* Rosneft threatens to revise deal terms, says one source
* Deal will help Rosneft compete with Saudi Arabia in Asia
* India sees deal as key to helping address bad debts
By Nidhi Verma, Vladimir Soldatkin and Julia Payne
NEW DELHI/MOSCOW/LONDON, May 11 Russian state
oil firm Rosneft is struggling to close its $12.9
billion acquisition of India's Essar Oil Ltd because six of
Essar's Indian creditors have yet to approve the deal, sources
close to the talks said.
The state-run banks and financial institutions that are
delaying Rosneft's biggest foreign acquisition hold about $500
million of Essar's debt, five industry and banking sources told
Kremlin-controlled Rosneft, which sees the deal as vital to
expanding in Asia's fastest growing energy market, had aimed to
close the deal at the end of 2016. Now a June target for
completion may be in doubt.
"Tensions between Rosneft and Essar are running high," said
one of the industry sources, who like others asked not to be
The sources said the acquisition was still expected to go
through, but one of them said Rosneft had written to Essar
threatening to change the terms of the deal, including to pay a
lower price, if the dispute over debt was protracted.
"The parties are working towards obtaining the approvals,"
an Essar spokesman said, without giving details about any delays
or the creditors involved. "We are hopeful that the deal will be
completed in the upcoming few weeks."
Rosneft Chief Financial Officer Pavel Fedorov told a
conference call on Wednesday that the purchase was now expected
to be completed by the end of June.
The six institutions holding up the transaction are IDBI
Bank, Punjab National Bank, Syndicate Bank
, Indian Overseas Bank, Life Insurance Corp
of India and non-bank financier IFCI Ltd, the sources
The six lenders gave no official comment when contacted by
Another industry source said Rosneft had wanted to finalise
the deal in early June at the St Petersburg Economic Forum,
where Indian Prime Minister Narendra Modi is due to meet Russian
President Vladimir Putin. But he said those hopes have now
Rosneft won a bidding war to buy Essar against Saudi Aramco,
its biggest competitor in the oil export market.
The deal will give Rosneft a 49 percent stake, with a
further 49 percent split between Swiss commodities trader
Trafigura and Russian fund United Capital Partners.
The billionaire Ruia brothers will retain a 2 percent stake.
Russia's VTB bank is acting as advisor on the transaction.
It declined to comment on the hold up.
"The process of closing the deal is in its final stages and
is expected to conclude soon," a spokesman for Trafigura said,
while UCP declined to comment.
CLEARING BAD DEBTS
The deal is also valuable for Modi's government, as it seeks
to clear India's $150 billion in bad debt.
Essar Oil India owed about $5.5 billion to almost 30 Indian
lenders. Apart from six, others have approved Essar's transfer
of ownership to Rosneft from its current owners Indian brothers
Ravi and Shashi Ruia, banking sources said.
The State Bank of India, the country's biggest
lender, has given its no-objection to the deal, the sources
Among the six institutions blocking the deal, Syndicate Bank
was expected to clear the deal with its board in 10 to 15 days,
one banking source said. A senior source at Indian Overseas Bank
said a no-objection certificate was being processed.
The sources said debt talks were complicated by the fact
that some lenders were also owed money by Essar's parent, Essar
Global Fund Ltd, or subsidiaries of the conglomerate that has a
portfolio ranging from steel to power generation.
Sources said some lenders might be seeking to gain
concessions on other debt with Essar units before giving their
Essar Global Fund has previously said it planned to use the
proceeds to clear half of the group's debt, which CEO Prashant
Ruia has put at about $13.5 billion.
(Additional reporting by Euan Rocha, Promit Mukherjee and
Devidutta Tripathy in Mumbai, Katya Golubkova in Moscow and
Dmitry Zhdannikov in London; Editing by Dmitry Zhdannikov and