S&P keeps Tata Motors on ratings watch

MUMBAI: Standard & Poor's Ratings Services has kept its 'BB-' long-term corporate credit rating on Tata Motors Ltd. on CreditWatch with negative implications. At the same time, Standard & Poor's kept its 'BB-' issue ratings on the company's senior unsecured notes on CreditWatch with negative implications.

"We have kept the ratings on CreditWatch pending clarification of the company's strategy to minimize the deterioration of its cash flow, its funding plans for significant capital expenditure; and its future debt composition. We believe Tata Motors' cash flows--particularly from Jaguar and Land Rover (JLR)--and related metrics may materially deteriorate on a consolidated basis. That's because, in our view, the operating environment continues to be extremely adverse for JLR and, to a decreasing extent, Tata Motors' India operations," said S&P credit analyst Manuel Guerena.

"In addition, the company has high debt, including a big proportion of short-term debt. We expect the ratings to remain on Credit Watch until Tata Motors has refinanced the remaining US$2 billion of a bridge facility, which is due on June 2, 2009."

S&P originally placed the ratings on CreditWatch on Dec. 12, 2008, when it also lowered the ratings to 'BB-' from 'BB', following a faster-than-expected deterioration in automobile market conditions.