Essar in talks with Russia’s VTB to refinance $3.5 billion loans

5 November 2015

Essar Global, the Ruia family holding company headquartered in London, is in talks with Russia's VTB Bank to refinance up to $3.5 billion of loans the conglomerate owes to a group of banks led by Standard Chartered as the British bank has been asking its borrowers to pay up as it sets its house in order, said two people familiar with the development.

"The negotiations are at a very advanced stage," said one of the persons who did not want to be identified. "Essar wants to refinance thesloans because it has links in Russia and would like to make them more solid." But there is no certainty of a transaction given the sanctions against Russia and the bank's ability to raise US dollar funds, the people said. Essar, the steel-to-shipping conglomerate, has piled up billions of dollars in loans across banks in India and the UK as it built steel plants, refineries, and power plants.
Standard Chartered Bank, which was among the most aggressive lenders for industrial houses, is believed to be having more than $3 billion exposure at Essar Global. It cut its India exposure to $33 billion from $42 billion in 2013, the British lender said. We cannot comment on individual client exposures," the bank said in response to the query.

Essar Global owns stakes in companies like Essar Oil, Essar Steel and Essar Power.Replying to a query from ET, an Essar spokesperson said Standard Chartered, ICICI Bank and Axis Bank have lent around $3.5 billion to Essar Global, which has been used to invest in steel, oil & gas, power and ports projects by the company.

"Essar has signed a non-binding term sheet with Rosneft to monetise part of its shareholding in Essar Oil and likewise we will be considering similar transactions for other assets as and when they are ready to attract investors. Monetization proceeds of such transactions will be used to pay down the Essar Global debt as and when these transactions consummate," the spokesperson said."The book in India remains primarily short-tenor. The external environment in India is quite challenging at the moment and we are seeing stress across the banking sector." The British lender's single biggest group exposure in India may be that of Ruias, one of the persons said.