October 08, 2008

SBI to lend USD 1.5 billion more to TATA for Corus buy

BS reported that State Bank of India will lend another USD 1 million to USD 1.5 billion to TATA Steel UK to enable the TATA group to refinance a part of the bridge loans taken by it for the acquisition of Anglo Dutch steel maker Corus.

TATA Steel is unable to raise funds from foreign banks, which have turned risk averse following the US sub prime mortgage crisis. It has therefore turned to SBI for funding support. The fresh loan will be in addition to the USD 1 billion SBI sanctioned late last month.

SBI will take the enhanced exposure to TATA Steel through its overseas branches. This will become a substantially bigger acquisition financing exposure of SBI, considering that it till now was involved in deals only of less than USD 100 million.

TATA needed refinance to pay off USD 7.2 billion of bridge loans taken for the biggest buyout by an Indian company. According to reports, over USD 500 billion of fund raising has been caught in a global credit logjam caused by risk aversion among banks and other investors.