Tata Steel refinances £3.53 bilion term loan

Tata Steel on Wednesday completed a refinancing process of £3.53 billion term loan borrowed to fund Corus acquisition in April 2007, lowering its interest costs.

The company did not specify the exact interest-cost benefit.
Tata Steel UK Holdings, a 100% indirect subsidiary of Tata Steel Ltd, signed a senior facility agreement with a syndicate of 13 banks for the loan amount.

The term loan and revolving credit facility will replace the complete current term loan and revolving credit facilities entered into at the time of the acquisition of Corus Group in 2007.

The new financing structure is in two parts: a 5-year loan of around £1.8 billion equivalent and a 7-year loan of £1 billion equivalent.
The revolving credit facilities for working capital purposes have been increased to £690 million and will have a tenor of 5 years.

The refinancing was spearheaded by State Bank of India and Standard Chartered Bank and 11 more financial intitutions.

A press release issued by the company said that the refinancing fulfils certain key objectives for the company, especially in terms of the syndicate which comprises a smaller and co-ordinated group of banks having a long term relationship with the company.

Besides these, the other benefits are that the repayment obligations for the next five years are minimised through the agreement, there is flexibility to incur higher capital expenditure in Europe and to raise working capital and the new financing arrangements carry lighter financial covenant obligations.

Koushik Chatterjee, group financial officer, Tata Steel, in the release said, “In the last 18 months, Tata Steel Group has repaid significant debt of approximately equivalent to £900 million, but it has remained an important goal to rework the Group’s capital structure especially in Europe.”

Tata Steel acquired UK-based Corus in 2007 at an enterprise value of £ 6.9 billion pounds which comprised a debt of £ 3.15 billion and equity of £ 3.75 billion. The company also started the process of rebranding and name changing of Corus to Tata Steel from Monday.