Financial pressure on Tata Motors has eased due to improvement in the automobile market and inflow of funds from bookings of its small-car Nano, said global agency Standard and Poor's while retaining the company's rating on creditwatch with negative implications.
Noting that the company took measures to manage short-term debts, the agency's credit analyst Manuel Guerena said, "This, along with improvement in the Indian automobile market conditions in 2009, has somewhat eased liquidity pressure at Tata Motors".
The agency, however, has continued to keep the long-term corporate debt and unsecured debt of Tata Motors on creditwatch with negative implications (possibility of a downgrade.
"There was no change in rating assigned to this company, which is B (plus) and is on credit watch with negative implications," Guerena said, adding the agency updated its views on Tata Motors beacuse of the $ two-billion bridge loan which becomes due for repayment on June 2 this year.
The rating B (plus) suggests that adverse business, financial and economic conditions can impair the ability of the company to meet its financial commitments.
Referring to its communications with Tata Motors, Standard and Poor's said, "We continue to expect the company to be able to successfully complete its bridge facility refinance before the June 2, 2009, due date".
To acquire the UK-based Jaguar and Land Rover (JLR), Tata Motors had taken a bridge loan of $ three billion, of which it paid $ one billion through proceeds from a rights issue and disinvestments in October 2008 and another $126 million recently through a voluntary prepayment option.
For refinancing the remaining of the loan, the rating agency said, the company would raise funds through rupee bonds with maturities up to seven years and roll-over the balance amount with loans with maturities up to December 2010.
"The company (Tata Motors) said it is close to completion on both the plans," it added.
On future fund requirements of JLR, S&P said, the company was in discussions with the UK government for providing guarantees to loans of 340 million pounds sanctioned by the European Investment Bank as well as additional loans from other commercial banks.
JLR, it added, was seeking funds to develop new and more fuel-efficient cars for improving its medium to long-term competitive position.
Standard and Poor's also indicated that Tata Motors could be removed from the creditwatch list after the completion of the bridge loan refinancing; review of its debt structure and liquidity position; and further clarity on JLR's operating and financial performance and also expectations.
"The company's ability to adjust its operations to maintain adequate liquidity will be a key component of our review given the continuing weak markets," it said.
As regards rupee resources, it added, Tata Motors took a host of measures to manage its "significant" short-term debt of Rs 19,200 crore.
The steps taken by the company include raising Rs 2,200 crore of public deposits, securitisation of Rs 1,800 of receivables and Rs 2,500 crore through booking of its recently-launched Nano.
These initiatives, along with some improvement in the automobile market, the rating agency added, have eased liquidity pressure on Tata Motors.
