ICICI Bank, others move UK court to recover $600-mn loans to Essar arm

Other banks that have raised claims include SBI, Syndicate Bank, Union Bank of India, Canara Bank

ICICI Bank Singapore, which is leading a consortium of Indian banks, has moved the London High Court against Essar Global Fund to recover a loan worth $600 million granted to its US subsidiary.

Essar Global Fund, an investment firm of the Ruia group, was guarantor to the loan to Essar Steel Minnesota, which filed for bankruptcy in 2016.

A banking source said the petition in the London High Court was filed last month by ICICI Bank’s Singapore branch, which was the facility agent for the loan. In its petition to the court, the lenders sought to attach Essar Global Fund’s British assets to recover their dues. Similar petitions had been filed in all other countries where Essar Global Fund had offices, said the source.

The other banks that have raised claims against Essar Global Fund include State Bank of India, Syndicate Bank, Union Bank of India and Canara Bank. The lawsuit was made public this week after Essar Global Fund was served a notice.

Essar Global Fund, the holding company of the Ruias for investments in assets globally, had set up the US project seven years ago with a planned investment of $1.8 billion. But the mining and steel mill project remained half completed as it ran out of cash.

Lenders first moved the New York court last year to recover their dues, but despite receiving a favourable judgment from the US court, Essar Global Fund failed to repay dues and a petition in the British court was filed to attach its British assets, a banking source said.

Last month, a group of new investors presented a plan to the bankruptcy court in the US to take over the project, which would require an additional investment of $600 million. More than 300 creditors had filed claims in the US bankruptcy court, including Indian lenders.  

An Essar spokesperson said this was an old matter related to the bankruptcy of Essar Steel Minnesota.

The Ruias, who have sold their Gujarat-based oil refinery to Russia’s Rosneft at an estimated enterprise valuation of $13 billion, plan to use the proceeds of the sale to repay dues of both Indian and foreign lenders. The Indian lenders are hoping that Essar Global Fund will be able to repay dues of the Minnesota project with the proceeds of the Rosneft transaction and hence filed the suit in the British court to exert pressure on the Ruias.

After the announcement of the Rosneft deal last October, the Ruias had repaid $1.5 billion to Standard Chartered Bank, ICICI Bank and Axis Bank. This was after VTB Bank of Russia provided bridge finance for the Rosneft transaction so that the Ruias could secure clearances from Indian lenders for the deal. Once the Rosneft transaction is closed, the Ruias are expected to repay other lenders.

Essar Steel has been identified by the Reserve Bank of India as one of 12 companies against which action must been taken under the Insolvency and Bankruptcy Code in the National Company Law Tribunal. Essar Steel moved court on Tuesday challenging the Reserve Bank of India’s “arbitrariness” in selecting the 12 accounts, and the Gujarat High Court stayed proceedings till the next hearing on July 7. The stay was granted after Essar Steel said it had paid over Rs 3,467 crore to banks in the last one year.