Tata Steel stays on S&P''s ''CreditWatch Negative'' after Corus deal finalisation

04 Apr 2007

Singapore: Standard & Poor''s Ratings Services today announced having kept its ''BBB'' long-term corporate credit rating on Tata Steel Ltd. on CreditWatch with negative implications. The ''BBB'' debt rating on Tata Steel''s senior unsecured bank loans of US$750 million and $500 million also remain on CreditWatch with negative implications.

This comes after the announcement on the completion of the procedure for the takeover of the UK-based steel maker Corus Group PLC (Corus) (BB/Watch Dev/B) by Tata Steel, which became effective on 2 April, 2007 (See: Tata Steel completes Corus acquisition). The ratings were placed on CreditWatch on 18 October, 2006, after Tata Steel''s initial bid for Corus at 455 pence per share.

"The CreditWatch status of Tata Steel continues to reflect ongoing uncertainty regarding the long-term financial structure of the transaction and its implications on the merged entity, potentially raising greater financing challenges for the company and further downward pressure on its rating," said Standard & Poor''s credit analyst Anshukant Taneja. "There is also a likelihood that the ratings on Tata Steel and Corus will remain different."

In resolving the CreditWatch placement, Standard & Poor''s will seek further information on the means of financing and integration by Tata Steel.

Tata Steel is India''s second-largest integrated steel company, with finished steel capacity of 5 million tonnes per annum (mtpa). In the year ended March 31, 2006, Tata Steel generated revenues of Indian rupee (INR) 202 billion (US$4.5 billion) and net profit of INR37 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.

After the Corus acquisition, the combined entity now ranks the fifth largest steel maker globally.