Tata Steel UK, a 100% indirect subsidiary of Tata Steel Ltd, has held meetings in London and Mumbai with its banking syndicate, which participated in the debt financing for the acquisition of Corus Group plc, to pro-actively discuss the current environment and the potential future impact on some covenant requirements under the Company's debt package.
Tata Steel UK has performed strongly in 2008-09 and has met all its covenant obligations to date, with a strong liquidity position at the year end.
The Company 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.
As part of the discussions with its lenders on the covenant package, the Company 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 / re-financing requirements in the near future. Furthermore, as part of the covenant reset package being sought, the Company will prepay, voluntarily, over £200 million of the non-recourse debt to continue its objective of de-leveraging its European operations.
This would be funded through additional support from Tata Steel Ltd, which continues to have a significant liquidity buffer. Tata Steel UK has appointed its original Lead Arrangers, i.e. Citigroup, Royal Bank of Scotland and Standard Chartered Bank, as the Coordinating Banks to facilitate the above process. The key relationship banks with significant interest in the debt have expressed strong support towards the covenant reset proposal