Greybull, Tata Steel ink investment deal for Scunthorpe units

Greybull Capital today said that it has cemented an investment deal with Tata Steel Europe for its loss-making three units in Scunthorpe. Greybull will invest 400 million pounds in the company whereas Tata Steel said it will get nominal consideration from the deal.
Tata steel, in a statement, says that Greybull will take all assets and liabilities of the company.

The deal will not reduce Tata Steel’s USD 700 million debt, but will help put a stop loss instead. The deal will remove USD 1000 million dollar loss that the company had been reeling under. The main worry for the UK government was welfare of 4500 workforce that the plants had. Nic Dakin, Labour MP of Scunthorpe says that Greybull will re-work on workforce as well as pension schemes arrangements. The company needs significant restructuring for work force, Dakin adds. Matt Ball of Tata Steel Union says that pension liability discussions are still under process. A new pension scheme will come into place once the deal is completed, Ball says. Ball further adds that all the current employees of Tata Steel will be transferred to Greybull. Vishal Kulkarni, Associate Director at S&P says that while removal of negative cash-burn pressure in near-term will help Tata Steel, deleveraging of debt will happen over a period of time. “Rating improvement for the company is still three to four quarters away,” Kulkarni says adding that overall steel demand needs to improve for the company to grow. Chintan Mehta Metal Analyst, Sunidhi Securities says that curtailing losses is the only positive for the company. The pension and salaries re-works done by the Tata Steel is expected to stay, Mehta says adding that Greybull has support from the government to take workforce forward. However, SP Tulsian of sptulsian.com says that the deal is negative for Tata Steel if the amount received via deal is nominal. Getting rid of loss-making assets is not enough for the company, he adds.Watch videos for more..