Within days of Essar Group signing a mega $12.9-billion asset sale in its oil business, its three top lenders — ICICI Bank, Axis Bank and StanChart — have got back an estimated $2.5 billion as part of the first payment for their debt exposure to the Ruias-led conglomerate.
The two Indian lenders — which together had an exposure of $1.5 billion — will get back nearly half of their money or about $770 million in cash while further $750 million of debt will get transferred to Rosneft-led consortium and Essar’s ports and other businesses, as per the terms agreed upon by them.
Out of the total cash component, nearly $350 million was paid in cash to the two Indian banks last night, which together with interest payout of about $100 million takes their total collection from Essar to about $450 million, banking sources said.
Between the two Indian lenders, ICICI Bank’s share is nearly three-fourths while that of Axis Bank is about one-fourth in the total exposure as well as repayments.
In the case of StanChart, whose total exposure was much higher at over $3.3 billion, the bank has decided to opt for a larger cash component of about $2.1 billion for repayment of its loans.
Sources said StanChart got back the entire cash component at one go last night while nearly $400 million of its debt will get transferred to ports and other businesses of the Essar Group. Besides, it has decided to write off nearly $850 million of its exposure.
Payments totalling about $2.5 billion were made to the three lenders as part of the first tranche of the repayment schedule while payout of the remaining cash component (over $300 million) to the two Indian banks will happen soon, sources said.
The loans totalling about $1.2 billion will get transferred to the Rosneft-led consortium, which has acquired 98 per cent stake in Essar Oil, and to other businesses of Essar.
Sources said the transferred loans will be backed by sufficient collaterals while the Indian lenders’ decision to opt for only half cash component showed their confidence in Rosneft’s commitment to the India growth story and in the future prospects of ports and other infrastructure sectors.
No immediate comments could be obtained from the Essar Group and the three banks.
However, public sector banks are yet to get any repayment of their loans as their exposure has mainly been to Essar Steel. In the case of the two private sector Indian lenders and StanChart, the payment has been made towards their exposure to the oil business and global holding company of the Ruias-led group, sources said.
“The money from the deal (Essar Oil buyers-Rosneft) will mainly go for repaying oil debt. A majority of the lenders have exposure to Essar Steel and so, they will not get any money,” said a public sector banker who has a large exposure to Essar Steel.
In the largest inflow of foreign direct investment, Russia’s state-controlled oil giant Rosneft and its partners on October 15 acquired Essar Oil, India’s second-biggest private oil firm, in an all-cash deal valued at about 413 billion.
Rosneft has bought a 49 per cent stake in Essar Oil’s refinery, port and petrol pumps while the Netherlands-based Trafigura Group Pte, one of the world’s biggest commodity trading companies, and Russian investment fund United Capital Partners split another 49 per cent equity equally.
The remaining 2 per cent will be held by minority shareholders after delisting of Essar Oil.
The Essar Group had said it would utilise significant portion of the deal proceeds for debt reduction and expected the group debt to come down by about 50 per cent.
The group, one of India’s largest but among the most-indebted conglomerates, had a total debt of about Rs. 88,000 crore (over USD 13 billion).
