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Ref: 09-BN-002 of 16 November, 2009

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Date: 16-Nov-2009News Source: Livemint.comBroker Source:

Tata Steel board has approved the exchange ofConvertible Alternative Reference Securities(CARS) with Foreign Currency ConvertibleBonds (FCCBs). As per the scheme, $875mnworth of CARS would be converted intoequivalent amount of FCCBs.

The company had issued CARS to fund theacquisition of Corus, which were to mature in2012 and were carrying a coupon of 5.15% perannum. The new FCCBs issued would have acoupon of 4.5% per annum and a maturity datetill 2014. The FCCBs will be convertible intoequity shares at conversion prices of Rs605.53per share.

The conversion of CARS into FCCBs will helpthe company to extend its debt payment period

by two years as well as reduce interest cost andfuture repayment obligations. We maintainNEUTRAL view on the stock.

Ratan Tata never wants to learn. He hasturned from stubborn to obstinate. Heappears to have lost the sense ofdiscrimination. Read the following views.

He is deep trouble by purchasing Corus. Whenthe whole world was wanting to invest inIndia, he ran to London to buy Corus for over $12 billions, the vagabond child Five times the

size of TISCO that no one wanted to own inlast two decades.

He finds difficult to raise the debt fromLondon, the biggest financial center. The USand Swiss bank backed out after arranging adeal and earning fat fees.

He is trying to convert CARS with 5.5%Coupon, sort of temporary bridge loans, issought to be replaced with FCCB or Foreign

Currency Convertible Bonds with 4.5%coupon.

Nothing wrong with that. However he is verygreedy. He is setting a conversion price of Rs605.53 at a time when the whole world is athighest economic risk.

He is already paying high coupon of 4.5%when the market interest rates are less than1% for US dollar. However, when he needs

equity badly, why does he set high conversion

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price?

Supposing the economy continues to slide anddoes not recover, which is very likely, hisshares may not trade around that level. It I

possible that the shares may trade at half theprice or even a third.

In that case, the FCCB which he believes willnot enjoin upon him debt obligations willsuddenly become real repayment obligations,same way the CARS has become actualliability.

Never become greedy when you are in deepdebt. Take the example of Hutchison in HongKong. When it received over $ 24 billionsworth of shares from Vodafone in payment ofits loss making Orange, the Li Ka Shing, themost admirable businessman, did not cash it.

The Vodafone shares were trading at about280 pence. Instead of selling the shares in themarket and walk away with huge cash, hebecame greedy and issued over $ 2 billions ofConvertible bonds, convertible into Vodafoneshares at 30% premium or at about 360pence.

The market crashed, and Vodafone sharestumbled to less than 100 pence, up to 84pence. Meanwhile, the Convertible Bonds (CB)matured for payment without conversion.

Mr. Li Ka Shing lost huge fortune. Ratan Tatais following his footstep. While LKS wastalking from the highest position of strength,

Tata is shouting from the lowest position ofweakness.

With banking crisis deepening, and interestrates rising (they will flare up very fast), theequity market will begin to falter on the doseof slow poison of rising interest rates.

His stock may become one third or at the mostof one half. Corus is a big stone around hisneck. He is counting on time 2014 is 5 years

away, and may be things will turn around. Hehopes. But the rising interest rates will make

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his huge debt an unaffordable exercise. Thegood local outfit of TISCO will be buried underthe dead weight of elephant, that is, Corus.

Why not businessmen too do not retire at 65.

Advanced age takes heavy toll on them, theybecome autocratic and obstinate.

Mutual Funds do write on the wall PastSuccesses do not necessarily guarantee thefuture performance.

So yeah, we remember our grandmas story once upon a time, there used to be a King

Oh nanny, that is a very old story, Tell ussomething new (story). Nanny thought overfor a while and quipped once upon a timethere used to be a businessman in India, Hewas called Ratan Tata who..

GRRRRR. Every one slept and started snoringin the room with eerie silence.