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Business News/ Companies / News/  Tata Steel raises $1.5 billion through bond sale
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Tata Steel raises $1.5 billion through bond sale

Bonds of tenure 5.5 and 10 years was available for investors in Europe and Asia through Tata Steel's Singapore-based subsidiary ABJA Investments

On Wednesday, Bloomberg said Tata Steel plans to refinance $5.6 billion debt—the highest since the acquisition of Corus Group.Premium
On Wednesday, Bloomberg said Tata Steel plans to refinance $5.6 billion debt—the highest since the acquisition of Corus Group.

Mumbai: Tata Steel Ltd on Thursday raised a total of $1.5 billion by selling bonds of different tenures to investors in Europe and Asia through its Singapore-based subsidiary ABJA Investments Co. Pte Ltd, two bankers involved in the deal said.

The company raised $500 million by selling bonds maturing in 5.5 years and $1 billion by selling bonds maturing in 10 years, on of the bankers said.

Manmohan Singh, managing director and head of debt capital markets (India and South-East Asia) at Royal Bank of Scotland Plc (RBS), who was directly involved in the deal, said the bond sale had closed late Thursday night. “We priced the 5.5-year bond at 4.85% and the 10-year bond at 5.95%, much inside our guidance of 5.12% and 6.25% earlier today. This is the first US dollar bond sale from Tata Steel and the pricing reflects the confidence investors have on the company and its parentage," Singh said in a telephonic conversation.

The dollar bond sale is part of Tata Steel’s attempt to refinance its debt through a combination of bonds and loans from banks to pay off the high-interest loans taken earlier, Mint had reported on Monday.

Twelve banks—Australia and New Zealand Banking Group Ltd (ANZ), Bank of America-Merrill Lynch Ltd, BNP Paribas SA, Citigroup Inc., Credit Agricole SA, Deutsche Bank AG, Hong Kong and Shanghai Banking Corp. Ltd (HSBC), Morgan Stanley, Rabobank International, RBS, SBI Capital Markets Ltd and Standard Chartered Plc—have been mandated to manage the dollar bond sale for which roadshows across Asia and Europe started on Monday.

On Wednesday, Bloomberg said Tata Steel plans to refinance $5.6 billion debt the highest since the acquisition of Corus Group Plc in 2007, to refinance debt taken to fund the purchase of Europe’s second largest steelmaker.

Details on the exact amount of loans the banks are willing to give and for what tenure are still unclear. But another banker involved in the bond sale said the pricing on bond was squeezed because of high interest from investors in Asia.

“58% of the investors in the 5.5-year bond were from Asia, while the same was 59% for the 10-year bond. Participants from Europe put 30% and 23% of the money respectively," the second banker said. He refused to be named because he is not authorized to speak to the media.

This being a regulation ‘S’ bond sale was not open to investors based out of the US.

“The pricing of the bond was also better because the company could get total bids amounting to more than $10 billion, indicating the strong demand for the paper," the second banker said.

“Since Tata Steel’s cash flow has improved, it should be able to refinance at a lower cost and could save 50-75 bps (basis points) on interest cost," Rakesh Arora, managing director and head of research at Macquarie Capital Securities (India) Pvt. Ltd had told Mint earlier on Thursday.

Tata Steel, which has a production capacity of 29 million tonnes per annum, had net debt of Rs70,526.27 crore as of 31 March 2014 and a debt-to-equity ratio of 1.93. Tata Steel has not responded to a questionnaire e-mailed on Wednesday seeking details on the fund-raising.

Shares in Tata Steel closed 2.18% higher at Rs567.05 apiece on BSE. The S&P BSE Sensex closed 0.48% higher at 26,271.85. ​

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Published: 24 Jul 2014, 10:52 PM IST
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