Essar Steel - Defaulting on Debt Payment
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"The fault did not lie in the instruments itself but in the financial planning that went behind it. It may be relevant to quote the safety motto of the National Rifle Association - 'Guns do not kill people. People kill people."
- A December 2002 article on www.indiainfoline.com, commenting on the Essar FRN default issue.
In July 1999, Essar Steel (Essar), the leading Indian sponge iron manufacturer and the flagship company of the well-known business house, the Essar Group was facing a severe financial crisis. Essar earned the dubious distinction of becoming the first Indian company to default in honoring its international debt repayment obligations.
The notice required FRN-holders to choose between the two options (rollover or refinance). Essar sources said that the future course depended on the response of the FRN-holders.
1] Primarily, development finance institutions such as IDBI and the erstwhile ICICI that play the role of owners/lenders in many Indian companies.
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