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Bathinda Refinery
Debts forcing Mittal to pull out?
Bhagyashree Pande
Tribune News Service

New Delhi, April 1
Insufficient sops may not be the only reason behind Lakshmi N Mittal’s threat to stop work at the refinery in Bathinda, Punjab. For, sources point out, the steel czar might be doing so due to his company’s mounting debts, with the bankers who used to fund his acquisitions in the past now facing crisis themselves.

Presently, say sources, Mittal’s debts stand around $40 billion. And the banks that used to fund his takeovers, including Goldman Sachs and Citibank, too, have been hit hard by the recession.

The fallout of Mittal-owned companies running into losses was evident from his asking for more sops in Bathinda refinery recently, as otherwise the steel czar had announced to stop work there. Sources in the oil ministry, however, say that this was a mere “arm twisting tactic” on Mittal’s part, as more sops could not be given for a refinery than those allowed earlier.

Even though Mittal had put in his personal resources for picking up the stake in the refinery, analysts were always skeptical about the choice of the location. A landlocked refinery, in a way, did not have any scope in the oil business. And moreover, already there existed two refineries in the region — Panipat and Mathura, owned by the Indian Oil Corporation.

The fund crunch for Mittal’s firms is quite acute and sources say the problem is likely to aggravate in the days to come. Notably, Arcelor Mittal (a firm owned by him) has already raised 1.1 billion euro (about USD 1.5 billion) by issuing convertible bonds.

Arcelor Mittal CFO Aditya Mittal had recently said: “Convertible bonds will ensure multiple benefits to our company, hence enabling us to extend the maturity of our debt and diversify our debt structure, besides enhancing our liquidity.”

However, market analysts say that convertible bonds in the present conditions were not really being looked as a profitable route, as the bonds would get converted or exchanged only in 2014, which was a long time in view of the current economic situation.

Also, the steel cycle internationally has hit a rock bottom and bankers are likely to put pressure on Mittal in the days to come, sources point out.

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