The loan to fund Tata's buyout of Corus is being restructured because institutional investorshave been reluctant to join amid current credit market volatility.
HONG KONG: A 1.5 billion pound (US$3.05 billion) loan to fund Tata Steel's buyout of rival Corus is being restructured because institutional investors, the loan's original target market, have been reluctant to join amid current credit market volatility, a source close to the deal said.
The term loan B (TLB) tranche of the 3.67 billion pound credit backing the Indian firm's $12.9 billion deal for its Anglo-Dutch rival was initially structured as a single-tranche seven-year bullet term loan paying a margin of 225 basis points over Libor.
To lessen the deal's dependence on institutional investors, the restructuring is designed to attract additional bank interest by offering front-end fees and shorter tenors.
The changes will include splitting the TLB into three 500 million pound bullet tranches with maturities of five, six and seven years.
These tranches will pay a front-end fee of 75 bps and margins of 200 bps, 237.5 bps and 275 bps over Libor, respectively.
If leverage is less than 2.5 times, margins will step down to 150 bps, 187.5 bps and 225 bps, respectively.
The restructured TLB will launch to banks and institutional investors later on Thursday and responses are due by Aug. 20. Meanwhile, the financing's other tranches will not be changed as they are understood to be going well.
They are a 1.59 billion pound five-year amortising term loan A and a 500 million pound five-year revolving credit, which both pay a 175 bps over Libor margin. There is also an 80 million pound loan note guarantee facility that is not being syndicated.
Calyon, HSBC, ING Bank and Deutsche Bank joined the facility as mandated lead arrangers prior to syndication. ABN AMRO Bank, Citigroup and Standard Chartered Bank were the original MLAs.
The financing is non-recourse to Tata Group. New holding company Tata Steel UK is a wholly owned subsidiary of Mumbai-based Tata Group and the intermediate parent of Corus.
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