Britain says could take 25 percent equity stake in Tata Steel UK assets

LONDON (Reuters) - Britain said on Thursday it could take an equity stake of up to 25 percent in Tata's UK steel assets as part of a package of hundreds of millions of pounds of financing to help support a potential buyer.

The Indian group announced plans to exit its entire British steel operation last month, leaving the government battling to save a once mighty industry that has been hammered by a surge in cheap Chinese imports, soaring costs and weak demand.

The government said the support it provided would be on commercial terms and would depend on the purchaser. It said this was most likely to be debt financing but taking an equity stake was also an option.

"If we were to take an equity stake it would be a minority one with the aim of supporting the purchaser in delivering long term future for the business. We are certainly not seeking to be controlling the company," a spokeswoman for Prime Minister David Cameron said.

The Business Ministry said in a statement the government could take a stake of up to 25 percent in the assets.

The government also said it was working with the pension scheme trustees of Tata Steel and British Steel to minimise any pension impact on the purchaser.

"The UK government is actively working with Tata Steel and the British Steel Pension Scheme's Trustees to find a solution that will help minimise its impact on a potential purchaser, and potentially separate it from the business," the ministry said.

Senior staff at Tata's Port Talbot site in Wales, Britain's biggest steel works, said earlier this week they were seeking to launch a management buyout plan with the support of staff, investors and the government to save the loss-making plant.

(Reporting by Kylie MacLellan and Costas Pitas, editing by Stephen Addison)