ET reported that TATA Steel approved a proposal to exchange its convertible bonds worth USD 875 million for new convertible bonds that will reduce costs and lower repayment obligations. But, the move indicates that the Jamshedpur based steelmaker, which earns about two third of its revenue from outside India is concerned with the pace of growth seen in the steel sector globally and the impact on the group.
TATA Steel said the new foreign currency convertible bonds will have a yield to maturity of 4.5% and will mature in November 2014. The bonds are convertible into shares at INR 605.53 each.
The existing convertible alternative reference securities had a yield to maturity of 5.15% and were due in 2012. The securities were convertible at INR 733 and had a redemption premium of 23% in case they were not converted. Under the exchange offer norms, for every 100 bonds held, the bondholder gets 111. The company also gains on lower costs; the old bond had guarantee from one of the banks, Standard Chartered, while the new bond doesn't have any such guarantee.
An analyst with a European brokerage firm said that "It indicates that the company is not very confident about a significant rally in its share price which would have meant a big redemption payout.”
TATA Steel said that Standard Chartered Bank, ABN Amro Bank, Citigroup and Calyon are the managers to the exchange offering.
(Sourced from Economic Times)
