Steel companies face the ECB squeeze

 According to the new guidelines, banks and financial institutions, principally IDBI, ICICI Bank and the State Bank of India, would not be able to stand guarantee to the three separate issues, senior executives at the steel companies said. The steel companies had planned ECBs to refinance their high-cost rupee loans.

 While Ispat and Jisco were looking at raising $225 million each, Essar was planning to raise $200 million through the ECB route. 

A senior Ispat executive told Business Standard, "Raising funds in the international market without financial guarantors is difficult. With the new guidelines, companies will have to look at other options for raising funds. We are again looking at financial restructuring."

 The ECB float would have lowered Ispat's average cost of borrowing from the existing 10 per cent to around 8- 8.5 per cent, he said.  Jisco had planned to convert around Rs 1,000 crore of its rupee debt into foreign loans to lower its funds cost from 9.2 per cent to about 8 per cent.  Jindal executives said, "The change in the ECB norms has delayed our financial restructuring plans. However, following the proposed merger of Jindal Vijaynagar (JVSL) and Jisco, we will have a stronger balance sheet which we will try to leverage and independently go for an ECB issue next year."  Essar Steel's plan of raising around $200 million foreign loans has also hit a roadblock.  Essar officials said, "Currently, we are studying the implications of the new guidelines." The company was planning to raise foreign loans at an interest cost of around 5.5 per cent, compared with the company