Essar Oil exits CDR, starts refinancing rupee loans

MUMBAI: Essar Oil has exited the corporate debt restructuring programme and started the process of refinancing its rupee loans by cheaper external commercial borrowings, the company said in a statement late on Thursday. The company said it has completed the process for exiting the Corporate Debt Restructuring (CDR) loan facility set up in December 2004 to help cover the construction of its Vadinar refinery in Gujarat. The CDR loan facility has been replaced with a new debt facility of about Rs 9,100 crore on commercial terms from similar group of lenders.

Subsequently, the company has refinanced Rs 2,611 crore of rupee term loans into equivalent foreign currency debt of $481 million through ECBs and swaps. This is a part of the company's plan to replace its high-cost rupee loans equivalent to $2.27 billion with external commercial borrowings, for which it has approval from the Reserve Bank of India.

"We are currently servicing debt at an average of 11.5% and the refinancing will help us reduce the rate to around 6%. This will result in savings of $120-150 million every year after we have refinanced the entire debt," Lalit Gupta, chief executive officer told ET.

Essar Oil, a part of the energy conglomerate controlled by billionaire brothers Shashi Ruia and Ravi Ruia, completed the expansion and upgradation of its Vadinar refinery last year. The refinery capacity stands expanded to 405,000 barrels per day from 300,000 previously and its complexity has increase to 11.8 from 6.1.

“The CDR exit marks a significant step forward for Essar Oil. Complete stabalising of our expanded capacity pave the way for us to move forward positively to maximize value for all our stakeholders. Capacity expansion and high complexity has already improved our profitability,” Gupta said.