S&P maintains negative outlook on Tata Steel
International rating agency Standard & Poor’s, while retaining negative implication on Tata Steel, has upgraded ratings assigned to Tata Motors.
By TNN |
MUMBAI: International rating agency Standard & Poor’s, while retaining negative implication on Tata Steel, has upgraded ratings assigned to Tata Motors.
S&P observed that future offers for Corus could have an adverse impact on Tata Steel’s financial risk profile. It also said that Tata Motors’ remains strong in comparison with its peers in the rating category.
The statement follows the Tatas revised bid to acquire UK-based steel maker Corus Group. The revised bid was made to out do the initial counter offer made by Companhia Siderurgica Nacional (CSN). S&P has upgraded its corporate credit ratings and senior unsecured notes for Tata Motors to ‘BB+’ from ‘BB’.
The outlook is stable. However, CSN is rated even lower than Tata Steel by S&P at ‘BB’ with negative implication. Moreover, a ‘BBB’ rating is investment grade, while BB is sub-investment grade.
“The upgrade reflects Tata Motors’ improving business profile, as reflected in a consistently strong position in the commercial vehicle segment, improving revenue diversity from a wider product portfolio and market coverage, integrated and efficient operations, and overall adequate financial profile of the company,” said S&P’s credit analyst Anshukant Taneja.
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S&P said that although there has been a marginal weakening in the credit-protection ratios of Tata Motors in the fiscal year ended March 2006, they remain strong in comparison with its peers in the ‘BB’ rating category.Meanwhile, the ratings on Tata Steel were initially placed on Credit Watch with negative implications on October 18, 2006, following the announcement of its initial bid of 455 pence per share for Corus. On November 17, 2006, CSN countered that bid for Corus at 475 pence per share. On December 10, 2006, Tata Steel upped its offer to 500 pence per share. Subsequently, on December 11, 2006, CSN announced a higher bid of 515 pence per share.
According to Mr Taneja, “Although it remains unclear whether the bidding will continue, Tata Steel evidently intends to finance the difference between its latest and initial bid with additional debt, potentially resulting in further downward pressure on the ratings compared with the original offer.”
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