Tata group company Tata Steel [Get Quote] will issue equity shares on a rights and preferential basis to raise about Rs 10,000 crore (Rs 100 billion) to repay 'bridge loans' raised for funding acquisition of British steel behemoth Corus.

"The proceeds will be used to repay bridge loans taken for acquisition of Corus. Tata Steel UK has raised 3.15 billion pounds of debt for financing the acquisition," a Tata Steel spokesperson told PTI.

The issue, opening on November 22, will include 12.18 crore shares of Rs 300 each to be issued on rights basis in the ratio 1:5 and Cumulative Compulsory Preference Shares of Rs 100 to be converted into equity on September 1, 2009, he said.

The issue will close on December 21, the spokesperson said, adding that the record date for the issue was November 7.

According to the Draft Letter of Offer filed with the Securities and Exchange Board of India, the rights issue will fetch Rs 3,654 crore (Rs 36.54 billion) while CCPS will bring in Rs 6,000 crore (Rs 60 billion).

The company's overall borrowings during 2006-07 increased by over 600 per cent from Rs 3,377 crore (Rs 33.77 billion) to Rs 24,926 crore (Rs 249.26 billion) "principally in connection with its acquisition of Corus and expenditure in connection with other acquisitions and expansions," said the document.

Tata's decision to raise funds from will result in enlargement of its equity by 20 per cent after the rights issue and 35 per cent after conversion of CCPS into equity.

The enlargement of equity base may impair Tata Steel's ability to maintain a high rate of dividend to its shareholders.

The Tata-Corus saga