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Global rating agency Moody's has upgraded Tata Steel Ltd ("TSL")'s corporate family rating to Ba1 with a stable outlook.
The upgrade reflects the group-wide refinancing and the improved liquidity which will support further growth of its highly profitable Indian operations, Moody’s said in a statement today.
Moody's also confirmed Tata Steel UK Holdings Ltd’s (TSUKH)'s corporate family rating and probability of default rating at B2/B2-PD with a positive outlook.
This concludes the rating review announced on 28 July 2014 in response to the Group's $6.9 billion refinancing exercise and which was extended on 18 September when a rating uplift of one notch, to reflect Tata Group support, was assigned to several Tata entities, including Tata Steel.
Moody’s said the pressure to support TSUKH's working capital has abated in the wake of the refinancing of its senior facility agreement. The better and sustained margins have led to reduced losses at unit in UK.
TSUKH's new term loans eliminate refinancing risk for at least five years and enjoy no financial maintenance covenants but with the cap on annual capital expenditure.
Although the European market still suffers from overcapacity and a weak price environment, TSUKH's restructuring measures and focused capex have kept it cost competitive and enabled it to benefit from the slight pick-up in European demand.
"The positive outlook on TSUKH's rating depends on further improvements in profitability, and the disposal of the long products segment, currently under discussion, would certainly reduce losses in the UK operations", says Alan Greene, a Moody's Vice President - Senior Credit Officer.
