Tata Steel said the value of its steel operations in the UK, bought for £6.2 billion (€7.9 billion) in 2007, was now "almost zero" as British politicians scrambled to find a buyer for its mills and save 15,000 jobs.
The crisis at Britain's biggest steel manufacturer, which was put up for sale on Tuesday night, prompted UK prime minster David Cameron and business secretary Sajid Javid to cut short foreign trips and return to the UK for emergency talks.
But industry experts were gloomy about the prospects for the former British Steel plants – which are now losing £1 million a day – even if they were to receive some state assistance.
One figure close to the company said several buyers had looked at the firm in the past two years, but had walked away after seeing the books.
Koushik Chatterjee, finance director of Tata Steel, said the company's UK assets now had a book value of "almost zero".
“We have taken about £2 billion of impairment. It is not a valuation exercise, it is a question of reducing an exposure.”
While the UK steel operations have no long-term debt, buyers may be concerned at taking on the £15 billion British Steel pension fund, one of the top 20 liabilities in the UK. Tata has committed to putting £125 million into the scheme for its 130,000 members over the next two years, according to documents seen by the Financial Times.
Market conditions
The Indian conglomerate also estimates that it would take another £2 billion of investment to transform
Port Talbot
, the UK’s largest steel plant, in to a producer of high-quality steel for advanced industries.
“It is a massive number, but one has to look at underlying market conditions and macroeconomic factors,” said Mr Chatterjee.
Tata would not say how much longer it was willing to support the plants. Mr Chatterjee said the company intended to conduct the sale “as far as possible in an orderly manner”.
Ministers believe they have only weeks to find a solution for the business, but said the plants would not be nationalised for a third time. One model could be the recent deal whereby the Scottish government facilitated the sale of two steelworks at Motherwell and Cambuslang from Tata to Liberty House.
The government could support a management buyout, but a private sector sale is the preferred solution, not least because taking responsibility for the steel plants could leave UK taxpayers on the hook for large losses while provoking state aid concerns. – Copyright The Financial Times Limited 2016
