The Hindu Business Line : Tatas to issue Rs 1,300-cr NCDs to fund VSNL buy

THE Tata group is raising Rs 1,300 crore through an issue of zero coupon non-convertible debentures (NCDs) to part-fund the group's acquisition of 25 per cent stake in Videsh Sanchar Nigam Ltd (VSNL).

The NCDs would be issued by Panatone Finvest Ltd, an investment company of the Tata group, which has acquired the VSNL stake.

The Tatas require Rs 2,591 crore for acquiring 45 per cent stake in VSNL (25 per cent from the Government and 20 per cent through mandatory open offer at a price of Rs 202 per share).

This would be funded through a combination of debt and equity. The equity would come from Tata group companies while the NCDs will meet the debt portion.

Rating agency Crisil has given a `P1+ (SO)' rating to the instrument, which is backed by Tata Sons Ltd (TSL) and Tata Power Company Ltd (TPL).

According to Crisil, this is the first ever rating given to a structured leveraged buyout transactions by it and the rating — `P one plus structured obligation' — indicates that the degree of safety regarding timely payment of financial obligations on the instrument is very strong.

The rating is based on the strength of the unconditional and irrecoverable corporate guarantee provided by TSL and TPL in the ratio of 60:40 to the instrument.

Since the tenure of the NCD is one year, the instrument has been assigned a `P1+ (SO)' rating, reflecting the highest credit rating of TSL and TPL on the short-term scale, Crisil said in a release.

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