Lenders likely to approve Essar Oil's exit from CDR debt today

The Ruia’s led Essar Oil, the subsidiary of London-listed Essar Energy, will meet its lenders today to discuss the company’s corporate debt restructuring programme, sources have told_CNBC TV-18_.

According to the sources, the company has agreed to pay a recompense amount to its lenders, led by SBI and ICICI Bank, to get out of the restructuring bracket that was implemented in 2005.However, Essar Oil’s recompense proposal requires approval from 75 percent of its lenders, reports CNBC TV18.

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The company’s Rs 9,000 crore Corporate Debt Restructuring scheme for recommencement of its 12 million tonne project at Vadinar in Gujarat dates back to 2005 under which lenders agreed to restructure all their existing debts, including debentures, and to provide fresh funds under certain conditions, one of which relates to the finalisation of a scheme suitable to all other large debenture-holders.

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However, Essar Oil received a major blow on 18 January when the Supreme Court rejected the company’s contention that it was entitled to make deferred payment of tax on sales from its Vadinar refinery in Gujarat.

Essar was originally granted the sales tax deferment as part of a capital investment incentive scheme in Gujarat after it agreed to build a refinery there in 1999.With the Supreme Court ruling going in state’s favour, Essar Oil will have to cough up the entire amount of Rs 6,309 crore it enjoyed as benefits of sales tax deferment so far.

In fact, reports say that lenders might consider this non-payment of sales tax as a default and ask for a conversion of debt into equity.