Tata Steel raises $1.5-bn in dollar bonds

Company has over Rs 33,000-crore loans due in the next 18 months

India's largest steel maker Tata Steel on Thursday raised Rs 9,000 crore ($1.5 billion) in dollar denominated bonds in the international markets. This marks the beginning of the company's efforts to refinancing over Rs 33,000-crore loan that it has to repay in the next 18 months.Tata Steel plans to follow this round of fund-raising with an additional $5.6 billion (Rs 33,600 crore) term loans in multiple currencies in the coming months.

India's largest steel maker acquired Anglo-Dutch firm Corus for $12.1 billion (Rs 53,460 core) in 2007, raising the company's consolidated net debt to Rs 49,392 crore by March 2008 from Rs 14,037 crore a year ago. Besides, it increased capacity at the century-old Jamshedpur plant to 10 million tonnes by 2012-13 from 4 million tonnes in 2006 and is building a six million tonne unit at Kalinganagar in Odisha for Rs 38,500 crore. Consequently, Tata Steel's consolidated net debt rose to Rs 59,788 crore in March.

RAISING IS RIGHT

• The dollar money was raised by the Singapore arm of Tata Steel ABJA Investments and the issue got an oversubscribed worth nearly $9 billion, according to the merchant banking sources
• India’s largest steel maker acquired Anglo-Dutch Corus for $12.1 billion (Rs 53,460 core) in 2007, raising the company’s consolidated net debt to Rs 49,392 crore by March 2008 from Rs 14,037 crore a year ago

"While the $1 billion bond for 10-year tenor was issued at a coupon of 5.95 per cent, the remaining $500 million was raised at 4.85 per cent coupon for 5.5 years," informed a banker after completing the transaction late on Thursday evening.

After this bond issue, the company will focus on raising the remaining $5.6 billion through term loans. It has already appointed near a dozen banks to syndicate this. State Bank of India has got the biggest mandate of $2.4 billion for syndicating a seven-year facility of  euro 1.8 billion, the banker said. The company has mandated another seven-year facility of $1.5 billion besides a six-year revolving credit of £700 million ($1.2 billion) and a euro 370 million ($500 million ) term loan for five years among 10 banks.

These include Australia and New Zealand Banking Group, Bank of America-Merrill Lynch, Bank of Tokyo-Mitsubishi, BNP Paribas, Citigroup, Credit Agricole, Deutsche Bank, HSBC, Royal Bank of Scotland, Rabobank International and Standard Chartered. "We expect that the new loans would bring 50-75 basis point relief in the company's interest cost," said an analyst with a foreign brokerage who did not wish to be named. An email query to Tata Steel did not elicit any response.

Tata Steel is also trying to generate additional cash flow by selling some of its assets. In the current financial year it sold land in Mumbai's suburb Borivali for Rs 1,150 crore and its New Zealand arm, Tata Steel International (Australasia), for Rs 142.5 crore.

It also sold its 50 per cent stake in Dhamra Port, a joint venture with Larsen & Toubro, at an enterprise value of Rs 5,500 crore. Analysts say these sales could help it cut debt by Rs 3,000-3,500 crore.