Tata Steel UK, a 100% indirect subsidiary of Tata Steel Limited, today received Lender approval to reset the covenants in its £3.7 billion acquisition-related senior debt facility. The Lenders voted unanimously in favour of the Company’s proposal.
As part of the agreement reached with the banks, testing of the facility’s earnings-related covenants will largely be suspended till March 2010 and will then resume with significantly higher flexibility than in the case of the original covenants. Furthermore, there will be no increase in the current level of interest costs for the remaining life of the loan. The revised covenant package does not involve any additional finance from the Lenders or rescheduling of its debt-servicing commitments.
As part of the package Tata Steel Limited will inject £425 million into Tata Steel UK in a phased manner, of which around £200 million will be used to prepay debt and de-leverage the European Balance Sheet.
Corus CEO Kirby Adams said: “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. 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.”
Tata Steel Limited Group Chief Financial Officer Koushik Chatterjee said: “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. It is important to highlight that, despite the challenging financial environment, there will be no increase in the debt-servicing costs of Tata Steel UK. Tata Steel Group continues to have adequate liquidity and has no material repayment obligations or refinancing requirements in the next 12 months.”
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Corus is Europe's second largest steel producer with 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.