ICICI, Axis, StanChart get back $2.5 bn of Essar loans

22 Oct 2016


The $13-billion sale of Essar Oil to Russia's Roseneft has helped lenders, including  ICICI Bank, Axis bank and StanChart, recover a combined $2.5 billion in part payment of their exposure to the Essar Group.

ICICI Bank, Axis Bank, the two Indian lenders, which together have an exposure of $1.5 billion in the Ruias-led group, will get back nearly half of their money or about $770 million in cash while $750 million of debt will get transferred to Rosneft-led consortium and Essar's ports and other businesses, as per the terms of the agreement.

Essar is reported to have paid a total of $450 million, including $350 million in principal and $100 million in interest payments, the two Indian banks – ICICI Bank and Axis Bank.

Of this, ICICI Bank's share is nearly three-fourths while that of Axis Bank is about one-fourth - in the total exposure as well as interest payments.

In the case of StanChart, it has received a larger amount of $2.1 billion in cash. Its total exposure in the Essar Group is about $3.3 billion.

StanChart, which got back the entire principal loan amount in one go has decided to write off nearly $850 million of its exposure. Nearly $400 million of its debt will get transferred to ports and other businesses of the Essar Group.

The $2.5 billion payment comes as the first tranche of loan repayment while Essar will make payment of the remaining $300 million it owes to the two Indian lenders soon, reports said.

Part of 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.

The banks, however, has not exited these businesses as part of the loans are being transferred to Roseneft.

However, public sector banks are yet to get any repayment of their loans to Essar Group, as their exposure has mainly been to Essar Steel.

''The money from the deal (Essar Oil buyers - Rosneft) will mainly go for repaying oil debt.

Russia's state-controlled oil giant Rosneft and its partners acquired Essar Oil, India's second-biggest private oil firm, in an all-cash deal valued at about $13 billion, on 15 October, in what could be the largest inflow of foreign direct investment

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, one of India's largest and among the most-indebted, said it would utilise significant portion of the deal proceeds for debt reduction and expected the group debt of about Rs88,000 crore (over $13 billion) to come down by about 50 per cent.

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