Mumbai: Tata Steel Ltd said on Tuesday it was seeking an easing of conditions on loans it took to buy Corus as an economic downturn could put pressure on operating profits of its UK unit.
Tata Steel UK, through which the group acquired Europe’s second-largest steelmaker Corus in 2006, is not seeking any additional funding or rescheduling of debt, the company said in a statement.
“The key relationship banks with significant interest in the debt have expressed strong support towards the covenant reset proposal,” it said.
A company official, who declined to be named, said the debt package covenants mainly relate to maintaining certain ratios of debt to operating earnings and the interest cover.
Tata Steel would repay early about £200 million ($304 million) of non-recourse debt as part of the covenant reset package and had appointed Citigroup, Royal Bank of Scotland and Standard Chartered to facilitate the process, it said.
The prepayment would be funded with support from Tata Steel as it had better liquidity, the company said.
Corus, which contributes two-thirds of Tata Steel’s global output, plans to keep 40% of its 20 million tonnes capacity idle in the first six months of this year.
Globally, steel makers have seen sales and prices slump as the global economic crisis hits demand from major steel consuming sectors such as automotives, consumer goods and construction.
Last month, the World Steel Association forecast steel demand would tumble 15% in 2009, its steepest since World War II.
At 0830 GMT, shares in the company were trading marginally lower at Rs271.60 , having recovered from the day’s low, in a Mumbai market up 2.5%.