Essar Steel - Defaulting on Debt Payment


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:

Case Code : FINC020 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate scams / Controversies
Case Length : 16 Pages
Period : 1998 - 2001
Pub. Date : 2002
Teaching Note : Not Available
Organization : Essar Steel
Industry : Steel, Financial Services
Countries : India

Abstract:

The case examines the financial crisis faced by Essar Steel (Essar), the leading Indian sponge iron manufacturer and the flagship company of the Essar Group, during the late-1990s and the early 21st century.

It discusses how the company issued floating rate notes (FRNs) in the mid-1990s to finance its Hazira HRC plant and examines in detail the reasons why it defaulted in repaying the FRN-holders on the maturity date.

The case critically analyzes the measures taken by the company to come out of its financial problems, the role of the FIs and the promoters.

Issues:

The suitability of FRNs in the capital structure of a long-term project

Contents:

  Page No.
The Default 1
Background Note 2
Detailing the Problems 3
End of Problems? 7
Exhibits 10

Keywords:

Financial crisis, Essar Steel, Essar, Indian, sponge iron, manufacturer, flagship, Essar Group, 1990s, 21st century, floating rate notes,FRN,1990,Hazira, HRC, FRN, maturity date, financial problems, FI, promoters

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