Tata Tea has restructured the entire outstanding debt of $171m in Tata Tea, the SPV that holds 100% of the Tetley group.

Under the restructured package, a fresh debt of $174m (the additional $3m on account of transaction costs) has been co-arranged by Rabo Bank and Bank of Scotland.

The new package will operate on a lower interest rate averaging 6.7% per annum replacing the earlier high interest rates of 10.22%. The Tetley group is expected to accrue interest cost savings upto $6m per annum with the debt recast.

A line of initiatives to cut down costs along with the present restructuring has brought the debt equity ratio to 1.7:1 at present from 3:1 earlier.

Announcing the new restructuring package here on Thursday, Peter Unsworth, managing director, supply & support and group finance director, the Tetley group said, "Out of the original debt that was raised in March ‘00 at the time of acquisition, the residual debt outstanding as on February 28, ‘03 has been fully paid and replaced off by a fresh coat of effective new debt."

The debt which was raised in three tranches originally comprised of $114m of senior debt, $49m of mezzanine debt and $8m of a secured loan stock debt. All together carried a weighted average interest of 10.22% per annum.

The refinanced debt of Tata Tea (GB) will comprise of three main segments, all of which will be senior debt.

While the first tranche of a value of $90m will be subject to a bi-annual repayment of 7 years, the other two tranches of $42m each will be subject to bullet repayments between years 7, 8 and 9.

"The entire debt continues to be securitised by the global assets of (the) Tetley group and its future cash flows. In effect, the lenders do not have any recourse on Tata Tea Ltd, which is in line with the original financing," said Anil P Goel, vice-president (finance), Tata Tea.

"The earlier loan was also financed by Rabo Bank and co-financing it this time reflects the confidence of the banks," Mr Goel added.

"Tetley group’s cash flows will improve significantly and enable the company to invest behind its brand globally. We will consolidate our markets globally in key geographies," Mr Unsworth said.