VTB’s CEO Says Bank Considers Buying Loans Made to India’s Essar

  • Essar Oil is seeking backing from Russia state-owned companies
  • VTB CEO Kostin says talks have been been held with Rosneft

State-run VTB Group, Russia’s second-largest bank, is looking into the acquisition of loans made to Essar Global Ltd. by other lenders as the holding owned by Indian billionaire Ruia brothers is strengthening ties with Kremlin-backed companies.

"We are holding the talks with Essar, the banks" and Essar’s partner, Russian state-run oil producer Rosneft PJSC, Andrey Kostin, VTB chief executive officer, told Bloomberg on the sidelines of an economic forum in Russia’s Pacific port city of Vladivostok. He declined to comment on details of the negotiations as "the deal is very complicated."

Essar Group has been pursuing divestments after earnings were hurt by falling commodity prices and weak demand. The company has been seeking financial support from major Russian state-owned companies. In June 2015, Rosneft, Russia’s largest oil producer, signed an agreement to buy up to 49 percent in Essar Oil Ltd.’s Vadinar oil refinery, with the deal yet to be finalized. VTB opened a $1 billion credit line for the Indian company in 2014. Both Rosneft and VTB are run by close allies of Russian president Vladimir Putin.

Essar Global has taken out about $3.5 billion in loans from banks including Standard Chartered Plc, ICICI Bank Ltd. and Axis Bank Ltd., people with knowledge of the matter said last November. The three banks have approached VTB asking if the Russian group would be interested in buying some of the loans, people familiar with the situation said at the time.

Rosneft, which has a long-term crude supply agreement with Essar as well, expects to close the acquisition of the refinery stake in October, the company’s CEO Igor Sechin said earlier this year. Commodity trader Trafigura Group Pte, a long-time partner of Rosneft, is looking to buy at least a 15 percent stake in Essar Oil, which runs the Vadinar refinery, sources familiar with the matter told Bloomberg in July.

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