Tata Steel said it will infuse £200 million into Corus, its UK subsidiary, for the prepayment of Europe’s second-largest steelmaker’s debt.
Tata Steel said it will infuse £200 million into Corus, its UK subsidiary, for the prepayment of Europe’s second-largest steelmaker’s debt.
A senior company official, who declined to be named, said the equity infusion will take place in the first quarter of this year and the debt will be prepaid in the next two-three quarters.
Tata Steel UK has appointed Citigroup, Royal Bank of Scotland and Standard Chartered Bank as the coordinating banks to facilitate the process.
Tata Steel is also in talks with lenders for easing the conditions on the loans it took to buy Corus as an economic downturn could put pressure on operating profits of the UK unit.
“The amount of money injected into Tata Steel UK also depends on our talks with the lenders,” the official said.
As on March 31, 2009, Tata Steel had $2.5 billion of buffer cash, which can be transferred to the UK subsidiary, the official pointed out.
The official further said that the company is trying to sell the Teesside Cast Products (TCP) and that money also will be used to pay the Corus debt.
“If the sale doesn’t proceed, then the company will look to infuse further cash in the UK subsidiary,” the official added.
The company said that it hasn’t sought any additional funding as it has sufficient liquidity for its operations. “…(the company) has not requested any re-scheduling of its debt servicing obligations as there are no material re-payment / re-financing requirements in the near future,” a company statement said.
However, the company is in talks with banks in London and Mumbai to discuss the impact of the current slowdown on the debt equation of the company. “Tata Steel UK, a 100% indirect subsidiary of Tata Steel Ltd, has held meetings in London and Mumbai with its banking syndicate to pro-actively discuss the current environment and the potential future impact on some covenant requirements under the company’s debt package,” the statement said.
The company said it has informed its lenders that it has taken significant steps to restructure its operations and reduce costs to weather the downturn. “In the near term, however, like most other companies in the industry there could be an adverse impact on its EBITDA, which could put a stress on its covenant package in the forthcoming quarters,” it said.
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