Tata Steel in talks for $5.4-billion loan

Tata Steel Ltd, the country’s biggest producer, was in talks with banks for £3.5-billion ($5.4 billion) in loans for its UK unit, four people with direct knowledge of the matter said.

BNP Paribas SA, Credit Agricole CIB, HSBC Holdings Plc and Royal Bank of Scotland Group Plc were among 11 banks that might lend £2.5 billion over five years, the people said, declining to be identified before an official announcement.

Citigroup Inc, Deutsche Bank AG, Standard Chartered Plc and ING Vysya Bank Ltd might also provide funds, one of the people said. State Bank of India may arrange a £1-billion loan over seven years, the people said.

Tata Steel Chief Financial Officer Koushik Chatterjee said on August 12 the Mumbai-based steel maker planned to refinance as much as $6.5 billion of long-term debt. The company took the loans to fund its $12.9-billion acquisition of Corus Group Plc in 2007, just before the global economic slump pared demand for steel and caused banks to curtail lending.

Chatterjee didn’t answer calls to his mobile phone or reply to an email seeking comment today. Spokespeople at Tata Steel and the banks didn’t immediately respond to emailed enquiries.

The five-year loan might pay interest of about 400 basis points more than the London interbank offered rate, or Libor, the people said. A basis point is 0.01 percentage point.

The interest rate on Tata Steel’s existing debt, due to be paid from 2012 to 2014, was at 210 basis points above Libor, one of the people said.

Tata Steel might sell $1 billion to $1.5 billion in bonds within the next year to repay a portion of the loans, they said.

Tata Steel declined 1 per cent to Rs 538.45 as of 2:05 pm in Mumbai trading today. The stock has dropped 13 per cent this year, compared with a 4.4 percent advance in the Bombay Stock Exchange benchmark Sensex.