The embattled Anglo-Dutch steelmaker Corus yesterday bought itself some breathing space after securing a new three-year, £830m loan facility with a syndicate of banks.
The facility replaces an existing credit line, due to expire in January, and will provide Corus with sufficient working capital while it sorts out the restructuring of its loss-making UK carbon steels business.
Philippe Varin, the new French chief executive of Corus, said the group was continuing to examine a range of options for financing the UK restructuring plan and aimed to give the market more news when the company reports interim results in September.
Options range from selling existing assets such as Corus' US plate mill at Tuscaloosa in Alabama, to issuing new shares. M. Varin said that a rights issue was a possibility "but it is not top of the list".
The UK rationalisation will cost £250m and will involve the closure of Corus' Sheffield-based engineering steels division with the loss of 1,150, jobs. A further 2,200 jobs are at risk at its Teesside integrated steelworks, which may also close unless it can make a living supplying steel slab.
News of the banking facility came as Corus said that higher prices and increased demand had helped cut operating losses in the first half to around £41m. Continuing heavy losses in the UK have been offset by profits from the group's Dutch steel and aluminium divisions.
Corus said it expected improvements seen in the first six months of the year to continue in the second half. The company also said it expected to benefit from the strengthening of the euro against the pound but cautioned that conditions in European Union markets remained "challenging and uncertain".
The new £830m credit line replaces a £960m facility and, together with £1.1bn in existing bond finance, gives Corus access to funding of £1.9bn compared with net debt of £1.55bn at the end of June. The three lead banks in the 17-strong syndicate are HSBC, CSFB and ABN Amro.
M. Varin said the debt facility was secured against shares in Corus' UK and Dutch companies and had been approved by the company's works council in the Netherlands. The supervisory board of the Dutch arm vetoed the planned sale of Corus aluminium business to Pechiney earlier this year, precipitating the financial crisis that hit the group in March.
Under the terms of the credit facility, Corus must be able to cover interest payments twice over from profits before interest, tax, depreciation and amortisation rising to four times cover by June, 2006. Corus shares, which touched a low of 4p in March, rose 0.25p to 25.5p.Reuse content