Kolkata: The Tetley Group Ltd, owned by Tata Tea Ltd, is gearing up to launch the brand in new markets, new territories and new products, with the cash released by the refinancing of the huge debt picked up Tata Tea (GB) Ltd in the Tetley acquisition three years ago.

The company expects to save pound six million a year on interest costs following the successful refinancing of the entire debt taken on by Tata Tea (GB) Ltd, the special purpose vehicle created to buy out Tetley in 2000.

The company has paid off the residual debt outstanding on February 28, out of the original debt of pound 171 million raised in March 2000, replacing it with a fresh cost effective new debt.

Mr Peter Unsworth, group finance director of Tetley, said the blended rate of the original debt was 10.22 per cent. "This has been replaced by debt at a blended rate of 6.7 per cent," he said.

"Roughly, we are saving pound six million a year in interest cost across the debt package," Mr Unsworth told reporters here Friday.

He said the new rate is competitive by City norms. The retired debt consisted of pound 114 million of senior debt, pound 49 million of mezzanine debt and pound eight million of secured loan stock debt.

The new funds are only senior debt, albeit of three tranches, adding up to 174 million pounds.

Mr Unsworth said this has improved the covenant headroom, or the freedom given by lending banks under such debt programmes.

"We can afford now to look more longer term, and look at the sort of investments we have to make in developing markets and the Tetley brand," Mr Unsworth said.

Tranche A is for pound 90 million, to be repaid biannually over seven years, while the other two tranches are of pound 42 million each and subject ot bullet repayment between years seven, eight and nine.

Mr Unsworth also pointed out that Tetley acquisition was highly leveraged, with debt-equity ratio of Tata Tea (GB) Ltd being 3:1. Over the last three years, the company has taken various initiatives to work the debt down, reducing the ratio to 1.7:1 at present.

Mr Anil P Goel, Tata Tea’s vice-president for finance, said the quality of the debt and its cost have increased dramatically.

He said the restructuring will release incremental cash flows that the management will be able to use for a whole lot of inititiatives ranging from brand building to market strategies.

Mr Goel stressed that the new debt continues to be ring-fenced. "The new debt is fully securitised by the global assets of the Tetley group and the cash flows of the Tetley group and Tata Tea continues to be insulated from that," he said.

He said there is no recourse that the lenders have on Tata Tea, in line with the approval given by the Union government to the original deal.