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Essar looks to resolve FRN debacle - Views on News from Equitymaster
 
 
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  • Oct 5, 1999

    Essar looks to resolve FRN debacle

    According to newspaper reports, Essar Steel, which had earlier defaulted on its US$ 250 m floating rate notes (FRNs), has proposed three options for the holders of the FRNs.

    Essar Steel (FY99 Total Income Rs 22.6 bn) is the flagship company of the Essar Group. It is the largest mini mill and sponge iron producer in India.

    The options are:

    • Extend the maturity of the loan by 12 years. This will give the FRN holders the status of secured creditors.
    • Extend the maturity of the loan by 5 years. In this case, they will continue to remain as unsecured creditors.
    • Redeem the FRNs on yet to be discussed conditions.

    However, it is uncertain whether or not the FRN holders will fall for the bait and extend the maturity period of the loan. If, however, they were to en masse opt for redemption, Essar Steel may again be faced with cash flow problems.

     

     

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