In one of the largest debt issuances this year, Tata Steel has raised about $1.9 billion through syndicated loans for its Singapore units Nat Steel Asia and TS Global to refinance its existing high-cost debt.
It is part of a mega financial reengineering exercise undertaken by the country’s largest steel maker to streamline its international balance sheet, multiple sources with direct knowledge of the matter told ET.
This will be among the largest fund-raising initiatives at the leading business conglomerate after N Chandrasekaran took over as Tata Sons chairman in February last year.
The loan is in two tranches – $1.29 billion and Euro 469 million. The facilities are priced at about200basis points above LIBOR and will have about six-year maturities, sources said. The fresh debt will likely have a 50-basis-point advantage over existing interest rates.
About 20 banks, including JP Morgan, Citigroup, Bank of America-Merrill Lynch, State Bank of India, Axis Bank and ICICI Bank, are part of the lending syndicate. Individual banks could not be reached
“The deal is almost done and the foreign banks are reselling the issue. An official announcement to this effect is expected soon. This will significantly bring down the interest costs at the Singaporean units,” said one of the sources cited above.
Tata Steel didn’t comment.
ET reported on January 18 that Tata Steel is planning a mega loan recast of up to $2.8 billion worth of existing debt to strengthen its balance sheet before its joint venture with German steel maker ThyssenKrupp takes off.
Separately, in January, the company raised $1.3 billion by selling dollar-denominated bonds to overseas investors.
As of September 30, Tata Steel’s gross debt stood at Rs 90,259 crore. Strong growth prospects, particularly in the key operating markets of India, Europe and Southeast Asia, amid capacity removals in China, augur well for Tata Steel, analysts said.
Tata Steel reported its highest ever domestic EBITDA in the third quarter (October-December). Due to increased domestic demand—domestic steel consumption is now at a 15-month high—and better realisations, domestic sales and EBITDA for the quarter increased 23% and 38%, respectively.
“We remain positive on Tata Steel given the strong rally in steel prices, and given its raw material security combined with exposure in the value added business…” JP Morgan analysts Pinakin Parekh and Priyanshi Jain said in a note on April 4.