BAS to advise Essar revamp

Mumbai, Aug 3: Beleaguered Essar Steel has appointed US-based investment banker, Banc of America Securities LLC (BAS) as Financial Adviso...

Mumbai, Aug 3: Beleaguered Essar Steel has appointed US-based investment banker, Banc of America Securities LLC (BAS) as Financial Advisor to chalk out a strategy to repay the $ 250 million Floating Rate Notes (FRNs) which it had defaulted in repayment last month. Essar Steel was the first Indian company to default in repayment of a foreign loan.

An Essar statement said BAS is a subsidiary of Bank of America and it will help Essar Steel in formulating a comprehensive approach to "restructure and reduce its indebtedness and financing costs."

The steel major would deliver the comprehensive repayment plan developed with the assistance of the financial advisor to the FRN holders, it added. Essar had sought 90 days time from its FRN holders to repay the bond holders. The appointment of BAS is part of the strategy to repay its debtors. “The company has notified its trustees to appoint an independent financial advisor. The company plans to work with its financial advisor and deliver a comprehensive repaymentplan to the noteholders,” it said.

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While the company is drawing strategy to the FRN holders by selling its assets like power plants, and pellet plant in Vizag, its net profit for the first quarter of the current fiscal went up to Rs 150 crore. The company is expected to finish the current fiscal with record losses, said steel analysts.

Essar is now expected to exit from unrelated areas like telecom and sell its stake in Essar Oil by roping in BPCL as 26 per cent shareholder. But due to ensuing elections, BPCL is reluctant to take any step which could flout the Election Commission’s model code of conduct.