A Tata Steel plant is seen in Jamshedpur, India. The company said yesterday it is in discussions with banks to raise a $3bn loan for refinancing debt taken to fund the acquisition of Corus in 2007.
Bloomberg
Tata Steel Ltd (TATA), India’s biggest producer of the alloy, is in discussions with banks to raise a $3bn loan for refinancing debt taken to fund the acquisition of Corus Group Plc in 2007.
The company plans to borrow in five- or seven-year tenor to repay debt used to purchase UK-based Corus for $12.9bn, according to three people familiar with the matter. The funds may be denominated in US dollars and other foreign currencies, the people said, asking not to be identified because the terms aren’t set. Tata Steel spokesman Kulvin Suri declined to comment.
Chairman Cyrus Mistry is seeking to take advantage of a revival in demand in Europe, the company’s biggest market, and falling borrowing costs to refinance part of the $6.14bn obligation taken to finance the Corus acquisition. Tata Steel has the equivalent of $15.4bn of bonds and loans due, according to data compiled by Bloomberg.
“Dollar rates are favourable at the moment, and they may seek to take advantage before the US and UK raise interest rates,” said Taina Erajuuri, who helps manage the equivalent of about $1bn in emerging-market assets at FIM Asset Management in Helsinki. “The company’s debt levels are still high and this move will help them repay some of this at lower rates.”
Margins on foreign-currency denominated loans taken by Indian companies have averaged 176 basis points in the first half of 2014 versus 197 in the six months ended on December 31, according to data compiled by Bloomberg. Indian companies have borrowed about $10.1bn from overseas this year, data show.
The company may also use part of the proceeds from the planned loan to repay other debt on its books, the people said. Mumbai-based Tata Steel is rated BB, two levels below investment grade, by Standard & Poor’s. Tata Steel’s shares fell 4.4% to Rs525.55 in Mumbai on Friday, while the benchmark S&P BSE Sensex index dropped 1.4%. Prices of Tata Steel’s 4.5% convertible notes due in November fell to $101.375, compared with $101.625 on June 12, according to Jefferies Group LLC prices.
The company reported a profit including that of Tata Steel Europe Ltd of Rs10.4bn ($174mn) in the quarter ended March 31, compared with a Rs65.3bn loss a year earlier.
Group steel deliveries rose 16% in the quarter to 7.62mn tonnes. Registrations for new cars in the European Union jumped 5.4% in the period, the longest streak of year-on-year gains since 2009, according to Bloomberg Industries.