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Tata Steel: Excalibur buyout team to meet banks Tata Steel: Excalibur buyout team to meet banks
(about 1 hour later)
Excalibur Steel, the management buyout vehicle interested in purchasing Tata Steel’s UK assets, will meet bankers to seek financing for the deal. Excalibur Steel, the management buyout vehicle that wants to purchase Tata Steel’s UK assets, is to meet bankers to seek financing for the deal.
The Tata UK executive, Stuart Wilkie, who leads the group, said it would hold talks with one British and three international banks to present the buyout plan on Friday. The Tata UK executive Stuart Wilkie, who leads the group, said it would hold talks on Friday with one British and three international banks to present its buyout plan.
Related: Excalibur management buyout is frontrunner to rescue Tata Steel UK
“Ideally, by the end of next week we will have secured necessary lines of finance,” Wilkie told Reuters late on Thursday.“Ideally, by the end of next week we will have secured necessary lines of finance,” Wilkie told Reuters late on Thursday.
Excalibur and Sanjeev Gupta’s metals group Liberty House both submitted letters of intent to buy Tata’s UK operations this week. Excalibur and Sanjeev Gupta’s metals group Liberty House submitted letters of intent to buy Tata’s UK operations this week.
Wilkie added that efficiencies achieved since last year, when the company was losing about £1m a day, had reduced losses to a quarter of those levels. “That’s significantly better than what was in the [turnaround] plan,” he said.
Excalibur has emerged as the frontrunnner to rescue Tata Steel UK, although concerns about funding and pensions remain.
At the same time, Liberty has bolstered its bid team with the appointment of Prof Julian Allwood, the Cambridge professor who has drawn up a plan to save Britain’s steel industry. Allwood advocates making high-value products from recycled steel for the aerospace and car industries.
Gupta, Liberty’s executive chairman, said: “The conclusions of the Cambridge team match our own industry analysis and our green steel strategy very closely and we believe their work will be hugely valuable to us in developing and refining our business model for the sector.”
Liberty argues that making liquid steel from scrap involved half the cost and a third of the carbon footprint of the blast furnace method, and could save many thousands of jobs in the UK.
However, Gupta added: “While we firmly believe the future of UK steel is in recycling, we are very conscious th‎at we need to protect the high-end customer base in automotive and other applications, so we will work with them to forge a transition plan that meets their expectations.”
The final report from Allwood’s team (pdf), drawn from six years of government-funded research, concluded that the world has more blast furnaces than it will ever need.
To be able to compete with China’s modern factories, and India’s likely investment in new blast furnaces, the UK should switch to making liquid steel from domestic scrap, most of which is currently exported for melting abroad, the report said. It found that the supply of UK scrap is projected to double to 20m tonnes a year over the next 10-15 years.
Related: Excalibur management buyout is frontrunner to rescue Tata Steel UKRelated: Excalibur management buyout is frontrunner to rescue Tata Steel UK
Wilkie added that efficiencies achieved since last year, when the company was losing about £1m a day had reduced losses to a quarter of those levels. Excalibur confirmed it wants 10% of its funding to come from employees, including those in the management buyout team.
“That’s significantly better than what was in the [turnaround] plan,” he said.
The group confirmed it wants 10% of its funding to come from employees, including those in the management buyout team.
Wilkie also said he expected the UK government to fulfil its recent statement saying it would provide up to 25% in funding.Wilkie also said he expected the UK government to fulfil its recent statement saying it would provide up to 25% in funding.
“All the discussions we’ve had with government are in line with that.”“All the discussions we’ve had with government are in line with that.”
Tata’s sizeable pension obligations could prove a sticking point for any party wanting to take on the business, Wilkie admitted. Tata’s sizeable pension obligations could prove a sticking point for any party wanting to take on the business, Wilkie admitted. “If the liability for the pension was on the table, then everybody would walk away,” he said.
“If the liability for the pension was on the table, then everybody would walk away,” he said.