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FIs set stiff terms for Essar Oil debt recast

Mumbai, July 22: Financial institutions have cleared a debt restructuring package for Essar Oil Ltd. With the restructuring, average interest cost would come down to around 12 per cent from 17 per cent.

However, the package comes with stiff clauses, including pledging of EOLís 51 per cent stake with the lenders apart from personal guarantees by the promoters and corporate guarantee of Essar Shipping Ltd.

The company will also have to take lendersí permission to participate in any disinvestment programme of the government, FI sources said.

The cost of the 12-million tonne Vadinar project has now been assessed at Rs 9,863 crore and 100 per cent holding in Vadinar oil terminal will have to be pledged with the lenders, sources added.

This package, which was approved by the corporate debt restructuring team led by ICICI Bank, will be funded through a debt-equity ratio of 2.26:1. Following this, work on the project will start again.

The promoters are to bring in Rs 311 crore ó Rs 150 crore upfront by way of sale proceeds of rigs and balance Rs 161 crore during further four months of restart of the project. ABB Lumus of Holland, contractors of the refinery, will pump in Rs 905 crore into the project, the sources said.

A trust and retention account would be opened where cash would flow in with lenders having a control over it. In case the milestones are not met, the lenders would have the option to convert to acquire up to 76 per cent of the equity in the firm.

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