Tata close to deal with government to keep UK plants
business Updated: Jun 04, 2016 06:17 IST
LONDON: Tata Steel is close to a deal with the government to keep its UK business rather than sell it off, which would secure the future of 11,000 workers and the Port Talbot steelworks.
Tata is in talks about a loan worth up to £1 billion (almost Rs 9,700 crore) and a restructuring of the British Steel pension scheme which could shave billions of pounds off its liabilities.
Although Tata Steel is continuing to run a sales process for the UK business, it was encouraged to work on keeping its operations by the package of support the government put together for potential buyers. A source close to Tata said: “They have never stopped negotiating. If everything works out they will stay.”
A deal could be announced by the end of June. Any loan between Tata and the government would be on commercial terms, but it could be a key in helping turn around the loss-making business. The Tata source said: “If it works then they [Tata] will make a profit; it doesn’t then they won’t be able to pay it back.” A spokesperson for the Department for Business declined to comment on talks.
The deadline for buyers to make a formal proposal to buy Tata Steel UK was last week. Eight bidders are thought to be in the running. However, the potential buyers are thought to be refusing to provide guarantees, and want cash from Tata.
The UK government is willing to offer millions of pounds to a buyer of Tata Steel UK and restructure the pension scheme, which has liabilities of almost £15 billion and costs more than £100 million a year to support.
The pension scheme is regarded as a hurdle to a rescue deal. The latest figures show the deficit has ballooned to £700 million, up from £485 million last year. The government has estimated it would cost £7.5 billion to buy out the scheme’s benefits. A consultation period has started and will end on June 23 .