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Moody's affirms CFRs of Tata Steel at Ba2 and TSUKH at B2; outlook stable

Steel News - Published on Thu, 16 May 2019

Image Source: The Hindu
Moody's Investors Service has affirmed Tata Steel Ltd.'s Ba2 corporate family rating (CFR) and the B2 CFR of its wholly owned subsidiary, Tata Steel UK Holdings Limited (TSUKH). The outlooks are maintained at stable.

RATINGS RATIONALE

The rating action follows Tata Steel's announcement on 10 May that it has suspended its planned divestment of the European steel operations, housed under TSUKH, into a joint venture (JV) with thyssenkrupp AG (tk, Ba2 review for downgrade). Kaustubh Chaubal, a Moody's Vice President and Senior Credit Officer, said "We view the suspension of Tata Steel's plan to divest its European steel business into a JV with tk as credit negative. However, even without the divestment of the relatively weak performing European operations, Tata Steel's consolidated credit profile remains supportive of its Ba2 CFR."

However, TSUKH's continuous focus on restructuring has led to improving credit metrics, in turn supporting its B2 CFR. Specifically, TSUKH in 2016 and 2017: (1) divested its long products business to Greybull Capital; (2) sold its specialty steel operations to Liberty House ; (3) sold 42 and 84 inch pipe mills to Liberty; and (4) resolved its long impending pension issue.

"Moreover, Moody's expects Tata Steel's Indian operations will continue to dominate the company's EBITDA and cash flow, and pave the way for its debt/EBITDA leverage to further improve to around 3.1x by March 2020 from an estimated 3.5x at March 2019," adds Chaubal who is also Moody's Lead Analyst for Tata Steel and TSUKH.

Tata Steel's Ba2 CFR continues to reflect the company's significant, diversified and growing operating base, its globally cost-competitive steel operations in India that are a function of its ownership of key raw materials, and its sustained track record of improving credit metrics that mirror the favorable industry dynamics in its key markets.

Meanwhile, TSUKH's B2 CFR is supported by its significant steel producing capacity, diverse manufacturing operations across the UK and the Netherlands, and the sustained improvement in its operating profitability.

Source :

Posted By : Sanju Moirangthem on Thu, 16 May 2019
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