India's largest lender reportedly has agreed to offer a loan of $800 million to $1 bn to Tata Steel UK, a special purpose vehicle created to fund Corus acquisition.
MUMBAI: While the US sub-prime mortgage crisis has forced top foreign banks to tighten their purse strings, State Bank of India is playing the good samaritan for Tata Steel by approving a big ticket loan to it for Anglo-Dutch steelmaker Corus' acquisition.
India's largest lender reportedly has agreed to offer a loan of USD 800 million to USD one billion to Tata Steel UK, a special purpose vehicle (SPV) created to fund Corus acquisition, the biggest by any Indian corporate at USD 12.9 billion.
Both Tata Steel and SBI officials confirmed the deal, but declined to share the details of the loan.
"We have a very long association with the Tatas and we have approved them the finances," a senior SBI official said.
The sub-prime mortgage crisis occurred in the US around July after large delinquencies emerged in loans offered to people with poor credit history on high interest rates.
The banks and financial institutions with exposure to the sub-prime market took a hit which led to a credit squeeze in the international market.
Earlier, the world's sixth largest steel company had agree to pay 0.50 per cent more on its USD one billion syndicated loan led by the ripples of sub-prime crisis.
Tata Steel had completed the Corus acquisition on April 2,2007 at a price of 608 pence per ordinary share in cash.
Tata Steel had earlier said it will infuse USD 4.1 billion as equity to part finance the transaction. Its SPV Tata Steel UK Ltd has contracted a USD 4.1 billion long-term debt from a consortium of banks.
The balance USD 2.66 billion was proposed to be raised through a long tenor quasi-equity or debt capital market instrument.
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