MUMBAI, DEC 8: The heads of financial institutions who are meeting here on Thursday are likely to consider a $ 104 million (around Rs 455 crore) loan package for the beleagured Essar Steel. This loan package will be used for the ``financial restructuring'' of the company which recently defaulted on its $ 250 million FRN repayment obligations.``The package is likely to be an eight year loan with four-year moratorium. The Ruias Shashi Ruia, Ravi Ruia, Prashant Ruia and Anshuman Ruia will be the personal guarantors for the loan,'' FI officials said.It may be recalled that the financial institutions had declined to bail out the Essar group when it defaulted on the FRN repayment earlier this year. Subsequently, institutions changed their stand and decided to back the group. FIs, which had met last month, had already taken an in-principle decision to fund the repayment.Essar Steel has around Rs 4,600 crore borrowings. The company's net worth had come down to Rs 1,736 following losses in the last year. Infiscal 1999, Essar Steel which has an equity capital of Rs 330 crore had posted a net loss of Rs 496.45 crore.Essar Steel had already issued a notice to the FRN holders to exercise their option by December 20. The three options offered to the bondholders are a five-year rollover on an unsecured basis, 10-12 year rollover on a secured basis and re-purchase option via a fixed price tender offer at an all-in price inclusive of any accrued interest of $690 per $1,000 note. The company is expected to complete the debt restructuring by the end of January. The company is expected to go ahead with the rights issue only after solving the FRN issue.According to FI sources, the company proposes to change the average maturity of two export securitisation deals struck earlier from three and a half years to five years. Of a total of $335 million, Essar Steel has already repaid $85 million. For the $135 million arranged by UBS, of which about 50 per cent has already been paid, is due in March 2000. IDBI, which issaddled with huge sticky loans, is planning to ask its large corporate borrowers, who were under pressure to repay loans, to pledge 51 per cent of their shares with voting rights with the institution.FIs are also likely to ask the promoters of Essar to pledge 51 per cent of Essar Oil's stake for fresh funds. IDBI officials had recently gone on record saying that they have already placed such a proposal before some of their clients where IDBI has substantial exposures. IDBI can also exercise the option of converting its loans into equity if the situation so warranted, FI sources said.
