NEW DELHI (Commodity Online): Tata Steel has approved an exchange offer for an existing $875 million of securities into foreign currency convertible bonds (FCCBs), in a move to reduce costs and ease repayment. The move gives an option to extend the repayment schedule by two years.

The new FCCBs will have a yield-to-maturity of 4.5 per cent and are to mature in November 2014. And, are convertible into shares at Rs 605.53 each, a 15 per cent premium to the closing price on Wednesday.

The existing convertible alternative reference securities (CARS) had a yield-to-maturity of 5.15 percent and were due in 2012. The securities were convertible at Rs 733, and had a redemption premium of 23 per cent in case they were not converted.

With the swap, there would be an $875 million reduction in the company’s outstanding debt, assuming full acceptance of the offer.

The company said it was making the exchange offer to lengthen its debt maturity profile, lowering cost and potentially reducing future repayment obligations. Standard Chartered Bank, ABN AMRO Bank, Citigroup and Calyon are the managers to the exchange offering.

Tata Steel, which bought Anglo-Dutch steel maker Corus in January 2007 for $12.9 billion, posted a group loss in the first quarter ended June 30 because of lower prices and production cuts at Corus. The unit, which provides more than two-thirds of Tata Steel’s output, operated at about 60 per cent of its capacity in the period after orders from car makers and builders collapsed.

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