The Hindu Business Line : Tata Chem ties up funds to retire debt for US buy

Number strength
Company getting the non-recourse loan at ‘very attractive’ rate
Decides to trim capex programme by Rs 150 crore from the originally proposed Rs 500 crore.

Our Bureau

Mumbai Nov. 24 Tata Chemicals on Monday announced completion of a non-recourse financing of $300 million to retire the bridge loan of $350 million it had taken for the acquisition of US soda ash producer General Chemical Industrial Products Inc (GCIP) earlier this year.

It had acquired the US firm for $1.05 billion early this year to become the second largest soda ash producer in the world.

This is a six-year, door-to-door facility with “attractive pricing,” which is based on net debt to EBIDTA (earnings before interest, depreciation, tax and amortisation) ratios and is without recourse to Tata Chemicals.

Led by Standard Chartered Bank, the transaction is through a consortium that includes ABN Amro Bank, ANZ Banking Group, Caylon and HSBC Bank. The global syndication process is expected to be completed by December.

Mr P.K. Ghose, Executive Vice-President and CFO of Tata Chemicals, did not disclose the rate at which the company was getting the non-recourse loan, but indicated that “it is very attractive,” especially given the current global financial market conditions.

The loan would have a tapering interest rate with reduction of debt over the repayment period. The remaining $50 million of the bridge loan will be paid through internal accruals of the company.

Strengthening position

The acquisition of an equal partnership in Indo Maroc Phosphore S.A. along with Chambal Fertilisers and the global phosphate major OCP of Morocco in 2005 was the first step that Tata Chemicals took to internationalise its operations.

In early 2006, it completed the acquisition of the UK-based Brunner Mond Group and last year it entered into a 50:50 joint venture with Total Produce of Ireland, the third largest fruit and vegetable distribution company in the world.

GCIP produces natural soda ash by mining the commodity and hence its product has a cheaper cost of production at about $70 a tonne, as compared to production of synthetic soda ash in India at $150 a tonne. GCIP at present feeds 60 per cent of its production in the US market and the balance to Latin American and other markets.

In response to a question, Mr Ghose said the company has decided to trim its capital expenditure programme by Rs 150 crore from the originally proposed Rs 500 crore. “We will review the expansion projects on hold six months later,” he said.

Among the proposed projects put on hold for the time being include the expansion of its Mithipur facility to 1.2 million tonnes capacity. Other projects such as the Rs 210-crore de-bottlenecking of its urea plant at Babrala is however progressing on schedule.

“It is not that we have stopped our capital expenditure. But, given the current times, we are going ahead with those projects that fetch us immediate returns, while keeping on hold other projects for the next six months,” he said.