Tata Steel raises $725 million via convertible bonds

Tata Steel has raised $725 million through foreign currency convertible alternative reference securities (CARS), which was oversubscribed by more than two times. There is a greenshoe option of $150 million, which has not yet been exercised.

The CARS will be convertible at an initial conversion price of Rs 876.6225 a share, which is at a premium of 35 per cent to the company's closing share price on the National Stock Exchange of India as on August 6, 2007.

The CARS carry a 1 per cent coupon and the effective YTM is 5.15 per cent. The outstanding CARS, if any, at maturity will be redeemable at a premium of 23.3419 per cent of the principal amount.

The CARS is part of the company's long-term financing plan. In April, Tata Steel had announced sources of funding the $4.1 billion in its wholly owned subsidiary Tata Steel Asia Holdings (Singapore) Ltd, which in turn would invest in Tata Steel UK, which acquired Corus Group.

According to the company release, application would be made to list the CARS on an overseas stock exchange.

The CARS would be convertible into either qualifying securities (which may in the form of depository receipts with restricted rights of withdrawal representing underlying ordinary shares with differential rights to voting) or ordinary shares.

Citigroup acted as the sole global coordinator and book runner to the offering with ABN AMRO Rothschild and Standard Chartered Bank being the joint book-runners.