Tata Steel UK to prepay debt of over 200 mn pounds

As part of restructuring, Tata Steel UK informed its lenders on Tuesday that it would prepay debt of over 200 million pounds to continue its objective of making its European operations debt-free.

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

Non-recourse debt is a secured loan that is availed of by pledging collateral but there is no personal liability on the part of the borrower.

This would be funded through additional support from Tata Steel, which has a significant liquidity buffer, it said.

Tata Steel UK has appointed Citigroup, Royal Bank of Scotland and Standard Chartered Bank as the co-ordinating banks to facilitate the process.

The banks with significant interest in the debt have expressed strong support towards the covenant reset proposal, it said.

Tata Steel UK held meetings with banks in London and Mumbai to discuss the current environment and the potential future impact on some covenant requirements under the company's debt package.

During discussions with lenders on the covenant package, the company said it has not sought any additional funding as it has sufficient liquidity for its operations.

Tata Steel UK has also not requested any rescheduling of its debt servicing obligations as there are no material repayment or refinancing requirements in the near future, it said.

The company informed its lenders that it has taken significant steps to restructure its operations and reduce costs to weather the downturn.

Tata Steel UK has performed better in 2008-09 and has met all its covenant obligations to date with the strong liquidity position at the year end, it said.

However, there could be an adverse impact on its EBITDA, which could put a stress on its covenant package in the forthcoming quarters, it said.