JSW Steel Raises $900 Million to Refinance Debt and Pre-pay Borrowings

JSW Steel Raises $900 Million to Refinance Debt and Pre-pay Borrowings
JSW Steel, India's largest steel manufacturer, has secured a $900 million loan from a consortium of eight foreign banks to refinance debt maturing this month and pre-pay some high-cost borrowings. The move aims to streamline the company's financial structure and provide capital for future growth.
The loan is priced at 180 basis points above the international secured overnight financing rate (SOFR), currently around 5.35%. This equates to an interest rate of approximately 7.15% for JSW Steel, which is competitive given market conditions. The funding was arranged by eight banks, including Singapore's DBS Bank, France's BNP Paribas, UK's HSBC and Standard Chartered, UAE's Mashreq Bank and First Abu Dhabi Bank, Japan's Sumitomo Mitsui Banking Corp (SMBC), and Taiwan's CTBC Bank.
JSW Steel has significant repayments due this month, including $500 million for a dollar bond maturing this month, issued in April 2019 with an interest rate of 5.95%. The new loan will help the company repay this bond and other foreign currency borrowings, with residual funds allocated for capital expenditure.
The consortium of banks plans to conduct roadshows in Singapore and Dubai later this month to syndicate the loan, seeking additional lenders to participate in the agreement. This process usually includes the lead arrangers retaining a significant portion of the loan.
JSW Steel is the flagship company of the $23 billion JSW Group and has a production capacity of 30 million tonnes. It is also recognized as one of the lowest-cost producers of steel globally. The company is in the midst of a capital expenditure program, aiming to increase capacity to 50 million tonnes by March 2031.
Global credit rating agency Fitch affirmed a 'BB' rating with a stable outlook for JSW Steel's long-term debt last year. The agency noted that maintaining a total debt-to-operating-profit ratio below 2.5 times, coupled with sustained positive or neutral cash flow, could lead to a credit rating upgrade.
However, in a report last month, brokerage firm CLSA downgraded local steelmakers, including JSW Steel, citing the expectation that supply may outpace demand growth, potentially impacting prices.
Between April and December, JSW Steel spent approximately Rs 13,249 crore on capital expenditure at a consolidated level and expects to spend around Rs 18,000 crore for the full year. Earlier this year, JSW Group and JSW Steel announced plans to invest Rs 65,000 crore in multiple phases to establish a 13.2-million-tonne integrated steel plant in Odisha.
JSW Steel's net debt-to-operating-profit ratio increased from 2.52 times to 2.64 times quarter-on-quarter due to higher working capital. Nonetheless, the company's strategic refinancing efforts and planned investments signal its commitment to growth and continued leadership in the steel industry.