Tata Steel on song on strong results

Tata Steel has been in talks with Thyssenkrupp AG and others for a joint venture in Europe since previous year as part of its strategy to trim losses amid oversupply in the global market, and Thyssenkrupp Chief Executive Officer Heinrich Hiesinger had identified the pension liabilities as a major stumbling block to a deal.

A Tata Steel deal to separate its 15 billion-pound ($19 billion) United Kingdom pension scheme still leaves many questions unanswered for a potential merger with Thyssenkrupp’s European steel operations, a source close to Thyssenkrupp said.

The three trade unions at Tata Steel UK – Community, Unite and the GMB – said the suggested deal was a “stepping stone” to rescuing some of their members’ benefits in a new, albeit less generous, scheme.

Pensions consultants questioned, however, whether the pensions deal announced on Tuesday would be enough to satisfy Thyssenkrupp.

However, the Pensions Regulator has to give its formal approval for the scheme.Tata has agreed to sponsor a new pension scheme, which would have lower benefits than those of the original scheme.

“We are in a very positive consultation with all stakeholders”, said Tata Steel’s executive director for finance and corporate Koushik Chatterjee.

It said the resulting improved funding position would pose the company “significantly less risk”.

“Should these qualifying conditions not be met, the new pension scheme, would not come into effect and all members of the BSPS would receive PPF compensation”, adding that the assets transferred into the scheme will include a proportion of the equity stake in Tata Steel UK.

Tata Steel has been involved in ongoing discussions with the BSPS, the Pensions Regulator, and the Pension Provident Fund (PPF) over the settlement of liabilities.

Thyssenkrupp has consistently opposed taking on Tata’s United Kingdom pension liabilities, though it continues to pursue merger talks with Tata in a bid to achieve sector consolidation and tackle Europe’s excess steel capacity. “Following the above, we. are hopeful of reaching a final agreement shortly”.

In the case of Tata Steel, it said that while the loss for the quarter was after one-off items including non-cash pension curtailment charges, it appears to be on the road to recovery after years of stress on account of a slump in steel sales in Europe and India. “Full year EBITDA was Rs 11,953 crore for the company”, it said in a statement.

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