Corus to extend production cuts beyond December

In order to align its production levels with demand in the European market, Corus last month announced plans to reduce its third-quarter production (Oct-Dec 2008) by 1mn tons of crude steel, equivalent to 20% of its output. Corus has now decided to extend the production cuts beyond December.
The company expects to produce about 30% less crude steel than planned during the two quarters to the end of March 2009. Consequently Corus will temporarily idle one blast furnace at each of its Scunthorpe, Ijmuiden and Port Talbot works and will also adjust output levels on its downstream production units to suit market conditions in their respective regions and end-use sectors.

SBI gives Tata Steel 1billion $ for Corus

The State Bank of India (SBI), the country's largest lender, has come to Tata Steel’s aid for completing the fund-raising for its $12.9 billion acquisition of Anglo-Dutch steelmaker Corus.

The bank has agreed to provide up to $1 billion to Tata Steel’s special purpose vehicle, Tata Steel UK, to refinance $7.2 billion of bridge loans taken for the biggest buyout by an Indian company.

“We have approved a loan of $800 million to $1 billion to Tata Steel,” said a senior SBI official. A Tata Steel spokesperson confirmed that the company was availing of the loan from the SBI.

Tata Steel had to turn to the SBI after some foreign banks backed out, thanks to the sub-prime crisis in the US and the credit squeeze that followed.

According to reports, about $500 billion of fund-raising has been caught in a global credit logjam caused by risk aversion among banks and otherinvestors.

This is also the first acquisition financing of this size provided by the SBI, which till now was involved in deals of less than $100 million (Rs 410 crore).

“In February, the SBI had raised close to $700 million — $300 million under the medium term note programme and $400 million through innovative perpetual debt instruments — which could have been used to fund the acquisition. The company (Tata Steel) did not avail of the loan then, but now it wants it,” said the SBI official.

Early last month, Tata Steel had to agree to pay 50 basis points more on a $1-billion, seven-year loan as the banks participating in the loan syndication bargained with the underwriters for higher yield. The loan’s underwriters were ABN Amro, Citigroup and Standard Chartered.

There has been as much as 200 basis point increase in credit spreads on Indian loan and bond issues since the last week of July, when the sub-prime crisis first struck international credit markets.

CSN of Brazil Tops Tata Bid for Corus

Brazilian steelmaker CSN raised the stakes in the bidding war for Britain's Corus Group PLC on Monday, topping a sweetened offer by Tata Steel of India.

Companhia Siderurgica Nacional's offer of 515 pence ($10.00) per share, valuing Corus at 4.9 billion pounds ($9.6 billion), was accepted by Corus' board, the companies said.

Corus earlier agreed to an offer of 500 pence ($9.78) per share from Tata Steel, which had raised its original bid of 455 pence ($8.90) per share in hopes of closing out the rival bid.

Shares in Corus, the world's eighth-largest steel producer, jumped 4.9 percent to 524.25 pence ($10.22) on the prospect of an accelerating bidding war. Tata said it was considering its position.

Corus' stock has soared more than 80 percent this year on takeover speculation. A takeover by either company would create the world's fifth-largest steel company.

Commerzbank analyst Jutta Rosenbaum said the cost savings advantage rests with CSN, but upping the offer is ambitious and expensive.

Rosenbaum added that a combination with Tata has long-term advantages but requires large capital expenditure.

Corus Chairman Jim Leng, who late Sunday backed the revised Tata offer, on Monday approved the CSN bid.

"It is ... consistent with our strategic objective of securing access to raw materials, low-cost production and growth markets," said Leng. "The combination of the two businesses will create a strong platform from which to compete and grow in an increasingly global market."

The proposed deal would create a company with output of 24 million tons of steel per year. It would also give Corus access to high-quality, low-cost iron ore from CSN's Casa de Pedra mine in Brazil as well fast-growing markets in South America.

"The strategic impetus for this combination is growth -- growth in Brazil, in Europe and for our combined work forces," said CSN Chairman and Chief Executive Benjamin Steinbruch.

Corus, which employs 47,300 people worldwide, has been searching for a business partner for a year.

It has been under pressure to link with a low-cost rival, and has said it would make sense to find a partner with assets in countries such as Brazil, India and Russia, as rising raw material and energy costs in the Britain and the Netherlands chip away at profits.

The fight for Corus extends consolidation in the steel industry, following the summer acquisition of Arcelor SA by Lakshmi Mittal's Mittal Steel Co. to create a global powerhouse with output of more than 110 million tons of steel a year.