Tata Steel raises $1.5 billion by issuing dollar bonds to overseas investors

Mumbai: Tata Steel has raised $1.5 billion by issuing dollar bond to overseas investors, as part of its plan to refinance debt of $7 billion.The bond issue that closed on Thursday included two tranches with tenures of 10 years and five-and-half years. The 10-year bond had a coupon rate of 5.95% had raised a total of $1 billion. The five-and-half years bond carried a coupon of 4.85% to raise $500 million. The coupon rate is the yield the bond will pay on maturity.

Tata Steel had started marketing the bonds after it mandated 12 international banks to arrange the issuance. It organized road shows in the Singapore, Hong Kong and London. The bond sale is part of the plan to refinance existing debt of Tata Steel Europe, formerly known as Corus.

It is a debut dollar issuance by Tata Steel. The deal had overwhelming response from investors, as reflected in order book and final pricing. It is the largest subinvestment grade deal in Asia this year. This landmark deal shows investor confidence in Tata Steel credit and its leading position in the global steel industry" said Manmohan Singh, the India India and SE Asia Managing Director and head of debt capital markets for RBS.

"It is a debut dollar issuance by Tata Steel. It was well received by investors. It is the largest sub-investment grade deal in 2014," said a banker involved with the deal. Tata Steel Europe (TSE), which has been a drag on the Indian steelmaker since recession hit the continent five years ago, is slowly stabilising.

It accounts for more than half of Tata Steel's total consolidated revenue. The whole refinancing plan is among the largest such exercises by an Indian company and will also see it raise fresh loans to refinance existing term loans and revolving credit facilities.

Tata Steel's existing loans don't mature until September 2015. Tata Steel had a net debt of Rs70,237 crore as on March 31, 2014. Indian companies are increasingly raising funds by selling dollar and euro denominated bonds to take advantage of the renewed interest among international investors.

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