Tata whittles down bidders but sale hampered by £900m loan

Tata Steel has whittled down the list of bidders to take over. Picture: Lisa Ferguson
Tata Steel has whittled down the list of bidders to take over. Picture: Lisa Ferguson
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Indian multi-national Tata is understood to have whittled down possible rescue bids for its key Port Talbot plant in south Wales and others of its remaining steel mills in Britain to just four.

However, mounting speculation at the weekend suggests two complications could still derail a rescue on which 11,000 Tata jobs and tens of thousands in the supply chain hang.

The Indian conglomerate is reportedly refusing to write off a huge £900 million intra-company loan to its remaining UK arm, insisting that it would have to be repaid by any new owner.

In addition, industry sources suggested at the weekend that the Indian conglomerate has not entirely given up on hanging on to the Port Talbot steelworks amid the personal intervention of prime minister David Cameron.

The company has noted Whitehall’s trailing of the possibility of multi-million pound loans to help keep the plant going, as well as the option of taking up to a 25 per cent stake in the business.

In addition, the government has let it be known it is investigating ways of slashing the liabilities of the £14 billion British Steel Pension Scheme, which is underwritten by Tata and has a £700 million deficit.

Industry sources said the cumulative effect had been to make the Indian giant believe there was now a potentially credible option on the table if none of the offers was deemed satisfactory.

It is believed potential bidders remaining in the running include management buyout team Excalibur; commodities group Liberty House, which took over Tata’s steel plants in Clydebridge and Dalzell in April; and turnaround fund Endless, backed by Wilbur Ross, the veteran US financier.

Three suitors understood to be not now in the frame are US steel producer Nucor Corporation; rival Indian steel giant JSW; and Greybull Capital, the private equity group whose separate £1 bn acquisition of Tata’s steelworks in Scunthorpe, north Lincolnshire, is expected to be finalised this week with a £400m financing package.

The Scunthorpe site is to be renamed British Steel, and the deal secures about 4,800 jobs. The rescue of the Lanarkshire plants taken over by Liberty, employing 270 before being mothballed early this year, was facilitated by the Scottish Government.

Liberty boss Sanjeev Gupta has said he hopes production at Clydebridge and Dalzell could start again by the end of the third quarter of this year.

One industry analyst said: “It is a deeply complicated situation re Tata’s remaining assets. Scunthorpe and the Scottish plants have got a lifeline, but Port Talbot is vexed.

“And if Tata is insistent on lots of conditions on the sale of the plant, including this £900m loan, when the plant was losing as much as £1m a day at one stage last year, who’s to say if a deal is possible?”

A Tata UK spokesman was unavailable for comment yesterday.