While taking part in redrafting India’s latest takeover code, he was also managing the financing activity of Tata Steel’s global businesses. In between his hectic schedule, Koushik Chatterjee, Group CFO, Tata Steel, took time out for a ‘green’ tea break and an exclusive chat with Arijit Barman on financing activity at the company. Edited excerpts:
Are you seeing clear signals that Europe is turning around?
There is a general recovery trend compared to last year, though gradual, as can be seen from the Purchasing Manager’s Index, which is certainly much more robust today. It’s month on month recovery. Some sectors are holding; in some, there is incremental growth. We need to carefully watch how the fiscal tightening measures by the European governments pan out in terms of impact on government spending. There are also issues related to some sovereigns in southern Europe…so that will be trends and events to watch out for. But it’s still a lot better compared to last year.
How does all this pan out for the European steel sector and Tata Steel Europe?
Overall, it’s going to be modest recovery. It will be important to see the sustainability in the long run. The inventory in the system is low. For us, the past eight months have seen a remarkable turnaround for a number of reasons that we have mentioned before. … But it’s a continuous process.
So, is this the best time to look at refinancing the debt that Corus has?
We have taken a proactive step to prepay part of our debt in the last 18 months. Keeping in mind the turnaround of Tata Steel Europe (TSE), the existing market realities and the movements of the currencies, we’ll see what best we can do for our debt management. In Tata Steel Group , we have prepaid $1 billion of debt from September 2009 to March 2010. We have also tied up funding for the three-million tonne expansion in Jamshedpur.
We hear the refinancing exercise has begun and the key reason is shrinking the lender consortiums to a manageable size?
When Tata Steel goes for such refinancing exercises, then it works very closely with the relationship banks. Consolidation of the lender syndicate is one key reason for refinancing, as and when it happens. Other drivers include flexibility of terms and maximising tenures.
So, you are not denying what we are saying about refinancing? We hear talks are on with five leading banks?
(laughs) Discussion with banks on several issues are an ongoing activity for us. Therefore, to discuss the potential of a refinancing scheme is part of my normal work activity. But that’s not closing tomorrow morning. Point is, we will want to ensure that any financing activity is done efficiently and effectively, keeping in mind today’s market realities. Financing activity in Tata Steel is a continuous process.
Are RBS, StanChart, SBI, Citi and BNP Paribas some of these banks?
I will not comment on specific names at this juncture.
But the amount you plan to refinance is £3.5 billion ($5.4 bn), right?
That’s the amount of debt TSE has on its books today; it’s public knowledge. The idea will be to look at the management of the total debt portfolio of Tata Steel Europe.
There is talk that £2 billion of debt will be for five years, with a rate of 300 bps above Libor and repayment obligation from the third year.
It’s premature to talk about specifics at this point.
Will there be a bond issue also, as part of this refinancing exercise?
TSE does not have any bonds at this point in time. Our objective is to get the best capital structure and terms.
After selling warrants and shares to Tata Sons, you will be raising $343 million. Will you be further prepaying part of the Corus debt with that? What will it be deployed for?
We had mentioned earlier that it was for expansion projects and capital expenditure. The three-million tonne expansion in Jamshedpur is the largest brownfield capital expenditure programme in the history of the company.
Will there be further fund raising via equity issuance?
Nothing immediate, though we will keep assessing the market and our own requirement. We did a GDR (Global Depository Receipt issue) last year, also had a programme to exchange part of our convertible bonds and have recently completed the preferential offer.
Update on Teesside?
The process is on for a sale and we have an independent adviser working to explore options for the company.
