Tata Steel, the Indian steel maker, has launched a jumbo $3.1 billion-equivalent loan package into general syndication as it seeks to refinance debt taken to fund its acquisition of Anglo Dutch steelmaker Corus, according to two sources familiar with the matter.
The company is tapping lenders amid a flurry of Indian corporate lending after Narendra Modi's Bharatiya Janata Party came into power in May, with large India blue chips such as Reliance Jio, the telecom unit of Reliance Industries, and Tata Power tapping the market.
Tata Steel acquired Corus in 2007, trumping a bid by Brazil's CSN, but has since struggled with the acquisition and soaring debt levels. The loans come due early next year but the company has sought to refinance the debt ahead of schedule.
The steel giant will hold roadshows in Singapore on Thursday and could also hold bank meetings in Dubai. The multi-tranche loan facility comprises a $700 million five-year term loan and a $800 million seven-year term loan, paying margins of Libor plus 280bp and 315bp respectively. The borrower for both tranches is Singapore entity Tata Steel Global.
In addition, there is a £700 million six-year revolving credit facility and a €370 million five-year term loan, paying margins of 343bp over sterling Libor and 315bp over Euro Libor. The borrower for both tranches is Tata Steel Nederland.
The original mandated lead arrangers were ANZ, Bank of America Merrill Lynch, Bank of Tokyo Mitsubishi, BNP Paribas, Citi, Credit Agricole, Deutsche Bank, HSBC, Rabobank, RBS and Standard Chartered.
Tata Steel held senior syndication and, at that level, Axis Bank, Emirates NBD, First Gulf Bank, Mizuho and Societe Generale joined. Also putting in smaller commitments were ING, ICICI and SMBC.
The loan is part of a massive $7 billion refinancing package that will go towards paying Corus debt and raising money for Tata Steel's Singapore entity. Tata Steel tapped the bond market in July with a $1.5 billion dual-tranche bond, and that, together with a €1.8bn (US$2.44bn) seven-year loan underwritten by State Bank of India, will also go towards refinancing the Corus-related debt.
Although Tata Steel has a strong position in India, where it owns iron ore mines helping it to keep raw material costs down, it has been a different story in Europe, where demand for steel has slumped as Eurozone countries grapple with economic woes.
"Corus has not been a successful acquisition because of the European downturn that affected European demand," Mehul Sukkawala, a Singapore-based analyst at S&P, told FinanceAsia. "The steel industry, especially steel and raw material pricing, has fundamentally changed since the global financial crisis and Tata Steel paid a high price for Corus,” he added.
Commitments are due on November 17 and the loan is expected to close in December.