Ruias to raise $900 m to fund Algoma buy

Essar Global, the international holding company for the Ruias, will raise $900 million through a combination of senior notes and loans to fund its acquisition of Canada’s Algoma Steel, sources said.

The non-recourse fund raising exercise by Essar Global is the second-largest such transaction by an Indian steel company, after Tata Steel’s almost $7 billion loan to finance its acquisition of Anglo-Dutch steelmaker Corus.

The Ruias’ international holding company had acquired Algoma in April for $1.58 billion in an all-cash leveraged buyout that is likely to pitchfork the Essar group with the Tatas in North America. Essar Global’s acquisition is considered the second biggest by an Indian company in North America, after Hindalco paid $6 billion to buy Atlanta-based Novelis in February. To finance its Algoma acquisition, Essar Global will sell $450 million of senior notes, recoursed to the Canadian company’s balance sheet, according to sources. The eight-year notes, denominated in dollars, may yield 9.75% to 10%. UBS is the financial advisor to the offer.

Essar Global also plans to issue $450 million in loans, based on Algoma’s earnings. The group’s own contribution will be about $500 million. It could not be ascertained how the rest of the acquisition amount — about $100 million — will be raised.

Read more in The Economic Times article.