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The new debt comprises three tranches, all of them senior, of which tranche A is worth £90-million sterling and subject to bi-annual repayment over seven years. The balance two tranches of £42-million sterling each are subject to bullet repayments between seven, eight and nine years.

Mr Peter Unsworth, Managing Director, Supply & Support and Group Finance Director of the UK-based Tetley Group Ltd, during a news conference in Kolkata on Friday.

KOLKATA, March 7

TATA Tea (GB) Ltd, the special purpose vehicle that holds 100 per cent equity of the UK-based Tetley Group Ltd, has restructured its entire debt, whereby the company's cost of finance has dropped by almost four percentage points.

This was formally announced by Mr Peter Unsworth, Managing Director (Supply & Support) and Group Finance Director, along with Mr Anil P. Goel, Vice-President (Finance) of Tata Tea, at a press conference in the city.

According to Mr Unsworth, the original debt that was raised by the company in March 2000, at the time of acquisition of Tetley Group, has been repaid and has now been replaced by a "fresh cost-effective new debt''. The deal was finalised on February 28, 2003.

While the original debt was of £171-million, the fresh debt is £174-million. However, due to debt restructuring, the average rate of interest has dropped to 6.7 per cent from 10.22 per cent.

The lead banker of the original debt was RaboBank International. The current restructuring exercise is arranged jointly by RaboBank and Royal Bank of Scotland Plc. These two lead a syndicate of 12-15 banks as far as the debt exposure in the company is concerned.

The new debt comprises three tranches, all of them senior, of which tranche A is worth £90-million and subject to bi-annual repayment over seven years. The balance two tranches of £42-million each are subject to bullet repayments between seven, eight and nine years.

All these debts are ring-fenced, whereby the banks would have the first right on the cash flow of Tetley Group. Due to this loan restructuring, Tetley Group is expected to save approximately £6-million sterling on interest cost every year.

The earlier debt comprised £114-million of senior debt, £49-million sterling of mezzanine debt and £8-million of a secured loan stock debt.

It may be noted that Tata Tea acquired Tetley Group in March 2000 for £275-million. At the time of acquisition, the debt equity ratio of Tata Tea (GB) was 3:1. In the meantime, the equity base of the company was increased from £70-million to £100-million.

Currently, the debt equity ratio of Tata Tea (GB) has come down to 1.7:1. According to Mr Unsworth, the management expects to reduce the current debt structure further down.

Mr Goel said that, at the time of the acquisition, the Union Government categorically stated that all debts of Tetley should be repaid from revenues earned by that company and not by Tata Tea. "Even in the current debt restructuring exercise we have followed that dictum'', he explained.

Mr Unsworth said that with improved cash flows the company would invest in consolidating its existing business and would try to enter emerging markets such as Bangladesh, CIS and West Asian countries.

Meanwhile, Tetley Group has restructured its overseas operations. For example it has closed down its factory located in the south of England. It is operating only from one factory in Eagles Cliff, located at northern England.

In the US, it has formed a joint venture with Harris Tea. Its existing packaging facility is now run by the joint venture company. The company has also closed down another factory located at William's Port near Pennsylvania.

Another factory located in Melbourne has been closed down. The tea needed for the Australian business is delivered by the Kochi-based joint venture company formed between Tata Tea and Tetley.

At present, Tetley is procuring approximately 10,000 tonnes of tea from India. Its UK business is growing at eight per cent per annum. "We restructured the business to attain a flexibility but at the same time retain our expertise in the packaging technology. With this we would reduce our operation cost too'', he said.

Both Mr Unsworth and Mr Goel ruled out a financial or legal merger of Tata Tea and Tetley but said that the two companies were currently operating as a "seamless entity''.

Our Mumbai Bureau reports: Tata Tea (GB) has informed the stock exchanges of the debt restructuring. The restucturing is expected to result in savings in future interest cost to the tune of £6 million per annum.

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