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Tata Tea bid to cut debt component for Tetley buy

Our Bureau

MUMBAI, July 25

A SECOND round of debt reduction is in the offing for the 271-million deal whereby Tata Tea Ltd (TTL) had acquired the UK-based Tetley in February 2000.

The total debt component of the transaction amounted to 201 million, including 131 million of senior debt and 50 million of mezzanine debt, besides subordinate vendor loans.

To retire the high-cost subordinate vendor loans, the Tatas had disclosed last month funding of 30 million, composed of 20 million from Tata Sons and 10 million from TTL. Quasi-equity replacing its own kind, post-conversion the equity participation of th e Tatas in Tetley was to go up by a further 10 million to a total of 100 million.

Tata Sons' 20 per cent equity stake in Tetley, acquired in the process, was also to be the first overseas stake acquisition by the main Tata Group holding company.

Mr R.K. Krishnakumar, Vice-Chairman, TTL and Chairman, Tetley, said at a press briefing in connection with Tata Coffee's equity participation in Barista, that the first tranche of debt repayment in the Tetley deal, using the 30 million, should have happe ned by now.

``We are looking at further debt reduction in a few months time,'' he said, quantifying it as another tranche of 30 million. It is not a case of reducing debt cost, but an actual cut in the debt quantum.

When asked, Mr Krishnakumar emphasised that this second round will not involve any fresh equity infusion and that as promised by the Tatas earlier, TTL will not be taking on any additional burden.

``We have other routes to work through,'' he said, declining to reveal more details of the repayment pattern.

Any merger between Tetley and Tata Great Britain, the special purpose vehicle used for the acquisition, can happen only after much of the deal's debt component, especially its high cost debt, is retired.

Tetley, known to have faced rising raw material prices last financial, ended the year with a reduced EBIT of 26 million as against the previous corresponding 30 million. ``However, the first five months of this year have been good,'' Mr Krishnakumar said .