Birla's Novelis Said in Talks for $5.3 Billion Refinancingby and
Aluminum rolled products producer seeks tenor of 7 years
Chinese overcapacity adding glut to global metal markets
Novelis Inc., a producer of rolled aluminum products used in automobiles and beverage cans, is in discussions with banks to refinance about $5.3 billion of loans, three people familiar with the matter said.
The Atlanta-based unit of India’s Hindalco Industries Ltd. may initially seek to refinance as much as $3.5 billion of debt, according to the people, who asked not to be identified because they aren’t authorized to speak publicly. The loans the company is seeking to refinance are currently due by 2017, the people said.
Aluminum prices slumped in November to the lowest level since 2009 as a slowdown in China’s economy led to a flood of supplies in the global market and hurt producers from the U.S. to India. Novelis Chief Executive Officer Steve Fisher said last month that he doesn’t see any relief in prices in the near-term.
Novelis is seeking an average tenor of about seven years, the people said. The deal would be the largest from a company owned by an Indian group since 2014, when Tata Steel Ltd.’s U.K. unit refinanced $5.4 billion of borrowings.
Novelis’s $1.4 billion of 8.75 percent bonds due 2020 rose to 102.75 cents on the dollar on Wednesday, the highest since August 2015. Hindalco shares slid 1.6 percent to 87.55 rupees at 1:23 p.m. Thursday in Mumbai.
Pragnya Ram, a spokeswoman for Aditya Birla Group, which controls Novelis, declined to comment on the refinancing. Hindalco, controlled by billionaire Kumar Mangalam Birla, bought Novelis in 2007 for more than $3.4 billion in cash and assumed $2.4 billion of debt.
Novelis is among companies including Alcoa Inc. and Constellium NV that have been expanding their automotive aluminum capacity in North America. Its customers include Ford Motor Co., which uses Novelis aluminum in its 2017 Super Duty trucks and F-150 pickups. About 64 percent of Novelis’s total flat-rolled product shipments are for can sheet, used for beverages, followed by 15 percent in automotive, according to the company.