Essar Comm to file revised bond offer doc

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The Reserve Bank of India (RBI) has sought a revised offer document from Essar Communication Holdings that details how it plans to use funds raised in a USD 920 million bond issue, two sources with knowledge of the development said.

Company officials confirmed the development to Reuters, and said once the details are provided the bonds, for which it received commitments last month, could be sold. The officials declined to be named.

In a letter to Barclays, the book-runner for the deal, the RBI sought the details of how Essar would use the money raised in India but earmarked to be spent outside the country, said the sources who spoke on condition of anonymity.

"RBI wants to ensure that the funds are not repatriated back," said a potential investor who had been told of the development.

Indian regulations do not permit firms to bring funds back into the country that were raised for offshore operations.

"RBI wants the company to spell out a break-up of intended investment. Say how the company would invest the proceeds till the money is spent on the uses mentioned," said another source.

Company officials said most of the proceeds would used for offshore acquisitions in areas such as coal, steel and power.

Essar Oil , a related group company, is in exclusive talks to buy three of Royal Dutch Shell European refineries.

Essar is raising the funds through zero-coupon bonds backed by receivables under a put option agreement for its 10.97% stake in mobile operator Vodafone Essar.

There are two tranches, a 9.15% bond maturing July 2011 and a December 2011 bond that carries a 9.25% coupon.

Investors and company officials expected the bond issue would be settled shortly.