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Rosneft closes $13-billion Essar Oil acquisition deal

LiveMint logoLiveMint 20-08-2017 Deborshi Chaki

Mumbai: The nearly $13-billion acquisition of Essar Oil Ltd by a consortium led by Russia’s Rosneft PJSC was completed on Sunday, two people aware of the matter said. The deal’s consummation paves the way for the Essar group to reduce its debt.

The deal, which Essar termed the largest foreign direct investment in India, includes the sale of a 20 million-tonnes-per-year Vadinar refinery and Vadinar port in Gujarat to Rosneft, United Capital Partners and Trafigura Group Pte. Essar’s promoters, the Ruias, will retain a 2% stake in these assets.

The total debt of Essar had been estimated at close to Rs1.3 trillion by equity brokerages at the time of signing the deal in October.

An Essar group spokesperson declined to comment. Rosneft could not be immediately reached for comment.

The deal’s completion took a little longer than what the company had anticipated because it was held up by some lenders refusing to give their approvals. The lenders, including state-run Life Insurance Corp. of India (LIC), had exposure to various Essar companies and demanded a repayment of their debts by the group as a pre-condition for approving the deal.

As per law, Essar Oil had to secure approvals from all its lenders to go ahead with the deal, which was initially expected to be consummated by the end of March.

On 5 July, Mint reported that LIC gave its nod to the deal after agreeing to receive part payment of its dues.

The final papers were signed on Sunday, the people cited earlier said. Both Essar and Rosneft-Trafigura consortium have called for separate media briefings in Mumbai on Monday.

At the time of signing the deal, Essar group director Prashant Ruia had said in an interview that the deal would wipe out a substantial part of the holding company’s debt. About $5 billion debt at the operating company level (Essar Oil, Vadinar Port and Vadinar Power) would be transferred to the buyers, while another $5 billion would go into deleveraging the holding company. Ruia had also said that a part of the proceeds would go into restructuring the debt of Essar Steel Ltd.

The steel firm is one of 12 large defaulters identified by the Reserve Bank of India for early insolvency proceedings. On 2 August, the Ahmedabad bench of the National Company Law Tribunal had admitted the insolvency petition against Essar Steel. The firm owed lenders about Rs45,000 crore, of which Rs31,671 crore had become non-performing as of 31 March 2016. The company owes as much as 93% of this amount to a consortium of 22 creditors led by State Bank of India.

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