JSW Steel, India’s leading steel manufacturer, has successfully secured a $900 million loan from a consortium of eight foreign banks, aimed at refinancing maturing debt and pre-paying high-cost borrowings. The move is part of JSW Steel’s strategic efforts to optimize its financial structure and ensure capital availability for future expansion endeavors.
The loan, priced at 180 basis points above the international secured overnight financing rate (SOFR), currently standing at approximately 5.35%, translates to an interest rate of around 7.15% for JSW Steel, a competitive rate considering prevailing market conditions. The funding was arranged by a consortium of reputable banks, including DBS Bank from Singapore, BNP Paribas from France, HSBC and Standard Chartered from the UK, Mashreq Bank, and First Abu Dhabi Bank from the UAE, Sumitomo Mitsui Banking Corp (SMBC) from Japan, and CTBC Bank from Taiwan.
JSW Steel faces significant repayment obligations this month, including a 500 million dollar bond issued in April 2019 with an interest rate of 5.95%. The newly secured loan will enable the company to fulfill these repayment commitments and settle other foreign currency borrowings, with the remaining funds allocated towards capital expenditure.
The consortium of banks intends to conduct roadshows in Singapore and Dubai later this month to syndicate the loan, seeking additional lenders to participate in the agreement. Typically, lead arrangers retain a substantial portion of the loan during this process.
JSW Steel, the flagship company of the $23 billion JSW Group, boasts a production capacity of 30 million tonnes and is recognized as one of the lowest-cost producers of steel globally. The company is actively pursuing a capital expenditure program to increase its capacity to 50 million tonnes by March 2031.
Despite a ‘BB’ rating with a stable outlook affirmed by global credit rating agency Fitch last year, brokerage firm CLSA downgraded local steelmakers, including JSW Steel, citing concerns about potential supply outpacing demand growth, which could impact prices.
JSW Steel remains committed to growth and leadership in the steel industry, having invested approximately Rs 13,249 crore in capital expenditure between April and December. The company expects to invest around Rs 18,000 crore for the full year. Earlier this year, JSW Group and JSW Steel announced plans to invest Rs 65,000 crore in multiple phases to establish a 13.2-million-tonne integrated steel plant in Odisha.
While JSW Steel’s net debt-to-operating-profit ratio witnessed a slight increase quarter-on-quarter due to higher working capital, the company’s strategic refinancing initiatives and planned investments underscore its dedication to sustainable growth and industry leadership.