Ratings on Tata Motors remain on -ve watch

Standard & Poor's Ratings Services said today it kept its 'BB' corporate credit rating on India's Tata Motors Ltd. on CreditWatch with negative implications, pending finalization of the long-term financing plans for funding the company's purchase of Jaguar and Land Rover from Ford Motor Co. (B/Watch Neg/--). At the same time, Standard & Poor's ratings on all Tata Motors' rated debt remain on CreditWatch with negative implications.
     
The rating on Tata Motors was lowered on April 4, 2008, to 'BB', from 'BB+', after the announcement of the agreement with Ford Motor Co. for the purchase of Jaguar and Land Rover. Tata Motors has paid about US$2.3 billion in cash for Jaguar and Land Rover (comprising brands, plants, and intellectual property rights). Ford has contributed US$600 million to the Jaguar-Land Rover (JLR) pension plans.
     
"To fund the initial transaction, Tata Motors raised short-term bridge facilities of US$3 billion, which it plans to repay through a mix of fresh equity infusion, liquidation of investments, and long-term debt," said Standard & Poor's credit analyst Anshukant Taneja.
     
The company has obtained a board approval to raise up to US$1.05 billion through a rights issue of equity shares, up to US$750 million of optionally convertible preference shares, and US$500 million-US$600 million through a separate issuance of securities in overseas markets.
     
The CreditWatch status is expected to be resolved as greater clarity and certainty is established on the long-term financing arrangements.
     
The likelihood of the rating being lowered further is low assuming: (1) the overall credit metrics remain consistent with the current rating; (2) the bridge facility is refinanced through proposed equity inflows and long-term funds, and (3) Tata Motors' capital expenditure commitments to its domestic operations and to JLR remain broadly at the levels given by the company.

Sourced From: CRISIL Limited