UK banks restructure Tata Steel UK debt

30 May 2009

Tata Steel UK, an indirect subsidiary of Tata Steel, has got lenders approval to reset the covenants for its 3.7 billion pounds (about $5.6 billion) loan that was taken at the time of the Corus acquisition, the company said in a press release today.

The company had asked the lenders to waive the loan's financial covenants in mid-May pummelled by global economic downturn.

"As part of the agreement reached with banks, testing of the facility's earnings-related covenants will largely be suspended until March 2010 and will then resume with significantly higher flexibility than in the case of original covenants," the company said.

Covenants are typically agreements between a company and its lender, that stipulates the conditions under which the loan is granted and could include restrictions on further borrowing.

The statement also said the interest costs would not increase in the remaining life of the loan and that the revised covenant did not include any additional finance from the lenders or rescheduling of debt servicing commitments.

As part of the package, Tata Steel pledged to repay about 200 million pounds ($304 million) of debt ahead of schedule and inject 425 million pounds into the company in a phased manner.