LONDON (CU)_Over the recent months, there has been a faster-than expected recovery in the global steel industry which has led to a significant jump in margins. As a result, Indian multinational steel manufacturer Tata Steel’s issuer default rating (IDR) was upgraded by Fitch Ratings to ‘BB’ from BB-‘. However, as businesses are still in the process of returning to normalcy, the company’s UK unit is raising more than funds through an offshore syndicated loan which will be used for working capital credit, The Economic Times reported.
According to the newspaper, three people familiar with the matter have revealed that the loan, amounting to $275 million (£200 million), is marked as revolving credit facility (RCF). It is funded by a group of banks, including HSBC, Citi, Axis Bank and Mitsubishi UFJ Financial Group (MUFG), ET reported.
“The discussions with banks are in relation to working capital limits provided by a consortium of banks for the UK business, which may or may not be utilised as part of day-to-day operating requirements,” a Tata Steel spokesperson said. “Tata Steel continues to be focused on deleveraging its balance sheet.”
The significance of this loan is that it enables the borrower to draw the credit, utilise it for the business, repay it and withdraw it again when required.
Tata Steel UK is part of Tata Steel Europe, a company which is currently in the process of splitting its operations between Netherlands and the UK. Meanwhile, the company’s unit in UK is in the process of renovating its site in the East Midlands region where its Corby steel tube making takes place. The work has already begun at the 150-acre site in Corby, North Northamptonshire, which produces a range of products, from iconic skyscrapers to sports stadiums and hospital beds.
