Sale will move the U.K.-based, loss-making long products division. After the sale of all U.K.-based assets, Tata Steel will operate only the Ijmuiden (Netherlands) unit.
Keeping in line with its earlier decision to sell its poorly performing business in the United Kingdom, India’s Tata Steel has sold its long products business assets in Europe to investment firm Greybull Capital. The sale amount, though not disclosed, was said to be “nominal.”
The sale marks the start of the end of Tata Steel’s foray into the U.K. that started in 2007 with its acquisition of Corus. Greybull Capital will bring in a package of £400 million provided by a combination of banks and its shareholders, to fund working capital and future investments in the business.
The deal includes the Scunthorpe steel plant, mills in Teesside and northern France, an engineering workshop in Workington, a design consultancy in York, a bulk terminal, and associated distribution facilities.
Meanwhile, ratings agency Moody’s Investors Service said the action by Tata Steel U.K., the signing of the sale agreement, was “credit positive” for its parent, Tata Steel UK Holdings, and ultimate parent, Tata Steel.
“However, the agreement will not immediately affect our ratings for Tata Steel and TSUK Holdings, based on the information so far on the amount of liabilities and debt to be transferred,” Moodys said.
With the sale of the long products business to Greybull, the balance of its U.K. business comprises primarily all of its operations at Port Talbot, which manufacture slabs, hot-rolled coil, cold-rolled coil and galvanized coil.
The sale of the Scunthorpe-based division to Greybull Capital was expected to cut losses at Tata Steel Europe (TSE). Because the long-products division was running at sub-optimal capacity (three million metric tons per year versus full capacity of 4.5 mt per year) due to low demand and losses. The total capacity of TSE is 17.4 mt per year.
The negative part, said Moody’s, was that Tata Steel would continue to carry debt and pension liabilities from the unit. Employees will remain under the £14-billion British Steel Pension Scheme, of which TSE is the sponsor.