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FRN bail-out eludes Essar Steel as FIs play it safe

Leading financial institutions like IDBI and ICICI met in New Delhi today but did not discuss any bail-out package for Essar Steel. Media reports during the last couple of days have been hinting that the meeting would lead to an announcement of a package for the financially beleagured company.

Essar had submitted a proposal to the institutions to work out a repayment package for its floating rate note issue of US $ 250 million.

IDBI is the lead financial institution for Essar Steel.

The loan extended for the FRN issue is due for redemption on July 20,1999 and if the institutions refuse to extend funds to the company, it may become the first Indian company to default in the international market.

Earlier, IDBI had asked the company to seek its foreign lenders' help in rolling over the FRN issue. Media reports however indicated that was easier said than done. Foreign lenders apparently want the Indian financial institutions to give a guarantee or take the loan on their books as a pre-condition to the rollover.

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