Credit derivatives market would surely feel the pinch as Tata Steel has gone ahead and secured the largest ever loan for any Indian company. The market looks surprised as a result as the company has taken a loan for $7.29 billion as a part of long term financing strategy for recently acquired Corus. It was a known fact that Tata would be financing a large part of its Corus deal but this loan amount has left everybody staggered.
Taking advantage of the high liquidity in the market the company has taken finance from Standard Chartered, Citigroup and ABN Amro. As per the deal Tata has taken a five year revolving credit facility of £500 million besides a long term debt of £3.17 billion. Since the loan is against the assets of the company therefore the company has been able to secure it at a low rate of interest. This has demonstrated that the loan market is quite liquid at present and as per the deal the company would be injecting extra £430 million equity in Corus. Though good news for Tata but derivative contract holders worth billions linked to debt issued earlier by Corus might not be in a good position.
Via ft
