Essar Oil is in the process of replacing its high-cost rupee loans equivalent to $2.27 billion with external commercial borrowings (ECBs), for which it has approval from the Reserve Bank of India (RBI).
As part of this process, the company replaced the corporate debt restructuring (CDR) loan facility with a new debt facility of about Rs 9,100 crore on commercial terms from similar group of lenders.
The CDR loan facility was availed by the firm in December 2004 to help cover the construction of its Vadinar refinery in Gujarat.
The firm is currently servicing debt at an average of 11.5 percent and the refinancing will help the firm reduce the rate to around 6 percent. This will result in savings of $120-150 million every year after we have refinanced the entire debt.
The company has refinanced Rs 2,611 crore of rupee term loans into equivalent foreign currency debt of $481 million through ECBs and swaps.
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.