JSW Steel, India’s largest manufacturer of the alloy, has raised USD 900 million from a consortium of eight foreign banks to refinance debt maturing this month and pre-pay some high-cost borrowings.
The loan was priced 180 basis points above the international secured overnight financing rate (SOFR) earlier this month, multiple people aware of the details said. One basis point is a hundredth of a percentage point.
Eight banks – Singapore’s DBS Bank, France’s BNP Paribas, UK-based HSBC and Standard Chartered, UAE’s Mashreq Bank and First Abu Dhabi Bank, Japan’s Sumitomo Mitsui Banking Corp (SMBC) and Taiwan’s CTBC Bank – are the joint underwriters for the loan.
“The company has some repayments due including USD 500 million for a dollar bond that matures this month. The money raised will be used to repay this and other foreign currency borrowings with the residual used for capital expenditure,” said a person aware of the transaction. JSW Steel did not respond to an email seeking comment.
The company did not reply to an email seeking comment. Spokespersons for HSBC, Standard Chartered and BNP Paribas declined to comment while DBS, and SMBC did not reply to emails seeking comment. Other banks could not be immediately reached.
JSW raised USD 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 currently 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 for syndication of the loan later this month. 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 USD 23 billion JSW Group, has a 30-million-tonne capacity and is also one of the lowest-cost producers of steel globally. The company is currently in the midst of a capital expenditure programme where it plans to raise capacity to 50 million tonnes by the fiscal ending March 2031.
Last year, global credit rating agency Fitch had affirmed a ‘BB’ rating with a stable outlook for the company’s long-term debt, adding that the company’s total debt to operating profit remaining below 2.5 times along with sustained positive or neutral cash flow could lead to an upgrade.
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 INR 13,249 crore on capital expenditure at a consolidated level between April and December and expects to spend around INR 18,000 crore for the full year. Earlier this year, the JSW Group and JSW Steel announced that they will be investing INR 65,000 crore in multiple phases for setting up a 13.2-million tonne 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.
