SBI Provides Tata $1Bn For Corus Acquisition

Mumbai: The State Bank of India (SBI), the country''s largest lender, has come to Tata Steel''s assist for completing the fund mopping up for its $12.9 billion acquisition of Anglo-Dutch steelmaker Corus. The bank has accorded to give up to $1 billion to Tata Steel''s special purpose vehicle, Tata Steel UK, to refinance $7.2 billion of bridge loans taken for the biggest take over by an Indian company. Tata Steel had to turn to the SBI after some foreign banks backed out, thanks to the sub-prime crisis in the US and the credit squeeze that followed. About $500 billion of fund-raising has been caught in a global credit logjam caused by risk aversion among banks and otherinvestors. This is also the first acquisition financing of this size given by the SBI, which till now was involved in deals of less than $100 million (Rs 410 crore).

The SBI had mopped up close to $700 million $300 million under the medium term note programme and $400 million through innovative perpetual debt instruments which could have been used to fund the acquisition. Early last month, Tata Steel had to agree to pay 50 basis points more on a $1-billion, seven-year loan as the banks taking part in the loan syndication bargained with the underwriters for higher yield. The loan''s underwriters were ABN Amro, Citigroup and Standard Chartered. There has been as much as 200 basis point increase in credit spreads on Indian loan and bond issues since the last week of July, when the sub-prime crisis first struck international credit markets.