Tata Steel has sold $546.9 million (around Rs 2,550 crore) of new 2014 convertible bonds to cut its funding cost for overseas acquisition.
The steel major had launched an exchange offer of new foreign currency convertible bonds for the existing $875 million Convertible Alternative Reference Securities (the CARS) due 2012 on November 11, 2009, a company statement said.
"The company had launched this exchange offer to exchange part or all of the existing CARS for a fresh set of convertible bonds.
"This not only reduces the overall finance charges for the company, but also extends the maturity of the bonds by two years. In addition, the lower conversion premium makes the exchange bonds more equity-like which is in line with the company’s overall de-leveraging strategy," Group Chief Financial Officer of the Company, Koushik Chatterjee, said in a statement.
The CARS have a yield to maturity of 5.15 per cent per annum and are convertible into qualifying securities or ordinary shares of the company. Under the exchange offer, the company invited holders of the CARS to offer to exchange any or all of their CARS for new convertible bonds due 2014.
The exchange bonds have a coupon and yield to maturity of 4.5 per cent each and will mature on November 21, 2014.
"While Tata Steel does not have any near-term material repayment requirements over the next 12-15 months, as part of our long-term financing strategy, we continue to seek market opportunities to reduce the financing costs on a pro-active basis," Chatterjee said.
The successful execution of this issue re-affirms the credit standing of Tata Steel in global financial markets as the majority of the CARS which enjoyed credit protection have been exchanged for these new convertible bonds enjoying direct equity and credit upside on the company, he said.
