Tata Steel eyes $500 m via bonds in Singapore

Co needs to redeem $5.5-bn bonds, loans by 2016

Tata Steel will kick off road shows on Tuesday for its first overseas bonds in over three years, investment bankers said, adding the the steelmaker would be looking to raise at least $500 million.

In a statement to the Bombay Stock Exchange on Tuesday, the company said Abja Investment, Singapore, a wholly-owned subsidiary, is contemplating an issuance of Singapore dollar bonds to be listed on the Singapore Exchange.

Tata Steel?s consolidated net debt increased by R2,800 crore sequentially to R58,000 crore at the end of December, 2012. Borrowings rose due to $2.1 billion worth of capital expenditure incurred in the nine months to December 2012 and could increase further, analysts say, since the company has expansion plans, estimated at $2.4 billion, over each of the next two years. ?We expect net debt to increase to R63,400 crore in FY14 from R58,000 crore at the end of December 2012,? Kotak Institutional Equities wrote in a report after the steelmaker announced results for the December 2012 quarter.

Bloomberg data show Tata Steel needs to redeem a total of $5.5 billion bonds and loans by November 2016. The company raised $547 million selling 4.5% convertible notes in 2009.

A drop in steel prices and restructuring costs caused Tata Steel Europe to report an Ebitda loss of $78 million in the three months to December, 2012 resulting in a consolidated net loss of R760 crore for Tata Steel. A higher-than-expected tax rate, interest and depreciation charges also hurt the company?s bottom line. Tata Steel reported consolidated loss of R530 crore in the nine months to December 2012.

Tata Steel?s issue will be the third Singapore-dollar issue this year from India, following ICICI Bank?s SGD225 million raise and Tata Communications? SGD250 million raise. So far this year, 12 Indian companies have already raised close to $8 billion with excess liquidity in the global markets having boosted appetite for Indian paper.

Spreads for Indian dollar bonds have tightened by 125-175 basis points, compared with last year, according to investment bankers who expect Indian firms to raise about $17-20 billion via the overseas route. In 2012, they mopped up $9.8 billion.

More Indian companies are hoping to refinance more expensive debt. Waiting in line are ONGC Videsh, the overseas unit of the country?s biggest energy explorer, which plans to raise as much as $1 billion by the first week of May.