Tuesday, June 19, 2007

Ruias funding Algoma acquisition through senior notes & loans

Essar Global will raise $900 million through a combination of senior notes and loans to fund its acquisition of Canada’s Algoma Steel, reported Economic Times. The non-recourse fund raising exercise by Essar Global is the second-largest such transaction by an Indian steel company, after Tata Steel’s almost $7 billion loan to finance its acquisition of Corus.

The Ruias’ international holding company had acquired Algoma in April for $1.58 billion in an all-cash leveraged buyout. Essar Global’s acquisition is considered the second biggest by an Indian company in North America, after Hindalco paid $6 billion to buy Atlanta-based Novelis in February.

To finance its Algoma acquisition, Essar Global will sell $450 million of senior notes, recoursed to the Canadian company’s balance sheet. The eight-year notes, denominated in dollars, may yield 9.75% to 10%. UBS is the financial advisor to the offer.

Essar Global also plans to issue $450 million in loans, based on Algoma’s earnings. The group’s own contribution will be about $500 million. It could not be ascertained how the rest of the acquisition amount — about $100 million — will be raised.

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