Tata Chemicals, a part of the country’s second-largest business group, has hired seven banks to arrange $850 million of loans to fund the purchase of US-based General Chemical Industrial Products, according to people with direct knowledge of the deal.
The Mumbai-based company appointed HSBC Holdings, Standard Chartered, ABN Amro Holding, Calyon, Mizuho Financial Group, Rabobank Nederland and Bank of Nova Scotia to arrange the loan, which includes $500 million for seven years and $350 million of short-term borrowing, said the sources, who declined to be identified as the information was not public.
Tata Chemicals, the country’s biggest producer of salt, in January agreed to buy General Chemical for $1 billion to become the world’s second-largest maker of soda ash.
Tata Chemicals bought UK-based Brunner Mond Group in December 2005, raising its soda ash capacity to about 3 million tonnes, accounting for 8 per cent of the global market.
“This is definitely not a cheap acquisition for Tata Chemicals and it will take them a while to digest it, but for the long term, the deal will give them scale and cost efficiency,’’ said Mumbai-based Chintan Mehta, an analyst at Asit C Mehta Investment Intermediates.
Prashant Ghose, the chief financial officer at Tata Chemicals, didn’t return a voicemail message from Bloomberg News.
Tata Chemicals plans to pay interest that’s 1.35 percentage points more than the London interbank offered rate (Libor) for the seven-year loan, said sources. Three-month Libor was set at 2.94 per cent on March 7.
The company’s shares have gained 2 per cent since it announced the acquisition, outpacing Bombay Stock Exchange’s Sensex, which fell 12 per cent.
Credit rating
Moody’s Investors Service said in February it may downgrade Tata Chemicals’ credit ratings because of the likely increase in its debt. Moody’s ranks the company’s foreign-currency debt Baa3, the lowest investment grade.
The borrowing will more than double Tata Chemicals’ debt from Rs 2,040 crore ($501 million) at the end of September, according to its earnings report.
Tata Group Chairman Ratan Tata has acquired the world’s largest maker of tea and the UK’s biggest steelmaker as he uses his dominance of industries from autos to software to fund an overseas push.
General Chemical has the capacity to produce 2.5 million tonnes of natural soda ash used to make glass and detergents at its facility in Green River Basin, Wyoming.
The Tata Group had a revenue of $28.8 billion in the year ended March 31, 2007, the equivalent of about 3.2 per cent of India’s gross domestic product, according to its website.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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