The Essar Group on Monday said it has pre-paid Rs 4,230 crore raised by subsidiary Essar Communications Holdings Ltd a year ago, a move that will give the Ruias a free hand to decide on the option for part-sale of their stake in joint venture Vodafone-Essar.
"Upon settlement of these bonds, the 10.97% equity stake in Vodafone Essar Limited held by ECHL will be free from all encumbrances," Essar said in a statement.
It has exercised the issuer call option of the Rs 4,230 crore rated, listed, zero coupon non-convertible debentures. The bonds were raised in January, 2010, in two series of Rs 2,115 crore each, with maturity dates of July 22, 2011, and December 7, 2011, it said.
"Now, Essar has decided to foreclose both the bond series with settlement date of March 29 and has deposited the entire outstanding amount in escrow with the account bank for onward payment to bond holders on March 29, 2011," the company said.
Essar has a put option with Vodafone, under which it has the option to sell its 33 % stake in Vodafone Essar for USD 5 billion, or part sale at a fair market value. Essar holds 11% in Vodafone through domestic entity ECHL and the balance 22% through overseas entities.
With the put option window closing on May 8th, Essar's decision to pre-pay the bond holders also means that the put option right has vested back with Essar from the bond holders.
Hence, Essar's stake is now free from all encumbrances and it can independently take a decision on the put or part sale option without being influenced by the bondholders.
Vodafone has objected to Essar's plan of reverse merging Essar Telecommunications Holdings Private Limited (ETHPL), the holding company of ECHL with India Securities, which is a listed entity.
While Essar maintains that the objective for reverse merging ETHPL with ISL is to determine the market value of its stake in VEL, Vodafone has filed an objection with the Madras High Court, where the scheme is slated to come up for hearing.
In its response, Essar has said that the objections raised by Vodafone are frivolous, untenable and aimed at achieving a collateral purpose of extracting commercial bargain.
Essar has said that Vodafone has no locus standi to make a complaint since it was neither a shareholder nor a creditor of the companies involved (ETHL and ISL) in the reverse merger.
Vodafone's interests were purely commercial, with an intention to delay the merger till a fair market valuation exercise gets complete and hence, its objections are with mala fide intention, Essar has claimed.
Essar has acted within its full rights under the contract that allows it to exercise an option to discover the fair market value of its shareholding in Vodafone Essar, it has asserted.