Essar Steel, State Bank of India and other lenders may wrap up loan recast today

MUMBAI: The State Bank of India and other lenders will meet Essar Steel's top management on Thursday to probably conclude a loan recast where parleys have been going on for months with neither side willing to sacrifice their claims, said two people familiar with the matter.

But this time round, banks believe that improvement in the fortunes of the steel industry due to government's duties on imports could help them bargain hard and push the company to be realistic in what it has to bring to the table to conclude the recast, said the sources, who did not want to be identified.

Essar Steel, which has borrowed more than Rs 44,000 crore from banks, is among the largest borrowers whose loans were classified as nonperforming assets by lenders in the quarter to March.

“A consortium of 30 lenders will meet at SBI headquarters to chalk out the future plan of action,“ said a senior bank executive, who did not wish to be identified.

In the past, banks have rejected at least a couple of debt recast proposals submitted by the company since these involved an enormous haircut from lenders. “A number of lenders are frustrated since the talks have been on for the past few quarters without much progress,“ the executive said.

In response to an emailed query from ET, Essar Steel said: “The company is in discussion with its lenders to restructure its long-term debt. The proposal of the company is under consideration. Hence it is too premature to offer any comment on the matter.“

Banking sector executives said the company has proposed that a part of the debt be restructured and the balance loan be converted into lowyielding bonds.

“The proposed loan restructuring scheme is outside S4A,“ one of the executives said on condition of anonymity.