Hindalco Hires 10 Banks for $1 Billion Loan to Refinance Debt

Aug. 29 (Bloomberg) -- Hindalco Industries Ltd., India's largest producer of non-ferrous metals, hired 10 banks to arrange a $1 billion loan to refinance debt it took for the acquisition of Novelis Inc., said three people involved in the deal. The Mumbai-based company hired ABN Amro Holding NV, Barclays Capital, Bank of America Corp., Bank of Tokyo-Mitsubishi UFJ Ltd., Calyon, Citigroup Inc., Deutsche Bank AG. HSBC Holdings Plc, Mizuho Financial Group Inc., and Sumitomo Mitsui Financial Group Inc. to arrange the five-year loan, said the people, who declined to be identified because the information isn't public. The company has also proposed to offer 3 shares at 96 rupees apiece for every 7 held, raising money to help repay the debt used for the Novelis acquisition, the company said on Aug. 14. Companies in Asia are turning to lenders for funds because the global credit rout has made selling bonds more expensive. Borrowers in India including Vedanta Resources Plc have raised $23.4 billion from syndicated loans this year, about the same amount recorded in the same period of 2007, while bond sales fell 28 percent to $12.4 billion, data compiled by Bloomberg show. Two more banks may come in later as arrangers of Hindalco's loan, the people said. Pragnya Ram, spokeswoman for Hindalco, didn't immediately respond to voice-mail or e-mail messages seeking comment. Hindalco plans to pay interest 2.75 percentage points above the London interbank offered rate in the first year of the loan, which will rise to 3.09 percentage points over Libor from the second year, the people said. The company paid interest of 0.55 percentage point for a four-year $48 million loan in 2001 to refinance debt, Bloomberg data show. Borrowing Costs Rise The average yield investors demand to buy bonds of Indian companies rose to a six-year high of 8.01 percent on Aug. 7, up from 6.6 percent at the end of June last year, according to JPMorgan Chase & Co.'s Asia Credit Index. That means it may cost Indian companies about $1.41 million more a year for every $100 million they seek to raise from dollar bond sales. Hindalco's net income for the three months ended June rose to 6.97 billion rupees ($159 million) from 5.99 billion rupees a year earlier as higher aluminum prices and an increase in other income helped offset a fall in copper-smelting fees Hindalco completed buying Novelis in May last year for $6 billion, including $2.4 billion of debt, to gain a fifth of the high-end aluminum market and access to U.S. customers including Coca-Cola Co. Hindalco took a $3.03 billion loan maturing in December to fund the acquisition, Bloomberg data show. Novelis, spun off from Alcan Inc. in 2005 to ease antitrust concerns, controls 19 percent of the world's flat-rolled aluminum products, according to its Web site, and also supplies to companies including Ford Motor Co., Eastman Kodak Co. and ThyssenKrupp AG.