Rosneft's India venture Nayara rejigs debt to cut interest costs

By Promit Mukherjee and Nidhi Verma

MUMBAI/NEW DELHI (Reuters) - Russian oil company Rosneft's Indian venture Nayara Energy, which owns one of the largest refineries in the country, is moving to replace high-interest loans with new debt, part of efforts to reshape its balance sheet and cut borrowing costs, according to three sources familiar with the plan.

The high-interest loans are being refinanced through a mix of both rupee- and dollar-bond issuances, said the sources, who declined to be named as the discussions are private.

Nayara did not respond to a Reuters' email seeking comment.

Rosneft and its partners - including global trader Trafigura and Russian fund UCP - in August 2017 closed the deal to buy Essar Oil, now known as Nayara Energy, for $12.9 billion. As part of the deal, Nayara inherited $5 billion in high-interest loans.

 

Within months of the deal, Nayara refinanced the legacy high-cost loans with 20-year loans at more favourable terms, helping it to save $60 million annually, one of the sources said. The source also said Nayara was now looking to cut interest costs further by converting some of these refinanced loans to long-term bonds.

The company on Wednesday raised 26 billion rupees ($380.16 million) via a three year domestic bond at an average coupon rate of 9.5 percent, said the three sources, who also said this would be followed by a $450 million dollar bond issue in a September.

"Though the bond market is currently unattractive, with the backing of Rosneft, any fund raise will be at interest costs way better than earlier," one of the sources said.

Nayara has appointed JP Morgan and Deutsche Bank as advisers to the overseas bond issue. JP Morgan and Deutsche Bank did not respond to Reuters emails seeking comments.

The refinancing will help Nayara to tackle legacy issues that it inherited from Essar Oil, which went into a corporate debt restructuring scheme after it defaulted on making loan payments.

($1 = 68.3925 Indian rupees)

(Reporting by Promit Mukherjee and Nidhi Verma; Editing by Euan Rocha and Jane Merriman)