Rosneft-Trafigura $13B Deal To Buy Essar Oil Delayed Over Debts

Six Indian creditors of Essar Oil have not yet approved the US$12.9-billion acquisition of the Indian company by Rosneft and Trafigura, potentially further delaying a targeted closing date in June, Reuters reported on Thursday, quoting industry and banking sources close to the talks.

Essar Oil owed around US$5.5 billion to nearly 30 Indian banks, and all but six have approved the acquisition, according to Reuters’ banking sources. The six lenders that are still holding up the deal have some US$500 million of Essar’s debt.

Back in October, when Rosneft announced the deal to buy 49 percent in Essar Oil, it said that the target closing is the end of 2016. Trafigura, which leads the investment consortium buying another 49 percent in Essar Oil, also expected the deal to close by the end of 2016. The cost of the acquisition of 100 percent of the Indian group is US$12.9 billion, Rosneft said back then.

After the closing of the deal slipped after 2016, the current delay is not the first debt snag the deal has hit this year. In March, reports suggested that some of the Indian creditors of Essar Oil had not yet approved its acquisition, and the deal had been postponed for April.

But that targeted closing slipped again as some banks have yet to endorse the acquisition.

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“Tensions between Rosneft and Essar are running high,” one industry source told Reuters today.

Another said that Rosneft had threatened Essar with altering the terms of the deal, including paying a lower price, if the debt issues are not resolved soon.

Spokesmen for Essar and Trafigura told Reuters that the deal was expected to conclude soon.

Although some of the six banks have initiated no-objection procedures, the negotiations over Essar’s debts are complicated because some of the lenders hold debt owed by the Essar’s parent company Essar Global Fund Ltd or its subsidiaries, according to Reuters’ sources.

By Tsvetana Paraskova for Oilprice.com

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