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Mumbai: Tata Steel Ltd, the world’s sixth-largest steel producer, on Tuesday said its subsidiary, Tata Steel UK, has asked its lenders to reset the terms of the debt it took to buy Corus. As part of the deal, Tata Steel will “voluntarily prepay” £200 million, or roughly Rs 1,500 crore, of this non-recourse loan to reduce the debt overhang on its European operations as its arm battles the downturn in the European steel industry.
The $12.1-billion (£6.2-billion) Corus acquisition was financed by an $8-billion debt raised by Tata Steel UK from a consortium of lenders.
In a release, Tata Steel said it has not sought any additional funding since it has sufficient liquidity to run its operations, and, “has not requested any re-scheduling of its debt servicing obligations, as there are no material re-payment or re-financing requirements in the near future.”
While announcing its Q3 results earlier, Tata Steel had said it had no repayment obligation till December 2009 in Tata Steel UK. It had also said it would prepay $450-million debt of Tata Steel UK in FY2010.
Tata Steel shares closed up 1.31% on Tuesday at Rs 275.20 on the Bombay Stock Exchange.
The statement comes two days after Tata Group chairman Ratan Tata said in an interview to a UK newspaper that the group wanted the British government’s support for “facilitation of access to credit.” Other than Corus, the group has also acquired Jaguar & Land Rover for £1.15 billion in 2008. Last week, Tata Steel said it might close its Teesside Cast Products (TCP) unit in the UK, part of the Corus, after a consortium of four international firms terminated a ten-year contract for slab offtake from the unit.
Tata Steel said talks for a renegotiation of the non-recourse loan terms are being led by Citigroup, Royal Bank of Scotland and Standard Chartered Bank. Tata Steel UK met its banking syndicate in London and Mumbai to discuss the current debt environment and the potential future impact on some covenant requirements under the company’s debt package.
Non-recourse debt is a secured loan, availed of by pledging collateral, but the borrower does not have any personal liability towards it.
The £200-million prepayment would be made by Tata Steel Ltd, which continues to have a significant liquidity buffer, the company said. According to the latest available annual report, for the financial year 2007-08, Tata Steel has investments worth Rs 4,103 crore,...
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