Russian steel giant OAO Severstal has arranged a $900 million bridge loan to back its $17 per share tender offer for outstanding shares of US steel producer Esmark Inc, the Russian metals and mining company said in a filing with the US Securities Exchange Commission (SEC).

A group of banks, including ABN AMRO, BNP Paribas and Citibank, has agreed to underwrite a non-amortising, unsecured bridge loan for financing Severstal's acquisition of Esmark.

The bridge loan will bear interest rate 100 bps above LIBOR until July 14, which will go up to 250 bps over LIBOR until August 1 and then to 275 bps over LIBOR until September 30 when the loan becomes repayable.

Severstal expects to refinance the bridge loan through a proposed offering of $1.8 billion of participation notes. The loan may also be refinanced with a syndicated term loan to be arranged by the banks if the bridge is not repaid by August 15.

Severstal's $1.24 billion tender offer will expire at midnight on June 26 unless extended, the company said.

Severstal's bid is backed by the United Steelworkers union, which had threatened to block an earlier offer for Esmark from Essar Steel Holdings, India's fourth-largest steelmaker.

Essar Steel said last week it was considering raising its $1.1 billion bid for West Virginia-based Esmark Inc to thwart a rival bid from OAO Severstal.

Essar may boost the offer of $17 a share, or about $670 million, after obtaining more information from Esmark, the company said in a statement.

Essar has also asked Esmark to disclose any ``arrangements'' Severstal may have had with shareholder Franklin Mutual Advisers LLC, which agreed to the Russian company's bid.

Severstal has said an acquisition of Esmark help it sell a wider range of steel products in the US with its Sparrows Point plant providing semi-finished steel slabs.

Both Severstal and Esmark have been expanding in the US, where steel prices shot up to a record $1,020 a tonne in May. Severstal agreed to buy ArcelorMittal's Sparrows Point plant in Baltimore and Ohio-based WCI Steel Inc this year while Essar bought two plants in North America last year.