Tata Steel Sells EU Long Products Biz to Greybull
Co’s 18,000-crore loans may be refinanced under 5/25 scheme
Shilpy Sinha & Saloni Shukla
Mumbai: Bankers are likely to refinance .₹ 18,000 crore worth of loans of Essar Power in the largest such exercise this calendar year. Essar’s loans, borne principally by its subsidiaries, will be refinanced under the 5/25 scheme. This extends loan repayment for infrastructure companies by up to 25 years, which can be refinanced every five years. Managing Debt Loans recast for a few Essar Power’s project subsidiaries capacity Tata Steel has sold its long products business assets in Europe for an undisclosed ‘nominal’ amount to investment firm Greybull Capital, reports Our Bureau.
“The company had sought easier terms of repayment for some of its power plants so it matches the lifecycle of the project. We have given a go-ahead to that under the 5:25 refinancing scheme,” a banker said on condition of anonymity. “The company recently paid off some debt on the books of the holding company that gives us confidence that loans are secure.”
This is the biggest refinancing so far this year and should provide a breather to the power firm which defaulted on bond repayments to Life Insurance Corporation of India (LIC) last year.
Power firms across the country saddled with high debt have struggled to repay loans amidst regulatory troubles and lack of fuel. Essar Power missed interest payments on 11-year bonds it sold in 2013 to raise .₹ 1,000 crore from LIC. It has not paid interest on the debentures in the past six months.
In order to ease the pressure on such firms, the Reserve Bank of India advised flexible refinancing of long-term infrastructure loans. The tenure is extended to 25 years and the repayment starts after five years with the option to refinance it with any bank. Debt-laden companies including Jaypee Infratech, Adani Power and Uttam Galva Metallics have availed of this scheme and rating company Crisil expects .₹ 80,000 crore more of infrastructure loans to be restructured soon. “Essar Power has not done any flexible structuring of debt in its books,” the company said in an email response. “Some of its subsidiaries which have eligible projects have got the approval of their lenders for flexible structuring of their debt as per RBI guidelines, as has been done by the lenders to other corporates, which have assets in infra and core sector.” The company and its subsidiaries had borrowed the money to set up electricity generation projects. State Bank of India leads a group of 16 banks that lent the money to the Essar Power subsidiaries, the banks said.
Bank officials say Essar is expected to benefit from a drop in prices of coal, which is used to fire some of its power plants. A fall in local interest rates could also help lower funding costs. The fact that the firm repaid some of its other loans some time back convinced bankers that it needs extra support.
Bank officials say Essar is expected to benefit from a drop in prices of coal, which is used to fire some of its power plants