Steelmaker Corus has secured a deal with its banks that will see the firms lending agreements relaxed.
A banking syndicate led by seven banks including Citigroup, Standard Chartered and Royal Bank of Scotland has agreed to reset the banking covenants (relaxing terms and conditions of loans) on £3.7 billion of debt used by Indias Tata Steel in its £6.2 billion takeover of Corus in 2007.
Some media reports have suggested that this could mean a lifeline for Coruss Teeside operation, which is facing closure after its top four international customers cancelled contracts with the plant.
But a Corus spokesman said: This is not related to Teeside but to Corus as a whole.
Last week MRW reported Corus had taken legal action to try to prevent a consortinum from pulling out of a contract to buy the majority of the steel from its Teeside Cast Products plant (see MRW story).
As part of the package to reset the debt covenants, Tata Steel UKs Indian parent company will inject £425m into the firm and £200m of this will be used to pay off debts.
Corus chief executive Kirby Adams said: This overwhelmingly positive response from our lenders is a mark of their underlying faith in our business, even as we explore options for Teeside Cast Products.
Since last November, Corus has been hit hard by declining steel prices and low global demand for steel.
Tata Steel chief financial officer Koushik Chatterjee said: The covenant resetting agreement demonstrates the strong relationship of the Tata Steel Group with its lenders and underlines the commitment of Tata Steel to its European operations. It is important to highlight that, despite the challenging financial environment, there will be no increase in the debt-servicing costs of Tata Steel UK.
Tata Steel Group continues to have adequate liquidity and has no material repayment obligations or refinancing requirements in the next 12 months.