JSW Steel to raise $1 billion via overseas bonds to acquire distressed assets
Mumbai: JSW Steel Ltd is tapping overseas bond investors to raise $1 billion to fund its plan to buy distressed assets in India, two people directly aware of the plans said.
Sajjan Jindal-controlled JSW has hired investment banks JP Morgan, Citigroup and Deutsche Bank to manage the fund raising, the people cited above said on condition of anonymity. The company plans to sell bonds that will mature between 5 to 7 years to overseas investors.
“The investor road shows will commence from this week and will be held in Hong Kong, Singapore and London,” said one of the two people cited above. “Part of the proceeds will be used towards funding working capital needs of company which may also include any new asset that the company may acquire that are up for sale in the ongoing bankruptcy process.”
JSW has partnered with at least two private equity funds, Aion Capital and Bain-Piramal fund, to bid for distressed steel assets.PTI reported on 6 March that a final decision on the lone bid for debt-laden Monnet Ispat and Energy Ltd by JSW-Aion will be taken within a fortnight. JSW-Aion had submitted a binding bid for Monnet Ispat on 23 December. The JSW-Aion offer has been approved and the lenders have sent it for legal vetting the fate of which is likely to be decided within 15 days, the PTI report said, citing people aware of the matter. JSW Steel had also submitted bids for Bhushan Steel Ltd and Bhushan Power and Steel Ltd. In case of Bhushan Steel, JSW lost out to Tata Steel Ltd, which has been declared the highest bidder.
Mint had reported in November that JSW Steel Ltd is looking to set up a platform for acquiring distressed assets and is open to various options including partnering with financial sponsors as it looks for inorganic growth and opportunities in the distressed assets space where a number of large steel companies are facing bankruptcy. In an interview on November 21, Sheshagiri Rao group chief financial officer said that JSW Steel was looking to increase its production capacity through organic growth by another 18 to 23 million tonnes of capacity with an overall capital expenditure of Rs23,800 crore in the next three years which will be funded by debt and equity without impacting its current debt to equity and debt to Ebitda ratio.
In a related development, on 6 March, Moody’s Investors Service had upgraded JSW Steel’s corporate family rating (CFR) and senior unsecured bond rating to Ba2 from Ba3 citing rising domestic demand, a wide slate of long and flat products, and an increasing proportion of value-added products.
These factors, along with a favourable pricing environment, will improve the company’s earnings growth, Moody’s noted in its rating report. Earlier on 1 March, Fitch Ratings also revised its outlook on JSW Steel to ‘stable’ from ‘negative’. Fitch Ratings said that it has revised the outlook on JSW Steel to reflect the company’s robust profitability from improved industry fundamentals and a measured approach to capacity expansion which will enable JSW Steel to deleverage steadily over the next few years.
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