TATA Steel executes agreements for the refinancing of its debt in Europe

TATA Steel announced that it has executed agreements for the refinancing of its European operations.

TATA Steel UK Holdings, a 100% indirect subsidiary of TATA Steel Limited, signed a Senior Facility Agreement with a syndicate of 13 banks for a GBP 3.53 billion term loan and revolving credit facility which is intended to replace in full the current term loan and revolving credit facilities entered into at the time of the acquisition of Corus Group plc in 2007.

The new financing structure is in two parts
1. 5 year loan of around GBP 1.8 billion equivalent 
2. 7 year loan of GBP 1 billion equivalent

The revolving credit facilities for working capital purposes have been increased to GBP 690 million and will have a tenor of 5 years.

Standard Chartered Bank and State Bank of India initially led these new financing arrangements, while 11 more institutions joined the syndicate as Bookrunners, Underwriters & Mandated Lead Arrangers prior to signing in a reflection of the strong ties between TATA Steel and its core relationship banks. These are: BNP Paribas SA, Bank of America NA, Credit Agricole CIB, Citicorp Securities Asia Pacific Limited, Cooperatieve Centrale Raiffeisen Boerenleenbank B.A. (Rabobank International), Deutsche Bank A.G., HSBC Bank PLC, ICICI Bank Limited, ING Bank NV, JP Morgan Chase Bank NA and The Royal Bank of Scotland. This transaction will continue to be syndicated in order to allow other banks that have a relationship with the company to participate as well.

The new facilities have been designed to achieve certain key financing and business objectives for the company: the syndicate comprises a smaller, coordinated group of Banks with long term relationships with TATA Steel; repayment obligations for the next 5 years have been minimized; there is flexibility to incur higher capital expenditure in Europe and to raise working capital depending on business needs; and the new financing arrangements carry lighter financial covenant obligations.

Mr Kirby Adams TATA Steel Europe MD & CEO said “Lenders to TATA Steel showed confidence by supporting the Company’s plans to weather the financial crisis. In the week that we have rebranded our European operations as TATA Steel, this refinancing agreement is an important sign of our Banks’ sustained confidence in our plans for the future. As I prepare to hand over the reins of TATA Steel Europe to Karl-Ulrich Köhler, it is very satisfying that another key strategic objective of the Company the securing of a sound and more favourable financing structure for the future is being achieved.”

Mr Koushik Chatterjee TATA Steel Limited Group Chief Financial Officer said “ The execution of agreements for the re-financing of our European debt marks an important financing milestone for Tata Steel Group. In the last 18 months, Tata Steel Group has repaid significant debt of approximately equivalent to £ 900 million, but it has remained an important goal to rework the Group’s capital structure especially in Europe. In the current global financing environment, the terms of this refinancing are exceptional for their flexibility and attractiveness to the business. I would like to thank all the Banks that have demonstrated the strength of their relationships with Tata Steel through this agreement, which will provide further robustness to Tata Steel Group as work continues on reshaping its Balance Sheet.”

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Macroeconomic indicators - ADB raises GDP forecast for India

The Asian Development Bank has raised India’s growth forecast for the current fiscal to 8.5% from 8.2% but has expressed concern over the persistent high inflation and rising value of rupee which could undermine the future economic expansion.

ADB outlook Update said that “Growth is being supported by robust investment, increased capital inflows and stronger industrial output, buoyed by rising consumer demand.”

In April, the multilateral lending agency projected a growth rate of 8.2% for 2010-11. For the next financial year (2011-12), ADB has retained its earlier projection of 8.7%.

ADB’s growth projection for the current fiscal is the same as has been forecast by the Finance Ministry, the Reserve Bank of India and the Prime Minister’s Economic Advisory Council.

The multilateral lending agency, however, expects the average inflation to be 7.5% during the current fiscal as against its earlier projection of 5.5%. It added that “High food prices (will) remain a near-term concern.”

The rate of price rise, according to ADB, is likely to be at the same level during the next fiscal. The inflation, according to the new Wholesale Price Index with base year 2004-05 was 8.5% in August and food inflation was 15.10% for week ended September 4.

ADB also warned that the rising value of rupee does not augur well for the Indian economy in the coming years. Rupee appreciated more than 11% in real terms between August 2009 and August 2010.

High inflation and rupee’s sharp appreciation, it added, could erode India’s export competitiveness and its plans to further expand the economic growth to 9% to 10% in coming years.

Pointing out that RBI was projecting overall inflation to moderate to 6 per cent by March-end, the report said that “if price pressures do not abate as expected, the central bank will be hard pressed to intervene in the foreign exchange market to dampen rupee appreciation.”

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JSW Steel backs out of talks to buy Brahmani -Report

ET reported that JSW Steel is backing out of negotiations to buy out Brahmani Steel, promoted by the controversial Reddy brothers of Karnataka, due to concerns over valid mining permits and a hostile state government.

As per report, JSW was in talks to pick up a majority stake in the 4 million tonne Brahmani Steel, founded jointly by Mr G Janardhan Reddy and Mr G Karunakara Reddy.

The report cited people familiar with the development as saying that talks between the JSW and the Reddys had been going slow due to lack of clarity over mining permits. The two parties could also not agree on the percentage of stake to be sold to the JSW. JSW wanted a greater share in the supply of iron ore which the Reddy brothers were reluctant to cede. 

However people familiar with the company said JSW was not comfortable with buying just 51% stake in Brahmani Steel and was keen on having complete equity control. The Reddy brothers, on the other hand, were in favor of retaining a significant minority stake.

Brahmani Steel owned by the Reddys’ Obulapuram Mining Company has already got 10,000 acres in Cuddapah district of Andhra Pradesh and civil works have now started to initially build a 2 million tonne plant.

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Indian tea industry: A SWOT analysis

Monojit Dasgupta

(The author is Secretary-General, Indian Tea Association.)

 
Strong domestic market

With tea prices rising, the tea industry is on the upswing again after several years and the expectation is that the trend will persist. But the industry is not without its challenges. The following is the SWOT analysis.

Strengths

The diverse agro-climatic conditions prevailing in the tea growing areas of India lend themselves to the production of a wide range of teas – black, (CTC, orthodox), green teas and organic teas.

A one-stop-shop for high quality specialty teas e.g. Darjeeling, Assam, orthodox, high range Nilgiris, etc.

Strong production base with 75 per cent of the production being accounted for by organised sector covering 1,600 gardens owned by nearly 1,100 entities.

Competent managerial manpower.

Strong research backing from well established research institutions. Availability of modernised and upgraded manufacturing facilities.

Labour welfare laws protecting workmen.

Emerging small grower sector with young plantation profiles. Availability of training facilities for plantation managers, supervisory staff and workers for continuous upgradation of their skills. Strong domestic market – by accounting for nearly 80 per cent of production offering demand cushion for the tea industry.

Weaknesses

Old age of the tea bushes – nearly 38 per cent have crossed the economic threshold age limit of 50 years and another 10 per cent on the verge of crossing this limit shortly. High cost of production mainly due to low productivity, high energy cost and high social cost burden.

Diminishing availability of workforce particularly in South India. Remote location of the plantations and transportation of teas over long distances from tea gardens to sale points. Poor infrastructure – approach roads to gardens, inadequate warehousing at ports, constrained availability of containers, placements of vessels and high ocean freight charges (due to feeder–mother vessel transfers).

Difficulties in introduction of mechanisation of field operations due to topographical and quality limitations.

Unorganised nature of small growers with fragmented small and scattered holdings leading to production of poor quality teas mainly due to non-availability of technical know-how at the doorstep – weak extension service.

Lack of quality monitoring mechanism for teas particularly sold through private sales.

Opportunities

Good awareness level world over as to the health attributes of tea leading to growing demand for good quality teas and specialty teas such as organic teas, green teas.

Narrowing down of the gap between supply and demand due to increased growth rate of consumption in the major producing countries. Producing countries reaching an agreement for forming an exclusive forum for resolving their differences over common issues.

Positive response by the tea industry responding to the Government towards renovation of fields and processing factories. (Special purpose tea fund and quality upgradation initiative).

Increasing strength of small growers and showing good response to the suggestion of Tea Board for collective approach towards adopting GAP and GMP.

Threats

Round-the-year production in countries such as Sri Lanka, Vietnam. Low cost of production of teas from Kenya, Vietnam and Indonesia etc.

Younger age of bushes (better quality of tea) of other producing countries.

Consistency in quality commitment and high service quality perception of exporters of other countries.

Better developed packaging and bagging capacity of Sri Lanka.

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Facebook has a face in India

The enticing and addictive Facebook now has got a face of its own in India. And that face is beautiful and creative – as creative as the social networking site itself.

With top MNCs such as CA, CSC, Accenture in the neighbourhood, Facebook chose to adorn its walls with paintings from local artists. Why, it announced a competition for local artists to submit their proposals for original designs to decorate the office space.

The social networking site, which posed a serious challenges to Gmail and its social networking site Orkut, has a global membership of 55 crore, with at least 50 per cent of them using it every day.

“Beginning today, artists can visit facebook.com/FacebookIndia to enter the contest. It is open till October 22, 2010,” Ms Kirthiga Reddy, Director (Online Operations and Head of Office India), said.

Showcasing what Facebook colleagues would do in office, she said India had emerged as a very important market for Facebook, with 1.5 crore users. The centre would act as a support and research centre. It would also support developers and marketing initiatives.

“There are 100 crore people in India. We have huge scope to build up the base,” Ms Meenal Balar, International Marketing Manager, Facebook Global, said.

However, the company, which expected authentic information from the users for getting a face on the Net, remained tight-lipped on the number of employees, investments, profitability and revenues. “Being private, we are not going to discuss financials,” Mr Don Faul, Director (Online Operations) of Facebook, said.

Where it stands

Mr Faul said about 3.5 crore users update their status each day, and 5.5 crore people wrote something on their ‘walls'. “People share 350 crore pieces of content such as Web links and photos each week,” he said.

An average user had 130 friends on the site, spent 55 minutes a day on the site and became a member of 12 groups.

As the company began to use more and more premium mobile handsets, the company was targeting the potential in that segment.

Security

Reacting to queries on the security challenges social networking sites posed, he said the company was aware of this problem and kept tabs on patterns to check abuse. The site looked for real people to enrol as members to “make it spam free”.

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New financial stability regime

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The IMF will monitor the policies of 25 countries to assess their impact on global financial stability. It will focus more on countries where the financial crisis broke out, and ensure they take the IMF's advice seriously.

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The International Monetary Fund (IMF) has come out a winner after the recent global financial crisis. It has provided intellectual and technical inputs to the G-20, which has emerged as the new global leadership to evolve policies to minimise the impact of the crisis. G-20 became the focal point for the revival of confidence in the global financial system.

The IMF has acquired the membership of the Financial Stability Board, which oversees the follow-up of G-20 decisions. It strengthened its position last week by integrating financial stability assessment with bilateral mandatory surveillance for 25 select countries.

These countries have been identified as important from the perspective of global financial stability, taking into account the size of their respective financial sectors and their interconnectedness with the rest of the world (see Table).

India has been caught in the net of these 25 countries. As a result, it will have to allow the IMF to undertake a stability assessment at least once in five years. Hitherto, such an assessment remained purely voluntary. But India, besides subjecting itself to IMF assessments since 1999, had undertaken a comprehensive self-assessment by the Rakesh Mohan Committee on Financial Sector Assessment in 2009.

While for India this policy change does not make any technical or policy departure, for many other jurisdictions identified as systemically important it will make a difference. Some of the advanced countries like the US, which were not keen to undertake stability assessments, will be compelled to comply with the new discipline.

SOME LIMITATIONS

Will the new paradigm make a difference in minimising the potential risks to global financial stability? While it resolves some weaknesses of the previous voluntary regime, it has thrown overboard some earlier strengths.

The new regime also lacks focus and a right sense of priorities.

The focus now has shifted in favour of stability issues, whereas the earlier regime laid equal emphasis on stability and development.

Financial sector development, in terms of orderly evolution and functioning of institutions and markets, is a prerequisite for ensuring stability. In fact, the recent crisis stemmed from the lack of robust financial markets and imprudence on the part of financial institutions.

The first priority, therefore, should have been to plug such loopholes and bring about orderly financial development in these countries.

This focus is dissipated to the extent that the newly identified systemically important countries include India and China, which were more the victims of the crisis rather than contributors to it. Dr Y V Reddy had often mentioned that India was not a contributor to the crisis, but was vulnerable to the crisis.

LIMITED EFFECTIVENESS

The mandate for making the Financial Sector Assessment Programme mandatory is derived from the provisions of Article IV. The success of the new regime will depend on whether the IMF policy advice under bilateral surveillance is effective, particularly in the case of advanced countries like the US.

The evidence so far has not been encouraging. IMF policy advice was effective in cases where the countries were implementing its programmes, since the release of IMF assistance depended upon the country's compliance with policy advice.

In advanced creditor countries, bilateral surveillance was more of a routine to be complied with periodically.

Article IV in particular emphasises policy advice on exchange rate management. In accordance with the framework set out in Article IV, the 2007 Surveillance Decision provides that systemic stability is best achieved by each member adopting policies that promote its own “external stability”— that is, by working towards a balance of payments position that does not give rise to disruptive exchange rate movements.

The new paradigm assumes that in the conduct of their domestic economic and financial policies, members are considered to be promoting external stability while promoting domestic stability.

How far has the IMF been successful in providing policy advice to its members on exchange rate management?

An evaluation carried out by the Independent Evaluation Office of the IMF in this regard concluded that in the period reviewed (1999–2005), the IMF was simply not as effective as it needed to be to fulfil its responsibilities for exchange rate surveillance.

FOLLOW-UP MOVES

All this is not to decry the IMF's new initiative. It is a welcome step and the new paradigm provides some teeth to IMF.

However, the following approach could provide better results: (i) within the group of 25, IMF should prioritise surveillance in the crisis-originating countries; (ii) in these jurisdictions, give equal emphasis to stability and development, so that orderly development of markets and institutions is ensured with a sense of urgency; and (iii) providing analysis of stability and advice are not enough by themselves and effective compliance mechanisms may need to be developed with appropriate incentive structures.

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Ayodhya Time line 

The dispute in Ayodhya regarding the structure has been a flashpoint of violence between Hindus and Muslims for decades. Here’s a look at the troubled history of the disputed holy site.

A cross-section of the Hindu community believes that in the 12th century, a temple is built in honour of Lord Rama in Ayodhya.

1528

The Babri Mosque is build by Babar’s general, Mir Baqi, on the orders of the Mughal leader Babur post destruction of the Ram Mandir.

1853

First recorded Hindu-Muslim clashes at the site.

1859

The British administration erects a fence to separate the places of worship, allowing the inner court to be used by Muslims and the outer court by Hindus.

1949

Idols of Lord Rama appear inside mosque allegedly placed there by Hindus. Muslims protest, and both parties file civil suits. The government proclaims the premises a disputed area and locks the gates.

1984

Spearheaded by the Vishwa Hindu Parishad party, Hindus form a committee to liberate the disputed site and build a Ram temple there. Bharatiya Janata Party leader Lal Krishna Advani takes over leadership of campaign. Congress leader none other than Mr.Rajiv Gandhi performs Shilanyasa as advised by his coluegues like Mr.Buta Singh

1986

District judge orders the gates of the Babri mosque to be opened to allow Hindus to worship there. In protest, Muslims set up Babri Mosque Action Committee. Mulayam Singh  approves shooting order on Sadhus protesting

1989

VHP steps up their campaign to construct the Ram Mandir, laying the foundations on land adjacent to the disputed mosque.

1990

VHP activists partially damage the mosque, Prime minister Chandra Shekhar tries to resolve the dispute through negotiations. L K Advani takes out a rath yatra to build the Ram temple.

1992

The mosque is demolished by the supporters of VHP, Shiv Sena and BJP, stirring up nationwide riots between Hindus and Muslims in which more than 2,000 people die. Congress Govt Dismisses BJP ruled sates like UP, MP, HP

1992

Government announces the setting up of the justice MS Liberhan commission to inquire into the conspiracy to demolish the Babri mosque.

2001

Tensions rise on the anniversary of the demolition of the mosque. VHP pledges again to build Hindu temple at the site.

2002

Vajpayee sets up an Ayodhya cell and appoints a senior official, Shatrughna Singh, to hold talks with Hindu and Muslim leaders.

2002

VHP confirms deadline of 15 March to begin construction. Hundreds of volunteers converge on site. At least 58 people are killed in an attack on a train in Godhra, which is carrying Hindu activists returning from Ayodhya.

2002

Between 1,000 and 2,000 people, mostly Muslims, die in riots in Gujarat following the train attack.

2002

Three High Court judges begin hearings on determining who owns the religious site.

2003

Archaeologists begin a court-ordered survey to find out whether a temple to Lord Rama existed on the site. The survey says there is evidence of a temple beneath the mosque, but Muslims dispute the findings.

Atal Bihari Vajpayee says at the funeral of Hindu activist Ramchandra Das Paramhans that he will fulfil the dying man’s wishes and build a temple at Ayodhya.

2004

LK Advani says the BJP still has unwavering commitment to building a temple at Ayodhya, which he said was inevitable.

September, 2005

The Union government extends the term of the Liberhan Ayodhya Commission by three months.

April, 2007

S C dismisses a petition seeking initiation of contempt of court proceedings against the centre, the state of UP and others for violating the Court’s order of 1992 directing status quo on the disputed land following demolition of the Babri Masjid in Ayodhya.

October, 2007

Fifteen persons, including a lawyer, accused of burning nine persons alive in the communal riots that broke out in Kanpur in the aftermath of Babri Masjid demolition in December 1992 were sentenced to life by a local court.

February, 2009

Former BJP leader Kalyan Singh said he owned total responsibility for the demolition of the Babri Masjid when he was the CM of UP in 1992.

June, 2009

Liberhan commission submitted its report to PM Manmohan Singh, 17 years after it was set up. The commission, which got 48 extensions, submitted the report in the presence of Home Minister P Chidambaram.

July, 2009

UP govt seeks a probe by the CBI into the disappearance of 23 files relating to the Babri Masjid-Ramjanmbhoomi case.

November, 2009

Eighth witness of the CBI in the Babri masjid demolition case, Mr Chandra Kishore Mishra said that LK Advani gave provocative speeches before the mosque was demolished.

November, 2009

Home Minister P Chidambaram tabled the Liberhan Commission Inquiry report in the Lok Sabha.

July, 2010

Allahabad HC asked parties in the Ayodhya case to find a compromise before the final verdict. The court said that the parties could inform the officer on special duty of the court if there is any possibility of out-of-court settlement until delivery of judgment.

September, 2010

The Lucknow Bench of the Allahabad High Court says it will pronounce its judgment on case on September 24.