Tata Chemicals taps 7 banks to fund US buy

Tata Chemicals, a part of the country's second-largest business group, has hired seven banks to arrange $850 million of loans to fund the purchase of US-based General Chemical Industrial Products, according to people with direct knowledge of the deal.

The Mumbai-based company appointed HSBC Holdings, Standard Chartered, ABN Amro Holding, Calyon, Mizuho Financial Group, Rabobank Nederland and Bank of Nova Scotia to arrange the loan, which includes $500 million for seven years and $350 million of short-term borrowing, said the sources, who declined to be identified as the information was not public.

Tata Chemicals, the country's biggest producer of salt, in January agreed to buy General Chemical for $1 billion to become the world's second-largest maker of soda ash.

Tata Chemicals bought UK-based Brunner Mond Group in December 2005, raising its soda ash capacity to about 3 million tonnes, accounting for 8 per cent of the global market.

"This is definitely not a cheap acquisition for Tata Chemicals and it will take them a while to digest it, but for the long term, the deal will give them scale and cost efficiency,'' said Mumbai-based Chintan Mehta, an analyst at Asit C Mehta Investment Intermediates.

Prashant Ghose, the chief financial officer at Tata Chemicals, didn't return a voicemail message from Bloomberg News.

Tata Chemicals plans to pay interest that's 1.35 percentage points more than the London interbank offered rate (Libor) for the seven-year loan, said sources. Three-month Libor was set at 2.94 per cent on March 7.

The company's shares have gained 2 per cent since it announced the acquisition, outpacing Bombay Stock Exchange's Sensex, which fell 12 per cent.

Credit rating
Moody's Investors Service said in February it may downgrade Tata Chemicals' credit ratings because of the likely increase in its debt. Moody's ranks the company's foreign-currency debt Baa3, the lowest investment grade.

The borrowing will more than double Tata Chemicals' debt from Rs 2,040 crore ($501 million) at the end of September, according to its earnings report.

Tata Group Chairman Ratan Tata has acquired the world's largest maker of tea and the UK's biggest steelmaker as he uses his dominance of industries from autos to software to fund an overseas push.

General Chemical has the capacity to produce 2.5 million tonnes of natural soda ash used to make glass and detergents at its facility in Green River Basin, Wyoming.

The Tata Group had a revenue of $28.8 billion in the year ended March 31, 2007, the equivalent of about 3.2 per cent of India's gross domestic product, according to its website.