JSW refinances Rs 6,000-cr Ispat debt

JSW Ispat Ltd has completed the Rs 6,000 crore debt refinancing deal. A source close to the development confirmed the new average interest rate for the refinance is 11.75 per cent, lower than the earlier rates.

The lead bankers for this term loan are Bank of India, Canara Bank and Punjab National Bank. “The term loan is approved by a consortium of 10 banks,” the source said. “The State Bank of India has not taken any exposure in the term loan.”

The earlier loans to Ispat were between 14 per cent and 19 per cent and the new loan terms will give some benefit in terms of cost savings to JSW Ispat. JSW Steel refused to comment on the development.

With this refinance, Ispat is finally out of the corporate debt restructuring process. The major lenders to Ispat prior to the refinance were IDBI Bank with Rs 3,000 crore, ICICI Bank Ltd (Rs 1,800 crore) and IFCI Ltd with Rs 1,500 crore. Ispat owned Rs 2,000 crore to SBI as part of its working capital requirements.

In December, JSW Steel had agreed to buy a controlling 41.3 per cent stake in Ispat Industries for Rs 2,157 crore, valuing the company at Rs 5,224 crore. JSW Steel owns 49.3 per cent in Ispat and has cleared its intentions to up the stake from open market share purchases.

The company official, requesting anonymity, said out of the Rs 6,000 crore, around Rs 900 crore is the margin money for the working capital and SBI is the lead banker for the loan. SBI has no exposure in the Rs 6,000 crore term loan, the official said.

In July, Seshagiri Rao, joint managing director and group CFO, JSW Steel, had said: “Our focus majorly is to reduce the working capital interest rate and we are successful in doing that.” For JSW Steel the deadline to refinance the debt was September 30 and the company has successfully managed to do so. The company is confident that it will achieve the Ispat turnaround in one year and will improve its profitability. However, the company will remain an associate company of JSW and there are no merger plans.

JSW Steel has its downstream units at Tarapur and Vasind and is feeding steel to those plants from Ispat's three million tonne Dolvi plant, thereby saving on freight costs of transporting steel from its Karnataka steel plant. The company is also using Ispat's retail outlets to further its strategy of selling steel through retail chain, JSW Shoppe.