BackTata Steel rijigs Corus buyout loan terms
Tata Steel rijigs Corus buyout loan terms
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Hong Kong: A £1.5 billion (Rs12,322 crore or $3.05 billion) loan to fund Tata Steel Ltd’s buyout of rival Corus is being restructured because institutional investors, the loan’s original target market, have been reluctant to join amid current credit market volatility, a source close to the deal said.
The term loan B (TLB) tranche of the £3.67 billion credit backing the Indian firm’s $12.9 billion deal to acquire its Anglo-Dutch rival was initially structured as a single-tranche, seven-year bullet term loan paying a margin of 225 basis points (bps) overLibor.
To lessen the deal’s dependence on institutional investors, the restructuring is designed to attract additional bank interest by offering front-end fees and shorter tenors.
The changes will include splitting the TLB into three £500 million bullet tranches with maturities of five, six and seven years.
These tranches will pay a front-end fee of 75 bps and margins of 200 bps, 237.5 bps and 275 bps over Libor. If leverage is less than 2.5 times, margins will step down to150 bps, 187.5 bps and 225 bps.
The restructured TLB was launched to banks and institutional investors late on Thursday and responses are due by 20 August.
Meanwhile, the financing of other tranches will not be changed because they are understood to be going well.
They are a £1.59 billion five-year amortizing term loan A and a £500 million five-year revolving credit, which both pay a 175 bps over Libor margin. There also is an £80 million loan note guarantee facility that is not being syndicated.
Calyon, HSBC, ING Bank and Deutsche Bank joined the facility as mandated lead arrangers (MLAs) prior to syndication.
ABN AMRO Bank, Citigroup and Standard Chartered Bank were the original MLAs.
The financing is non-recourse to Tata Group.
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