Tata Steel raises $725m abroad

MUMBAI: Tata Steel, the country’s largest steel manufacturer, on late Monday announced it has raised $725 million through the issue of foreign currency convertible alternative reference securities (CARS), which was oversubscribed by more than two times.

The amount is part of the $7.4 billion infusion from Tata Steel and its Singapore subsidiary Tata Steel Asia into the funding of its Corus acquisition. Last week, the Indian major had said it will increase its contribution to the purchase of Corus by about $800 million to $7.4 billion in order to cover some extra costs and working capital of Corus.

Tata Steel acquired Corus for a net value of $12.9 billion, that was funded by Tata Steel UK’s debt of about $6.14 billion, and equity contributions from Tata Steel India and Tata Steel Asia, a 100% subsidiary of the Indian company. However, the acquisition amount did not include the continuing working capital of Corus. Including all the debts and extra costs, the acquisition is now estimated at $13.7 billion.

The CARS issue includes a green shoe option of $150 million, which has not yet been exercised, said the company in the statement. “Application will be made to list the CARS on an overseas stock exchange,” said the company.

Earlier this year, group company Tata Motors had used the CARS instrument to raise $450 million to finance the firm’s product development expenditure and other corporate projects. The CARS will be convertible into either qualifying securities (which may be in the form of depository receipts with restricted rights of withdrawal, representing underlying ordinary shares with differential rights as to voting) or ordinary shares.

The CARS has an initial conversion price of Rs 876.6225 per share, which is at a premium of 35% to the company’s closing share price on the National Stock Exchange as of August 6, 2007. The CARS carry a 1% coupon and the effective YTM is 5.15%. The outstanding CARS, if any, at maturity will be redeemable at a premium of 23.3419% of the principal amount. The issue is subject to fulfilment of certain conditions precedent, the company said.