The government of United Kingdom is offering a package of support worth hundreds of millions of pounds available on commercial terms to potential buyers of Tata Steel UK.
It said in a statement that it was willing to take a 25 percent minority stake in the business to support the buyer, but would not take control of the business.
The announcement follows a second meeting between Business Secretary Sajid Javid and Tata Chairman Cyrus Mistry this week in Mumbai where progress on the sales process was discussed, according to the statement.
“The UK government has been clear that since Tata announced its intention to divest its UK operations, it is ready to support a credible private buyer of Tata Steel UK, offering financing on commercial terms to support the ongoing operations and deliver long-term investment in the future of the business,” the statement said.
The India-based Tata Group announced last month it was looking at selling its assets in the UK due to a mounting losses and unhelpful market conditions at a time when the global steel industry is going through a crisis due to falling prices.
The government said the financial support package will be tailored to the purchaser’s strategy and financing needs. However, it is expected that all, or the large majority, will be through the provision of debt financing. Other options include providing hybrid (convertible debt) or alternative forms of financing and supporting a purchaser’s financing by taking a minority equity stake of up to 25 percent in support of the purchaser.
“This government is committed to supporting the steel industry to secure a long-term viable future and we are working closely with Tata Steel UK on its process to find a credible buyer. The detail of our commercial funding offer is clear evidence of the extent of that commitment,” Javid said.
The UK government is actively working with Tata Steel and the British Steel Pension Scheme’s Trustees to find a solution that will help minimise its impact on a potential purchaser, and potentially separate it from the business, the statement said.
In addition to the support package, the UK and Welsh governments will also be willing to consider additional grant funding support, for example to support the development of power plant infrastructure, energy efficiency and/or environmental protection measures, R&D and training, it added.
The European Investment Bank has also stated that it recognises the diverse challenges facing European steel companies and stands ready to consider possible financing for new investment in the UK steel industry on the basis of specific proposals.