Tata Steel on S&P's 'negative watch' list following Corus offer
18 Oct 2006
At the same time, Standard & Poor's placed its 'BBB' foreign currency rating on Tata Steel's senior unsecured bank loans of $750 million and $500 million on CreditWatch with negative implications.
The CreditWatch placement follows the announcements by Tata Steel on 17 October, 2006, and the Corus Group PLC (Corus) confirmation of then proposal from Tata Steel for a possible recommended offer for Corus at 455 pence per share in cash and that discussions are taking place between them.
"In Standard & Poor's view, the size of the acquisition and the potential cash outflow of about $10 billion that Tata Steel may make in its offer to Corus could have an adverse impact on its financial risk profile," said Standard & Poor's credit analyst Anshukant Taneja.
The rating agency noted that a successful acquisition, however, could potentially improve the business profile of the merged entity. In resolving the CreditWatch placement, Standard & Poor's will seek further information on the progress of the offer and the potential means of financing.
Tata Steel is India's second-largest integrated steel company, with finished steel capacity of 5-millions tonnes per annum (mtpa). In the year ended 31 March, 2006, Tata Steel generated revenues of Rs202 billion ($4.5 billion) and net profit of Rs37 billion.
Corus is the second-largest steel manufacturer in Europe and ranks ninth globally, with a production capacity of 20.8 mtpa. For the year ended December 2005, Corus reported revenues of £10.14 billion (US$19 billion) and net profit of £452 million.