S&P keeps Tata Motors on creditwatch with negative implications

Standard & Poor's Ratings Services said today that it had kept its 'BB-' long-term corporate credit rating on automaker Tata Motors on CreditWatch with negative implications. At the same time, Standard & Poor's kept its 'BB-' issue ratings on the company's senior unsecured notes on CreditWatch with negative implications.
 
"We have kept the ratings on CreditWatch pending clarification of the company's strategy to minimise the deterioration of its cash flow, its funding plans for significant capital expenditure; and its future debt composition. We believe Tata Motors' cash flows--particularly from Jaguar and Land Rover (JLR)--and related metrics may materially deteriorate on a consolidated basis. That's because, in our view, the operating environment continues to be extremely adverse for JLR and, to a decreasing extent, Tata Motors' India operations," said Standard & Poor's credit analyst Manuel Guerena.

"In addition, the company has high debt, including a big proportion of short-term debt. We expect the ratings to remain on Credit Watch until Tata Motors has refinanced the remaining $2 billion of a bridge facility, which is due on June 2, 2009," he further added.
 
Standard & Poor's originally placed the ratings on CreditWatch on Dec. 12, 2008, when it also lowered the ratings to 'BB-' from 'BB', following a faster-than-expected deterioration in automobile market conditions. Tata Motors' financial profile has been aggressive since the company acquired JLR in April 2008.
 
S&P note further noted that they will review Tata Motors' debt and funding plans in the next few days, and believe there is a high likelihood that we will lower the rating further, possibly by more than one notch. We will keep the ratings on CreditWatch until at least the refinancing of its bridge facility is completed.