Banks agree deal to ease conditions on Tata Steel loan

MUMBAI (Reuters) - Tata Steel UK, a wholly owned subsidiary of Tata Steel Ltd, has won approval from banks to ease conditions on 3.7 billion pounds of loans it took to buy Anglo-Dutch Corus, the company said on Saturday.

Two bankers close to the deal had confirmed the development to Reuters on Friday.

Tata Steel UK, which bought Europe's second-largest steelmaker in 2006, asked lenders to waive the loan's financial covenants in mid-May.

"As part of the agreement reached with banks, testing of the facility's earnings-related covenants will largely be suspended until March 2010 and will then resume with significantly higher flexibility than in the case of original covenants," it said in a statement.

The statement also said the interest costs would not increase in the remaining life of the loan and that the revised covenant did not include any additional finance from the lenders or rescheduling of debt servicing commitments.

As part of the package, Tata Steel pledged to repay about 200 million pounds ($304 million) of debt ahead of schedule and inject 425 million pounds into the company in a phased manner.

(Reporting by V.Ramakrishnan; Editing by Mike Peacock)