The potential sale of Tata Steel UK's Speciality Steel business to the Liberty House Group will help the embattled giant improve operational performance, Moody's Investor Service said today.
Last month, Tata Steel UK Holdings Ltd (TSUKH, a wholly- owned subsidiary of Tata Steel UK, announced that it had signed a letter of intent with Liberty House to enter into exclusive negotiations on the potential sale of its Specialty Steel business for an enterprise value of GBP 100 million.
The sale, which is subject to due diligence and corporate approvals, would be credit positive for TSUKH because it would dispose of loss-making assets at a time when the company faces challenging conditions in Europe, Moody's said in a statement.
"Although the sale is for a nominal consideration and will not materially improve leverage, we expect that it will improve TSUKH's operating performance and marks another step in the company's restructuring efforts," it added.
As part of the deal, Liberty House would take on several South Yorkshire, England-based assets, notably the Rotherdam electric arc steelworks, the steel purifying facility in Stocksbridge, a mill in Brinsworth, and a few service centres in the UK and China, Moody's said.
The announcement follows the sale of the long products business to Greybull Capital in May 2016. With the divestment of the Specialty Steel business, the company's operations will comprise a number of manufacturing locations for downstream steel production and distribution centres in Europe, it added.
"The potential sale of Specialty Steel business and the restructuring and/or divestment of the remaining UK operations will reduce the drag on TSUKH's profitability given that these segments are loss-making, while the remaining Dutch operations are profitable," it said.
The company is also exploring other measures to boost the performance of its entire European business. In July 2016, it initiated discussions with strategic players in the steel industry including ThyssenKrupp AG to explore the feasibility of a potential joint venture for its European business, it said.
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