NEW DELHI: Essar Steel has struck a deal with CMC Trading AG for settling its $130m (about Rs 610 crore) outstanding export advance facilities.

The settlement will save the company about $86m or a little over Rs 400 crore. Essar Steel had recently settled its FRN issue at a deep discount too.

Besides, Essar Steel is also said to be negotiating with other foreign lenders such as BLB, IKB and Societe Generale for settling a $68m debt at a similar discount. Banking sources said the proposed settlement could save Essar Steel another Rs 245 crore.

Sources said the export advance facilities from CMC Trading were funded by United Bank of Switzerland (UBS) and Bank of America (BOA). Essar had availed export advances from CMC in two tranches in the form of unsecured loans. Sources said the export advance facility has come down from $335m to $130m.

Confirming the CMC Trading deal, a company spokesperson said, "The Corporate Debt Restructuring (CDR) committee of lenders has approved the comprehensive debt restructuring proposal of Essar Steel. This buyback is part of the restructuring."

Essar's debt settlement move with its foreign lenders is in line with its corporate debt restructuring plan. In May '03, Essar Steel had arrived at a settlement with FRN holders for buyback of the $250m issue at a 76% discounted rate. While about 70% FRN holders opted for the buyback, the rest opted for rollover of the notes at a fixed coupon rate of 0.25%.

Sources said the settlement of unsecured loans would help Essar Steel to reduce its debt by over Rs 1,200 crore in the current fiscal. Essar Steel has also entered into a one-time settlement of secured term loans amounting to Rs 123 crore with a clutch of Indian banks and FIs. Sources said the company has settled this loan at Rs 86 crore, saving around Rs 37 crore.

The FIs and banks involved in the one-time settlement with Essar Steel included Central Bank of India, Bank of Baroda, Barclays Bank, Exim Bank and the Industrial Investment Bank of India. The one-time settlement with these banks, however, was outside the purview of the debt restructuring package approved by the CDR group of FIs in January this year.