Tata Steel UK, a wholly-owned indirect subsidiary of Indian steel-maker, will prepay over 200 million pounds (about Rs 1,500 crore) of the non-recourse debt to de-leverage its European operations. The company has held meetings with its banking syndicate, which participated in the debt financing for the acquisition of Corus Group Plc, in London and Mumbai to discuss the future impact on some covenant requirements under the company's debt package.
The non-recourse debt would be funded through with the help of Tata Steel, which has a significant liquidity buffer, said the company in a media statement. The UK subsidiary has performed strongly in 2008-09 and has met all its covenant obligations to date with strong liquidity position at the year end, it added.
Tata Steel, which has about $9 billion debt in its books, is also looking to roll over the $4 billion of debt it raised to buy Corus. Tata Steel has to repay $795 million in 2009-10 and $1.3 billion in 2010-11; however, the company is free from repayment until December 2009. It has $1.9 billion cash and cash equivalents in its books, while it requires $1.2 billion for its capital expenditure during this fiscal.
Tata Steel informed its lenders that it has taken significant steps to restructure its operations and reduce costs to weather the downturn. "This would enable the company to emerge stronger with improved profitability in the future. In the near term, however, like most other companies in the industry there could be an adverse impact on its EBITDA, which could put a stress on its covenant package in the forthcoming quarters," said the company.
The steel-maker informed that it has not sought any additional funding, as it has sufficient liquidity for its operations and has not requested any re-scheduling of its debt servicing obligations as there are no material re-payment requirements in the near future. Furthermore, as a part of the covenant reset package being sought, the company will prepay over 200 million pounds of the non-recourse debt to continue its objective of de-leveraging its European operations, said the company.
Tata Steel UK has appointed Citigroup, Royal Bank of Scotland and Standard Chartered Bank as the coordinating banks to facilitate the process. The banks have expressed strong support towards the covenant reset proposal, said the company.
