Tata Steel arm raises Rs 5,000 crore to pay Bhushan’s lenders

Mumbai | Kolkata: Bamnipal Steel, a Tata Steel unit at the vanguard of the parent company’s current acquisition drive for insolvent mills, has raised about Rs 5,000 crore by selling commercial paper (CP), seeking to use the proceeds for immediate debt repayment.

The special-purpose vehicle, created to help acquire Bhushan Steel as part of the broader insolvency resolution process, will be the financing conduit for Tata Steel’s Rs 35,200-crore acquisition of the debt-laden alloy maker from lenders. CPs are shortterm debt instruments issued by companies.

Citibank and top mutual funds, including ICICI Prudential Mutual Fund, Birla Sun Life Mutual Fund, Reliance Mutual Fund and Kotak Mutual Fund, have subscribed to the papers that offered about 8.5 per cent with threemonth maturities, three people familiar with the matter told ET. A small portion of the sum is of four-year maturity.

“The short-term money may be used to repay lenders immediately. The issuer sold those papers directly to investors without any involvement of an arranger,” said one of the persons cited above.

Tata Steel declined to make any official comment on the matter while emails sent to Citibank, and ICICI Prudential MF remained unanswered until the publication of this report. Birla Sun Life and Kotak could not be reached immediately for their comments, whereas Reliance MF declined to comment. A top source close to the development confirmed the Tata Steel unit’s fund-raising.

On May 15, the National Company Law Tribunal approved Tata Steel’s bid for Bhushan Steel Limited (BSL), paving the way for the acquisition of the 5 million tonne steel plant. Tata Steel has also received a formal nod for the deal from the Competition Commission of India. Tata Steel had said that as per the terms of the approved resolution plan for Bhushan Steel, Bamnipal will initially subscribe to 72.65 per cent equity share capital of BSL at face value i.e. at Rs 2 per share, for an aggregate amount of Rs 158.89 crore.

BSL’s financial creditors shall receive a total consideration of Rs 35,200 crore for the settlement of the existing financial debt of BSL. It will be funded through a combination of equity and inter-corporate loans, of which up to Rs 9,000 crore loans have an option of conversion into equity shares of BSL.

Earlier on April 23, ET had reported that Tata Steel was raising up to Rs 17,000 crore in loans from a consortium of about six private and foreign financiers. The company was in talks with HDFC Bank, Yes Bank, Standard Chartered Bank, DBS Bank, Kotak Bank Mahindra Bank and mortgage financier HDFC.

The extended resolution period for Bhushan Steel ended on April 22. The company was admitted for debt resolution on July 26 last year.

Source: Economic Times