India's largest producer of non-ferrous metals Hindalco Industries Ltd has hired 10 banks to arrange a $1 billion (nearly Rs 4,300 crore) loan to refinance debt it took for the acquisition of Novelis Inc, sources close to the development said.
The Mumbai-based company has hired ABN Amro Holding NV, Barclays Capital, Bank of America Corp, Bank of Tokyo-Mitsubishi UFJ Ltd, Calyon, Citigroup Inc, Deutsche Bank AG HSBC Holdings Plc, Mizuho Financial Group Inc, and Sumitomo Mitsui Financial Group Inc to arrange the five-year loan, said the sources.
The company has also proposed to offer 3 shares at Rs 96 apiece for every 7 held, raising money to help repay the debt used for the Novelis acquisition, the company said on August 14.
Companies in Asia are turning to lenders for funds because the global credit route has made selling bonds more expensive. Borrowers in India including Vedanta Resources Plc have raised $23.4 billion from syndicated loans this year, about the same amount recorded in the same period of 2007, while bond sales fell 28 per cent to $12.4 billion.
Hindalco completed buying Novelis in May last year for $6 billion, including $2.4 billion of debt, to gain a fifth of the high-end aluminum market and access to US customers including Coca-Cola Co, Hindalco took a $3.03 billion loan maturing in December to fund the acquisition.
Two more banks may come in later as arrangers of Hindalco's loan.
Pragnya Ram, spokeswoman for Hindalco, didn't immediately respond to voice-mail or e-mail messages seeking comment.
Hindalco plans to pay interest 2.75 percentage points above the London interbank offered rate in the first year of the loan, which will rise to 3.09 percentage points over Libor from the second year, the sources said. The company paid interest of 0.55 percentage point for a four-year $48 million loan in 2001 to refinance debt.
Borrowing costs rise
The average yield investors demand to buy bonds of Indian companies rose to a six-year high of 8.01 per cent on August 7, up from 6.6 per cent at the end of June last year, according to JPMorgan Chase & Co's Asia Credit Index. Tha t means it may cost Indian companies about $1.41 million more a year for every $100 million they seek to raise from dollar bond sales.
Hindalco's net income for the three months ended June rose to Rs697 crore ($159 million) from Rs 599 crore a year earlier as higher aluminum prices and an increase in other income helped offset a fall in copper-smelting fees.
Hindalco completed buying Novelis in May last year for $6 billion, including $2.4 billion of debt, to gain a fifth of the high-end aluminum market and access to US customers including Coca-Cola Co, Hindalco took a $3.03 billion loan maturing in December to fund the acquisition. Novelis, spun off from Alcan Inc in 2005 to ease antitrust concerns, controls 19 per cent of the world's flat-rolled aluminum products, according to its website, and also supplies to companies including Ford Motor Co, Eastman Kodak Co and ThyssenKrupp AG.
