Hindalco Industries, an Aditya Birla Group company, will receive a dividend （return of capital） of $1.7 billion （Rs 7,650 crore） from its Canadian subsidiary Novelis Inc which recently announced plans to raise $4 billion （18,000 crore） through debt. Hindalco acquired Novelis in 2007 for $6 billion （Rs 27,000 crore）.
Novelis plans to raise $2.5 billion through issue of senior unsecured notes. The offer consists of $1.1 billion of 8.375 per cent senior notes due 2017 and $1.4 billion of 8.75 per cent due 2020. Both the issues were priced at par value and interest will be paid semi-annually beginning June 15, 2011.
The company expects to close the offering on Friday, subject to the satisfaction of customary closing conditions, Novelis said in a press release.
New credit facility
As part of the refinancing, Novelis also intends to enter into a new $1.5-billion （Rs 6,750 crore） secured term loan credit facility and replace its existing $800 million asset-based loan （ABL） facility with a new $800 million ABL facility.
The money received from the US subsidiary will help Hindalco to fund its expansion and retire some of its high-cost debt.
Hindalco had debt of Rs 23,000 crore as on June 30 and plans to spend Rs 40,000 crore on its various expansion projects in India. The debt to equity ratio of Hindalco's expansion is 7:3, which means the company requires Rs 28,000 crore of debt, said an analyst.
The company's decision to refinance debt on easier covenants would improve cash fungibility across the group.
Hindalco had raised $1 billion through a special purpose vehicle （SPV） for funding the acquisition of Novelis. The payback by Novelis can be used to retire that debt, he said.
Novelis has initiated a buyback of bonds worth $1.3 billion issued in two tranches of $1,124 million of 7.25 per cent and $185 million of 11.5 per cent, the company said in a separate statement. The buyback for the 7.25 per cent bond was 93.35 per cent complete and the other was 99.3 per cent complete.
Hindalco's shares on the BSE were up 3 per cent at Rs 221 on Monday.
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