S&P revises outlook of Tata Steel and its UK unit to stable

Credit rating agency Standard & Poor's today revised its outlook for Tata Steel and its UK-based subsidiary from negative to stable, as the liquidity conditions at its unit have eased.

"We revised the outlook as we believe the potential pressure on Tata Steel UK (TSUK)'s liquidity has eased following the refinancing of a £3.67 billion bank loan," the rating agency said in a statement.

The outlook assesses the potential direction in which a rating will move. While stable outlook means that rating is unlikely to change, negative denotes that it may be lowered.
    
It further said that the refinancing also reduced the potential pressure on parent Tata Steel's liquidity.
   
 Besides, the rating agency has retained the 'BB-' long-term corporate credit rating on Tata Steel and the 'BB-' issue rating and 'B+' long-term and 'B' short-term corporate credit rating on TSUK.
    
BB is less vulnerable to non-payment than other speculative issues, while B is one notch down than BB.
   
"We view TSUK as a strategic subsidiary of Tata Steel, and believe that the parent will continue to support the company, if required," it added.
    
S&P said that Tata Steel's consolidated operating performance has improved over the past year, especially with a turnaround at TSUK.
   
"The companies' operating performance remains susceptible to any weakness in the tentative global economic recovery, particularly in Europe. In addition, it remains exposed to volatile steel and raw material prices," it added.
   
The rating agency said that Tata Steel and TSUK have adequate liquidity and the companies' liquidity positions have improved with the refinancing of debt at TSUK by a new bank loan.
    
"The new bank loan lengthens the repayment schedule and will enable TSUK to significantly reduce its repayment obligations for the next four to five years," it added.