June 23, 2017 / 8:36 AM / 2 years ago

Essar Oil's creditors approve $12.9 billion Rosneft takeover: sources

Employees walk past an Essar Group logo outside their headquarters in Mumbai May 20, 2013. REUTERS/Vivek Prakash

MUMBAI (Reuters) - Creditor banks to India’s Essar Oil approved the acquisition of the company by a group including Russia’s Rosneft, two sources familiar with the matter said, removing a key hurdle to the $12.9 billion deal that has been in the works for two years.

The news comes a day after Igor Sechin, CEO of the Russian oil and gas giant, said the Essar Oil deal could be considered as closed. Kremlin-controlled Rosneft, which sees the buyout as vital to expanding in Asia’s fastest growing energy market, had aimed to close the deal at the end of 2016 but it got held up over debt issues.

Those delaying what is Rosneft’s biggest foreign acquisition were India’s state-run banks and financial institutions that hold about $500 million of Essar’s debt, sources said in May.

However, it is still unclear whether India’s biggest insurer Life Insurance Corporation (LIC), which also lent money to Essar Oil, had given its approval or not.

LIC was not a part of the creditors’ group that gave its nod to the deal on Friday, said one of the two sources, who did not want to be named due to rules on talking to media.

An LIC spokesman did not answer a call seeking comment. A call made to the Essar Oil CEO also went unanswered.

The deal will give Rosneft a 49 percent stake in Essar Oil, while another 49 percent will be split between Swiss commodities trader Trafigura [TRAFGF.UL] and Russian fund United Capital Partners. Essar’s founder billionaire Ruia brothers will retain a 2 percent stake.

Reporting by Promit Mukherjee and Devidutta Tripathy; Editing by Himani Sarkar

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