ArcelorMittal, Nippon Steel sign $5.14 billion loan pact to refinance Essar Steel buy

The 10-year-term loan would be used to refinance their acquisition of Essar Steel India, now known as ArcelorMittal Nippon Steel India Ltd. Other banks part of the loan pact are MUFG Bank Ltd , Sumitomo Mitsui Banking Corp, Mizuho Bank Europe N.V....

Kolkata: AMNS Luxembourg Holding S.A., the joint venture between Nippon Steel Corporation and ArcelorMittal has entered into a $5.14 billion (about Rs 38,000 crore) term loan agreement to refinance a loan taken for acquiring the erstwhile Essar Steel India, now renamed as ArcelorMittal NipponSteel India (AM/NS India).

This will include the amount borrowed under the $7 billion bridge term facilities agreement guaranteed by ArcelorMittal, the latter said in a statement on Tuesday. The rate of interest for the 10-year term loan agreement is not known as the two partners refused to disclose any further details of the agreement.

"For ArcelorMittal, this can be a game-changer since they get to refinance the borrowings at low rates of interest prevalent in Japan," a Mumbai-based banking sector analyst who did not wish to be named said.


An official statement from Nippon Steel said the banks involved in the 10-year term loan arrangement include, Japan Bank for International Cooperation, MUFG Bank, Ltd., Sumitomo Mitsui Banking Corporation, Mizuho Bank Europe N.V. and Sumitomo Mitsui Trust Bank, Limited (London Branch). Industry experts believe the move will give ArcelorMittal and its partner Nippon Steel much needed headroom as far as finances are concerned since the cost of funds in Japan are lower than the rest of the world.

"The proceeds of the loan will be used to refinance in full the amounts borrowed by AMNS in connection with the acquisition of ArcelorMittal Nippon Steel India Limited (formerly known as Essar Steel India Limited)," the statement added.

Japan's biggest steelmaker Nippon Steel Corp has entered into a 40:60 joint venture with ArcelorMittal for the acquisition of the former Essar Steel, as part of the auction of stressed assets under the Insolvency and Bankruptcy Code. The partners completed the acquisition in December 2019 after making an upfront payment of Rs 42,785 crore for the asset.
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