Tata Steel UK, that groups Corus Steel and its units, is in the process of prepaying £200 million of debt as part of its plan to make its European operations debt-free.

"The company will prepay, voluntarily, over £200 million of the non-recourse debt to continue its objective of de-leveraging its European operations," Tata Steel UK said in a statement.

The company said Tata Steel, the Indian parent, would also pool in surplus resources with it to finance the repayment of debt. Tata Steel has significant cash reserves, it added.

While Tata Steel UK has performed better in 2008-09 and has met all its covenant obligations to date, the company informed its lenders that it has taken significant steps to restructure operations and reduce costs to weather the downturn.

Tata Steel UK said it has a strong liquidity position and the only adverse impact of the prepayment of debt would be its impact on the company's EBITDA, which could in turn put a stress on its covenant package in the forthcoming quarters despite its strong liquidity position.

Tata Steel said since the debt is a secured loan availed of by pledging collateral, there is no personal liability on the part of the borrower.

Corus Steel, meanwhile, is planning to close one of its mills in Northern England following the termination of contract by a group of buyers of its products.

Alternatively, Corus said, it is also looking at legal options to avert the closure of its Tees side cast product unit.

A consortium of buyers that account for 80 per cent of the Teeside unit's  annual sales has terminated a 10-year contract, forcing the unit to close, putting 3,000 jobs directly and several thousands downstream at risk, reports said.

The consortium comprises Italy's Marcegaglia, Korea's Dongkuk Steel,  Duferco Participations and Alvory SA.

The Corus units has around 1,920 employees on its roll and another 1,000 on contract.