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MUMBAI, June 30

LAST year's decision by Tata Sons and Tata Tea to inject £30 million of cash into Tetley will help the British tea major save on interest outgo during 2002-03 as well.

The saving for the year is estimated at £7.3 million. Tetley had similarly benefited from the cash injection in 2001-02.

It may be recalled that Tata Tea had acquired Tetley in a £271-million Leveraged Buy Out (LBO) whereby the ring-fenced deal insulates Tata Tea from the transaction's debt burden, making it Tetley's onus to repay the borrowings from its cash flows.

The cash injection by Tatas into Tetley was a combination of £29 million of convertible loans and £1 million of equity. The proceeds from this were used in part to negotiate the redemption of £20 million of high coupon subordinated loan stock at par, with the note holders waiving more than £5 million in interest.

Additionally, Tetley also redeemed £6.3 million of subordinated loan stock and re-based the interest rate swap facility put in place at the time of acquisition of Tetley by Tata Tea, thus improving operating covenant headroom.

Mr Peter Unsworth, Group Finance Director, Tetley, who pointed out at Tata Tea's press briefing here that the cash injection helped save on interest outgo in 2001-02, had said in Tetley's 2001-02 performance report that such a saving was expected for 2002-03 also.

"Overall, this commitment from Tata will result in a saving of £4.8 million in interest in 2001-02 and £7.3 million in 2002-03,'' he says in the report.

By this year-end, Tetley's debt burden from the LBO is expected to reduce to £165 million.

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