The Aditya Birla group flagship Hindalco is gearing up to refinance the acquisition of Canadian major Novelis.
Hindalco, which recently concluded a $3-billion bridge-loan transaction for the acquisition, has started the preliminary dialogue with foreign banks.
UBS, ABN Amro and Bank of America provided the bridge loan.
Eight banks, including Barclays, UBS, Citi and ABN Amro, have made presentations to the company’s top management, offering innovative instruments to mitigate the risk associated with the rising turmoil in the global financial markets triggered by the sub-prime crisis.
“We have got another 18 months to refinance the deal. We are watching the global developments. We will do the refinancing at the appropriate time. Some foreign banks have made presentations,” said a source familiar with the development.
Investment banking sources said that global banks have been offering innovative instruments like Foreign Currency Convertible Alternative Reference Securities, which was used by Tata Steel to fund a substantial part of the acquisition of Corus. Tata Steel Ltd has raised $875 million in CARS issue, including a $150-million green-shoe option, to fund its $12-billion Corus acquisition.
“The Birlas have got enough time to refinance the bridge loan,” said an analyst from Credit Suisse. An Aditya Birla group spokesperson declined to comment on the issue.
Hindalco shares were up 0.14 per cent at 139.20 at the BSE on Thursday. Over the last one month, the company’s share price came down by almost 24.70 per cent at the BSE.
Hindalco acquired Novelis for $6 billion, including approximately $2.40 billion of debt. Under the terms of the agreement, Novelis shareholders will receive US $44.93 in cash for each outstanding common share.
Novelis is the global leader in aluminum rolled products and aluminum can recycling, with a global market share of about 19 per cent.
Hindalco has a 60 per cent share in the currently small but potentially high-growth Indian market for rolled products.
Novelis is planning to introduce its products in India, including cans, automotive components and lithographic products.