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| Tata Steel gets lenders' nod for easier Corus loan terms |
| Press Trust of India / Mumbai May 30, 2009, 13:34 IST |
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Tata Steel today said lenders of its UK-based subsidiary have approved easing certain terms for a 3.7-billion-pound Corus acquisition-related debt, after it agreed to infuse 425 million pounds into the European business.
Nearly half of the amount to be injected by Tata Steel into Tata Steel UK would be used for debt pre-payment and de- leveraging of the company's European balance sheet.
The revised debt package would not lead to any increase in interest cost for the remaining terms of the loan and it does not involve any additional finance from the lenders or any rescheduling of the debt commitments, Tata Steel said.
The company said in a statement, "Tata Steel UK, a 100 per cent indirect subsidiary of Tata Steel Ltd, today received lenders' approval to reset the covenants in its 3.7 billion pound acquisition-related senior debt facility."
"The lenders voted unanimously in favour of the company's proposal," Tata Steel said.
As part of the agreement reached with banks, "testing of the facility's earnings-related covenants will largely be suspended till March 2010 and will then resume with significantly higher flexibility than in the case of original covenants."
"As part of the package, Tata Steel Ltd will inject 425 million pounds into Tata Steel UK in a phased manner, of which around 200 million pounds will be used to prepay debt and de- leverage the European balance sheet," Tata Steel said.
Earlier this week, the company had said that banking syndicate, including Citigroup, StanChart and Royal Bank of Scotland, have sought time till May 29 to finalise the terms for the loan taken towards 12-billion dollar Corus takeover.
The terms were earlier to be finalised on May 22.
After reaching the deal today, Tata Steel's Group CFO Koushik Chaterjee said the covenant resetting agreement demonstrates the strong relationship of Tata Steel with its lenders and underlines the commitment of the company to its European operations.
"... Despite the challenging financial environment, there will be no increase in the debt-servicing costs of Tata Steel UK. Tata Steel Group continues to have adequate liquidity and has no material repayment obligations or refinancing requirements in the next 12 months," Chaterjee noted.
Corus CEO Kirby Adams said the "overwhelmingly positive" response from the lenders is a mark of their faith in the company's business, even as Corus explores options for Teesside Cast Products.
"We also look forward to stronger commercial relations with suppliers through an improved credit profile," Adams added.
Corus has annual revenues of more than 12 billion pounds and crude steel capacity of about 20 million tonnes.
Following the acquisition of Corus by Tata Steel in 2007, the combined enterprise has an aggregate crude steel capacity of over 28 million tonnes and has a workforce of about 82,700 across four continents, the Tata Steel statement said.
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