Ispat Industries to exit CDR, restructuring Rs 7000 cr debt

Sajjan Jindal’s newly acquired company Ispat Industries is heading fast towards an exit from the Corporate Debt Restructuring (CDR) status. JSW has mandated SBI Capital and Bank of India to re-finance Rs 7000 crores debt.

Sources with direct knowledge said the re-financing of the debt is expected to be completed by March 31, 2011.

Sources said the Rs 7000 crores debt will attract 10.75%-11% interest cost, Ispat is presently paying an average funding cost of close to 10%. Under the debt re-structuring, Ispat will get a moratorium of one year from the re-payment of debt. The tenure for debt repayment is expected to be about 10 years. Out of Rs 7000 crores, close to Rs 1800 crores is expected to be raised via foreign currency non-resident loan ( FCNR) in dollars and the rest will be rupee loan.

Around seven banks are in the process of syndicating the loan for Ispat. Sources said, banks like IDBI, IFCI, ICICI Bank with substantial exposure to Ispat CDR are expected to stay away from the debt re-financing of the company.

This restructuring will help JSW Steel in two ways, firstly, with Ispat going out of CDR, the new promoters can make independent decisions on the company. Secondly, a moratorium of one year will give Ispat a breather from debt re-payment and an option to channelise cash for expansion and backward integration projects to improve profitability of the company.