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JSW Steel, India's largest alloy manufacturer, has raised $900 million from a consortium of eight foreign banks to refinance debt coming this month and prepay some high-cost borrowings.
Earlier this month, the loan was priced 180 basis points over the international secured overnight financing rate (SOFR), according to various sources familiar with the matter. A basis point is one-hundredth of a percent point.
The loan is jointly underwritten by eight banks: Singapore's DBS Bank, France's BNP Paribas, UK-based HSBC and Standard Chartered, the UAE's Mashreq Bank and First Abu Dhabi Bank, Japan's Sumitomo Mitsui Banking Corp (SMBC), and Taiwan's CTBC Bank.
JSW raised $500 million through a five-year bond in April 2019 at 5.95%, which matures this month. The proceeds of the loan will help the company repay that bond. The three-month SOFR is trading at around 5.35%, and at 180 basis points above the SOFR, JSW will pay around 7.15% for the loan.
Meanwhile, the consortium of banks will conduct roadshows in Singapore and Dubai later this month to syndicate the loan. Syndication involves getting more lenders in the loan agreement for a fee. Usually, the lead arrangers keep the larger chunk of the loan with themselves.
JSW Steel, the flagship company of the $23 billion JSW Group, has a 30 million tonne (MT) capacity and is one of the lowest-cost steel producers globally. The company is currently in the midst of a capital expenditure programme and plans to raise capacity to 50 MT by the fiscal year ending March 2031.
Brokerage firm CLSA, in a report last month, had downgraded local steelmakers, including JSW Steel, as it expects prices to remain under pressure given that supply is likely to outpace the growth in demand.
The company spent about ₹13,249 crore on capital expenditure at a consolidated level between April and December and expects to spend around ₹18,000 crore for the full year. Earlier this year, the JSW Group and JSW Steel announced that they will invest ₹65,000 crore in multiple phases to set up a 13.2 MT integrated steel plant in Odisha. Its net debt to operating profit ratio rose to 2.64 times from 2.52 times a quarter ago due to higher working capital.
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