Tatas set off process to finance Corus deal
Corus in fact recommended Credit Suisse name to Tatas for funding the acquisition. Read to know more.
By Rajesh Unnikrishnan, TNN |
LONDON: Tata Steel and its investment bankers have initiated the process of finding the right way to finance India's largest leveraged buyout (LBO), the take-over of Corus Group Plc.
Tata Steel has purchased the European steel maker that is roughly three times bigger than it in steel output, and has had to find a mechanism to finance a debt package worth $11.3 billion- a large sum given the relatively small size of Tata Steel, a source involved in the transaction said. The financing is being done in a debt-equity ratio of nearly 2:1.
| "Corus in fact recommended Credit Suisse name to Tatas for funding the acquisition. Credit Suisse will now fund 45% of the debt component of the deal. The remaining 55% will be organised by Deutsche Bank and ABN Amro and other banks close to Tatas." |
Tata Steels' $11.3 billion bid for Corus all but foundered due the complexities of the proposed loan package. The biggest problem, Tata Steel and its investment bankers are trying to tackle is the availability of a set of loans plus a schedule for paying them back, that would take into account Corus's complex mix of liabilities from its plants in the UK and the Netherland, plus from its ��13 billion pension funds.
The investment banking firm Credit Suisse, was called into specify a mechanism for raising a loan of around $8 billion, which formed the basis of the Tata Steel bid for Corus. The debt to be taken on to the accounts of Tata Steel and to be repaid by future cash flows of the company.
Credit Suisse's involvement was unusual since it is also acting of the banking advisor to Corus. Approved by the Takeover Panel, the UK watchdog was required to permit Credit Suisse to act in the way for both sides.
"Corus in fact recommended Credit Suisse name to Tatas for funding the acquisition. Credit Suisse will now fund 45% of the debt component of the deal. The remaining 55% will be organised by Deutsche Bank and ABN Amro and other banks close to Tatas."
Deutsche Bank and ABN Amro- two of Tatas' key advisors on the Corus deal also joint in putting up some of the cash for the $7 billion loan. A further $4 billion for this offer is securing through cash put in to the venture from other Tata group companies though which the Tata group controls its holding in Tata Steel. The |Export-Import Bank of India is believed to have extending a line-of-credit to the Tata Steel to fund the Corus acquisition.
Standard Chartered Bank, which had agreed to provide $375.24 million subordinated debt financing for the acquisition, has agreed to step up funding by another $1 billion.
The investment banking firm Credit Suisse, was called into specify a mechanism for raising a loan of around $8 billion, which formed the basis of the Tata Steel bid for Corus. The debt to be taken on to the accounts of Tata Steel and to be repaid by future cash flows of the company.
Credit Suisse's involvement was unusual since it is also acting of the banking advisor to Corus. Approved by the Takeover Panel, the UK watchdog was required to permit Credit Suisse to act in the way for both sides.
"Corus in fact recommended Credit Suisse name to Tatas for funding the acquisition. Credit Suisse will now fund 45% of the debt component of the deal. The remaining 55% will be organised by Deutsche Bank and ABN Amro and other banks close to Tatas."
Deutsche Bank and ABN Amro- two of Tatas' key advisors on the Corus deal also joint in putting up some of the cash for the $7 billion loan. A further $4 billion for this offer is securing through cash put in to the venture from other Tata group companies though which the Tata group controls its holding in Tata Steel. The |Export-Import Bank of India is believed to have extending a line-of-credit to the Tata Steel to fund the Corus acquisition.
Standard Chartered Bank, which had agreed to provide $375.24 million subordinated debt financing for the acquisition, has agreed to step up funding by another $1 billion.
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