Click to play videoLondon: January 31 is a red-letter day in the calenders of Corus, Tata Steel and CSN. If there are competing bids to buy Corus by then, Corus will go the Dutch auction way.
The boards of CSN and Tata Steel are busy figuring out just how far they should go, but they are both working under the watchful eye of their bankers and repayment is not the only issue.
Analysts say that the chinks in Corus's armour, may limit how high the bids go.
Says Steel Editor, Metal Bulletin, Robert Jones, "Everybody knows that Corus's margins are extremely thin, and anybody who is lending to this deal will be aware of the fragility of Corus's margins and the danger of a market deterioration."
Adds Director-Operations, Iron and Steel Statistics Bureau, Steve Mackrell, "There has to be a tipping point beyond which you can go no further. If the debt is to be serviced out of Corus's profits there has to be a limit to the size of that debt, so I don't really see this bidding going that much higher."
'Jjust how high will the bids go?' That's the billion-dollar question. "The main criterion bankers are expected to be studying are profitability, the ability to generate future cash flows," says Chairman, New and Emerging Markets Group, KPMG, Ian Gomes.
The bidders are doing their sums on how far they should go. Behind them their backers and bankers are doing their sums on how far they should let them go.
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