The Telegraph
Since 1st March, 1999
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Lenders’ lifeline for Essar oil terminal

Mumbai, Aug. 22: The Essar Shipping board has cleared a debt-recast plan under which it will be required to raise the authorised capital of Vadinar Oil Terminal by Rs 1000 crore to Rs 1510 crore in a cash-infusion aimed at revitalising the project.

The restructuring proposal envisages raising $ 200 million, of which $ 100 million (Rs 458 crore) will come from the promoters — brothers Shashi and Ravi Ruia — and ABB Lummus through foreign currency convertible bonds or equity. Another $ 100 million will be raised from the market.

The promoters and their associates will chip in with amounts exceeding $ 100 million, the company told stock exchanges. The money will help restart work on the Rs 2000-crore pipeline, a 100 per cent subsidiary of Essar Shipping. The company has been making money from shipping, but its oil terminal has been slow to get off the ground.

The plan makes Essar Shipping the last among the troika of Essar firms to have their debts reworked by lenders. The group commands assets of Rs 17,000 crore and sales to the tune of Rs 6,500 crore.

The move comes at a time when the company is harbouring ambitions of acquiring the government’s stake in Shipping Corporation of India (SCI).

Last year, Essar Steel had its loans restructured by reducing its average interest cost to 11.5 per cent and getting more time to repay. It came as a great relief for the company which, along with other steel companies like Ispat Industries and Jindal Vijaynagar, were groaning under high interest costs.

The plan approved by Essar Shipping board today was prepared by the corporate debt restructuring cell, a forum where banks and financial institutions help corporate entities struggling to repay because of factors beyond their control.

Earlier, Essar Oil won a breather with the cell restructuring its debt in a way that pruned the interest rate to 12 per cent from 17 per cent. Under the plan, the promoters will contribute Rs 311 crore and ABB Rs 905 crore. The lenders will revalidate earlier sanctions of Rs 1500 crore, and disburse the bulk of the credit in foreign currency.

Analysts tracking the segment say the restructuring proposal will help work on the group’s 12-million tonne refinery, also at Vadinar, move apace. The project is likely to be completed in 24 months. Sources close to the company say the re-appraised project cost has been pegged at Rs 9863 crore.

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