Tata Steel refinances its $5.4 billion Corus debt ahead of UK asset sale

Tata Steel UK Holdings, a 100% indirect subsidiary of Tata Steel, has executed agreements to replace its costly debt to banks through term loan and revolving credit facilities of €3.05bn ($5.4 billion).

The debt was originally incurred in its acquisition of Corus Group plc in 2007.  Tata Steel proposes to use the proceeds of the loan to repay term debts, term out working capital and fund investment needs of the Tata Steel Group outside India.

Tata Steel Ltd, Europe's second-largest steel producer, on Wednesday said it was also in talks with Geneva, Switzerland-based Klesch Group to sell its European long products operations, including mills in northern England and Scotland, as it battles weak demand and low margins in an uncertain market.

The assets being put on the block account for about half of Tata Steel's European operations.

The new financing structure consists of a five-year loan of €370 million, a six-year revolving credit facility for working capital purposes of £700 million and a seven-year loan of €1.8 million, with more favourable terms and pricing relative to the earlier debt.

Further, Tata Steel Global Holdings Pte Ltd, another 100 per cent indirect subsidiary of Tata Steel and incorporated in Singapore, has also executed agreements for loan facilities of $1.5 billion comprising of a five-year loan of $700 million and a seven-year loan of $800 million.

The 5-year loan and revolving credit facilities have been contracted as part of a joint $3.1bn credit mandate to 18 lead arrangers, including ANZ, Axis Bank, Bank of America Merrill Lynch, MUFG, BNP Paribas, Citi, Credit Agricole, Deutsche Bank, Emirates NBD, First Gulf Bank, ING, HSBC, Mizuho, Rabobank, RBS, SMBC, Societe Generale and Standard Chartered.

The 7-year loan of €1.8bn has been contracted with a set of 7 mandated lead arrangers, including State Bank of India, ICICI Bank, Bank of Baroda, Bank of India, Exim Bank of India, Syndicate Bank and SBI (Mauritius).

Tata Steel group finance and corporate director Koushik Chatterjee said: "The new loan facilities are being put in place well ahead of any material maturities of the existing debt structure of the Tata Steel Group.

"The financing structure has been designed with flexible terms and better pricing that will provide financial headroom to the international business especially in Tata Steel Europe in the coming years. Along with the recent bond issuance of $1.5bn completed in July this year, this marks the completion of the restructuring and refinancing of the entire international debt portfolio and de-risking of the capital structure of the Tata Steel Group.

"The overall capital structure and the consolidated leverage level will remain unaffected by this financing while the cost of the same will be lower. This financing also demonstrated the company's long standing relationship with the banking syndicate and I would like to thank these institutions for their continuing support to the Tata Steel Group."