Tata Steel Europe reports debt reduction

Tata Steel said its European subsidiary, Tata Steel Netherlands Holdings, has refinanced its bank debt by raising term loan facilities of 1.75 billion euros. In comparison, Tata Steel’s European operations had reported a debt of over 2.2 billion euros as of March.

“This represents a reduction of EUR 500 million versus the external debt outstanding in Tata Steel Europe as of Mar 2019, enabling the standalone European business to have a more robust balance sheet while it is also putting in significant efforts at restructuring and improving its operating performance,” the Indian company said.

The new loans have been secured from 19 banks, the Indian steel maker said.

Tata Steel also said the new loans contain more favorable terms and more efficient pricing, and have a longer maturity compared to the earlier ones.

“The new financing..will provide greater financial headroom to the business in the coming years,” said Koushik Chatterjee, Executive Director & Chief Financial Officer, Tata Steel.

“The Company was able to complete this financing despite all the volatility in the financial markets, demonstrating the strong confidence enjoyed by Tata Steel in the financial community.”

The move represents a small, but significant win for a company that has been struggling to turn its European operations since it was hit by the 2016 commodity down-cycle.

The latest attempt was the aborted merger of Tata Steel’s operations in Germany, the Netherlands and the UK with Germany’s Thyssenkrupp.

The deal would have shifted the 2.2 billion euro debt on to the new company, but the entire transaction was called off due to objections from the competition watchdog European Commission.

Tata Steel has a debt of around Rs 1 lakh cr (equivalent to 12.7 billion euros at current exchange rates) at the group level.

It reduced its net debt by around Rs 18,000 cr in the financial year ended March 2019. The Indian company has already announced that it wants to bring down its net debt level by about $1 billion (Rs 7,000 cr) in the ongoing financial year.

Corus Group plc was acquired by Tata Steel in 2007 for $12 billion in one of India’s most high-profile outward foreign investment deals. The acquisition was expected to give Tata Steel a strong foothold in higher margin steel segments.

The company was renamed Tata Steel Europe in 2010. Tata Steel has taken impairment of around $3 billion due to losses at its European steel operations so far.