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Tata Steel UK Receives Lenders’ Consent to Reset Debt Covenants
06/01/2009 - Tata Steel UK receives Lenders’ approval to reset the covenants in its £3.7-billion acquisition-related senior debt facility with no increase in interest costs and additional financing.
Tata Steel UK has received Lenders’ approval to reset the covenants in its £3.7-billion acquisition-related senior debt facility. The Lenders voted unanimously in favor of the company’s recent proposal.
The new agreement with the banks does not require any increase in the current level of interest costs for the remaining life of the loan. The revised covenant package also does not involve any additional finance from the Lenders or rescheduling of its debt-servicing commitments. Testing of the new facility’s earnings-related covenants is to be suspended until March 2010.
“The covenant resetting agreement demonstrates the strong relationship of the Tata Steel Group with its Lenders and underlines the commitment of Tata Steel to its European operations,” commented Tata Steel Limited Group Chief Financial Officer Koushik Chatterjee. “Tata Steel Group continues to have adequate liquidity and has no material repayment obligations or refinancing requirements in the next 12 months.”
As part of the package, Tata Steel Limited will inject £425 million into Tata Steel UK in a phased manner. Around £200 million of that amount is to be used to prepay debt and de-leverage the European Balance Sheet.
“This overwhelmingly positive response from our Lenders is a mark of their underlying faith in our business, even as we explore options for Teesside Cast Products,” said Corus CEO Kirby Adams. “The company will continue its focus on improving operating efficiency, as well as on enhancing customer relations and revenues through better product quality and service. We also look forward to stronger commercial relations with suppliers through an improved credit profile.”
Corus, Europe's second largest steel producer, has annual revenues of more than £12 billion and crude steel capacity of about 20 million tonnes. With main steelmaking operations primarily in the UK and the Netherlands, Corus supplies steel and related services to the construction, automotive, packaging, mechanical engineering and other markets worldwide. Corus is a subsidiary of Tata Steel, one of the world’s top-ten steel producers. Following the acquisition of Corus in 2007, the combined enterprise has an aggregate crude steel capacity of more than 28 million tonnes and approximately 82,700 employees across four continents.
