institutions to save the company from defaulting on the payment of the FRNs.

The financial institutions had asked the company management to seek a rollover at higher coupon rates and refused to provide either refinance or a bridge loan to repay the FRN-holders.

ESL, which became the first Indian firm to raise loans in the form of FRNs, has thus also become the first one to default on its international obligations.

The FRNs were originally placed in 1994 at 265 basis points over LIBOR. The FRN route was used at that time in view of the low global interest rates prevailing. The proceeds were used to finance the construction of a steel plant in Hazira.

UNI

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