Essar Steel Holdings, the Mauritius-based steel business holding company of the $14 billion Ruia-controlled group, has been forced to abandon plans to raise up to $750 million through issuance of junk bonds in the international capital markets.

On Wednesday, Moody’s Investors Service said it had withdrawn the provisional (P)B1 corporate family and (P)B2 senior unsecured bond ratings for Essar Steel Holdings (ESHL) following the company’s decision to defer its bond issue.

The issue of seven-year, sub-investment grade, dollar-denominated, unsecured bonds was targeted at qualified institutional buyers in the US and other countries. Bank of America Merrill Lynch, Deutsche Bank AG, Standard Chartered Plc and UBS AG were mandated by the company to raise the money.

“Ours was a benchmark offering where the terms and conditions, including the amount to be raised and the rate of interest, were to be decided based on investor demand gau-ged through road shows. We can confirm that we have deferred the bond issuance as we feel we can get a better deal if we go later. But we have not decided when to relaunch the issue,” Mahadev Iyer, chief financial officer of steel business at Essar Steel Business Group, told Financial Chronicle.

Moody’s Investors Service had rated the proposed bonds issued by ESHL and its fully owned Delaware-registered subsidiary Gallop Holdings LLC as speculative and subject to high credit risk. ESHL, according to Moody’s, has fairly tight liquidity and needs to complete its bond offering and debt consolidation plan. ESHL is looking to refinance up to $1639 million (Rs 7,250 crore) in short term debt.

“Upon issuance of the proposed notes and refinancing, ESHL’s consolidated short-term debt should fall to about $700 million, of which $300 million will be working capital loans,” S&P had said in a previous press release.

The deferral of the bond issue could jeopardise the Ruias’ plans to extend its debt maturity and put the company on a sounder fo-oting.

However, Iyer said “We are working on other options available to us. If Option A is no longer being pursued then we have Option B.” He declined to explain what the alternative options to achieve the debt consolidation plan were.