Tata Steel today said it has entered into an agreement with a consortium of 13 banks, led by Standard Chartered and State Bank of India, for raising 3.53 billion pounds (about Rs 25,000 crore) to refinance the loan it took to partly fund the acquisition of Corus.
"Tata Steel today executed agreements for the refinancing of its European operations," the leading global steel major said in a filing to the London Stock Exchange.
Tata Steel UK Holdings, a wholly-owned subsidiary of the Indian steelmaker, said it has signed the "senior facility agreement with the consortium of banks for 3.53 billion pounds term loan and revolving credit facility".
The funding will replace in full the current debt taken at the time of buying Anglo-Dutch steel maker Corus in 2007 for about $12 billion, the company added.
"The new facilities have been designed to achieve certain key financing and business objectives for the company," it said.
Commenting on the development, Tata Steel Europe MD & CEO Kirby Adams said, "Lenders to Tata Steel showed confidence by supporting the company's plans to weather the financial crisis. ...It is very satisfying that another key strategic objective of the company - the securing of a sound and more favourable financing structure for the future - is being achieved."
Tata Steel Group Chief Financial Officer Koushik Chatterjee said, "The execution of agreements for the re-financing of our European debt marks an important financing milestone for Tata Steel Group. ...The terms of this refinancing are exceptional for their flexibility and attractiveness to the business."
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Tata Steel said that with the loan, repayment obligations for the next 5 years have been minimised.
"...There is flexibility to incur higher capital expenditure in Europe and to raise working capital depending on business needs; and the new financing arrangements carry lighter financial covenant obligations," it said.
Chatterjee said that in the last 18 months, Tata Steel Group has repaid debt approximately equivalent to 900 million pounds, "but it has remained an important goal to rework the group's capital structure especially in Europe."
Tata Steel said the new financing structure is in two parts, a 5-year loan of around 1.8 billion pounds equivalent and a 7-year loan of 1 billion pounds equivalent.
"The revolving credit facilities for working capital purposes have been increased to 690 million pounds and will have a tenor of 5 years."
Besides Standard Chartered Bank and State Bank of India, 11 other banks include BNP Paribas, Bank of America, Citicorp Securities Asia Pacific, Deutsche Bank, HSBC Bank PLC.