Who is financing IndiaÆs largest LBO?

Sell-side advisor to Corus, Credit Suisse, becomes the lead financing bank for Tata Steel in India's largest leveraged buyout to date.
The financing package accompanying Tata Steel's $8.23 billion leveraged buyout of UK steel producer Corus is multi-faceted. The deal, which sees Tata assume some debt on the Corus balance sheet and agreed pension liabilities, comprises a $3.88 billion equity contribution from Tata Steel, a fully underwritten non-recourse debt package of $5.63 billion, and a revolving credit facility of $669 million.

The deal represents IndiaÆs largest cross-border outbound acquisition ever and also the largest leveraged buyout (LBO) attempted by an Indian company.

Tata Steel appointed ABN AMRO and Deutsche Bank to advise on the transaction and raise the required financing for the acquisition. But somewhere along the way, the appointed banks were unable to commit the debt required. Sources close to the deal suggest the transaction was almost derailed at this stage.

So Corus turned to a bank it was close to, Credit Suisse, to resolve the impasse. Credit Suisse was advising Corus on the Tata deal. The two have a long-standing advisory relationship built over a number of years working together on various transactions.

Credit Suisse bought into the story of the strategic fit between Corus and Tata Steel and was prepared to back Tata Steel's ability to extract the synergies necessary to make the acquisition a success.

In order to finance the transaction, Credit Suisse had to approach the Takeover Panel in the UK for approval. Strict Chinese Walls had to be erected within the bank to separate the advisory and lending teams. Credit Suisse was apparently willing to pick up the entire financing, say our sources, but Tata Steel requested that ABN AMRO and Deutsche be part of the consortium.

A Credit Suisse spokesperson has confirmed that it is ôthe lead financing bank on the deal and is leading the provision of financing at the request of its own client, Corusö. Sources say that of the ú3.3 billion of financing being raised at the SPV level, Credit Suisse will provide 45% and ABN AMRO and Deutsche will pick up 27.5% each.

The $1.8 billion bridge debt being raised at the Tata Steel level in India is being shared between Standard Chartered and ABN AMRO. An ABN AMRO spokesperson says it is pleased to be ôthe only bank participating at both levels of the financingö namely the UK SPV and the Indian holding company. In addition, Standard Chartered is providing subordinated debt of ú196 million to Tata Steel. Deutsche Bank had no comment.

The ability to finance the aspirations of Asian companies that are going global will become a differentiating factor. The banks that are going to lead the M&A charge in Asia will be the ones that can front the finance as well as provide the advice.
¬ Haymarket Media Limited. All rights reserved.
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