Lenders explore Essar Steel debt recast under S4A norms

Mumbai, July 4: Lenders to Essar Steel are exploring the possibility of restructuring the R30,000 crore worth of company's loans under the sustainable structuring of stressed assets (S4A) norms, two sources with direct knowledge of the matter told FE.

Sources added that Essar's lenders have appointed MECON, a government run engineering and steel sector consulting company to conduct a techno-feasibility study into Essar's operations based on which the lenders will take a final call. Sources added that a final report was submitted to the consortium of lenders led by SBI on June 30 and the report is understood to be inclined towards restructuring Essar's loans undertheS4Aprovisions.Significantly, the appointment of MECON in April was a parallelprocessinitiatedbyEssar's lenders, even as they were looking for potential buyers for a majority stake in Essar Steel, said a senior banker directly involved in the negotiations. “None of those who showed initial interest followed up with a non-binding offer,” the source added.

When contacted a senior Essar official, who refused to be named, confirmed that that company has been in talks with lenders for restructuring its outstanding loans under S4A provisions but addedthatdiscussionsareata preliminary stage. “We have been in talks with the lenders torestructuretheloansunder CDR route for some time now but the S4A norms notified by RBI on June 13 has definitely come as a favourable option,” the official added.

Sources added that the lenders have per mitted Essar Steel 'holding on operations' which allows Essar Steel to plough back a part of its revenuesbackintoitsoperations tillafinaldecisiononpossible restructuring is taken.

In an email response to FE's query on the subjrct, Essar Steel said that it has recorded a 48% quarter-onquarter growth in flat steel production in the first quarter of the current fiscal. The total production stood at 1.22 million tonnes, compared to 0.824 million tonnes in the corresponding period last year.

With the ramp up in production volumes since March 2016thecompanymaintained that there has been a significant growth in the company’s Ebitda margin and a marked improvement in the debt-equity ratio.