Tata tackles steel debt

Jun 1 2009 by Karen McLauchlan, Evening Gazette

TATA Steel UK’s (TSUK) Indian parent has pledged to pump £400m into the company, which will be used to help pay off the £3.7bn it borrowed to acquire Corus - including its now threatened Redcar site - two years ago.

The cash injection follows an agreement by the banks to relax terms on the loan, although the lending will not be rescheduled and there will be no new money.

Corus chief Kirby Adams said the decision by the Indian board and TSUK’s lenders signalled their faith in the underlying strength of the business, despite the cloud hanging over Teesside Cast Products where 2,000 jobs are on the line after a group of buyers walked away from a deal which would have filled the order book for the next five years.

Although the moves will have no direct impact on the plant, it could go some way to restore Corus’ credit rating with suppliers, which would boost local bosses’ attempts to hammer out a rescue deal for Redcar.

Mr Adams said Corus would continue its “focus on improving operating efficiency, as well as on enhancing customer relations and revenues through better product quality and service. We also look forward to stronger commercial relations with suppliers through an improved credit profile”.

Under the new lending arrangements, testing of the facility’s earnings-related covenants will largely be suspended until March 2010 and there will be no increase in the current level of interest costs for the remaining life of the loan.