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Hindalco gets nod to amend terms of $982-m loan

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Mumbai, July 2 Hindalco Industries, the Aditya Birla Group company, has received approval from lenders to amend the terms of a $982-million (Rs 4,714 crore) loan it had obtained to part-finance the acquisition of Novelis Inc.

“Under the new agreement, banks have agreed to waive requirement to test covenants on consolidated financials,” said the company in a statement to the BSE.

The lenders will now consider only the financial performance of Hindalco Industries on a standalone basis.

Hindalco has done much better than Novelis which has been hit by the economic recession in the US and Europe. The latter’s losses grew to $1.91 billion in 2008-09 against $117 million in the same period last year.

Mr D. Bhattacharya, Managing Director, said in a recent press conference that Novelis’ performance had been largely hit by the sharp fall in demand from carmakers in the US. Sales (of cars) were expected to fall to nine million units this year from 16.6 million last year,” he added.

Hindalco had, in 2007, borrowed Rs 13,000 crore ($2.7 billion) using its own assets as collateral and availed itself of a $2.8-billion loan against Novelis’ assets to fund the $6-billion (nearly Rs 29,000 crore) acquisition. The consolidated debt of Hindalco stood at Rs 28,000 crore in FY’09, while it was Rs 13,000 crore on a standalone basis.

In May, Tata Steel, which had raised $6 billion to acquire UK-based Corus, changed the terms of its debt after the global economic crisis hit demand and muted earnings at overseas units.

Hindalco shares in BSE were up one per cent at Rs 85 on Thursday.

(This article was published in the Business Line print edition dated July 3, 2009)
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