Domestic banks holding Essar's floating rate notes (FRNs) have asked the company not to sell off Essar Power as it is related to the group's core business. This was conveyed to the company in a meeting with bankers last week.
Banks have directed Essar Steel to provide them an independent valuation of its total assets before they can consider the possibility of rolling over the FRNs on a secured basis. Essar Steel has offered an option to roll over the FRNs for a period of 10-12 years, with the security of a charge on the company's assets that will rank pari passu with the charge of the financial institutions (FIs).
Currently, State Bank of India, Bank of Baroda Bank of India and UCO Bank hold $40 million of $250 million FRN bonds.
The bankers are of the view that the Essar Group should not sell assets that are connected with their core activity. Instead, Essar should hive off assets not related to its core business. Bankers would prefer the company moving out of telecom instead. In case of valuation of assets, bankers said Essar should first provide them with a valuation study on assets and also arrange a meeting between banks and FIs for an open discussion on the extent to which the latter would be interested in sharing the charges on assets with banks.
