Moody's raises Tata Steel rating outlook to 'stable'

Moody's Investors Service says it has raised the outlook on the speculative grade rating of Tata Steel to 'stable' from 'negative'.

Global rating agency Moody's Investors Service on Wednesday said it has raised the outlook on the speculative grade rating of Tata Steel to 'stable' from 'negative', after it repaid USD 3.1 billion of bridge loans, used to fund the buyout of Corus.

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"The change in outlook to stable reflects the completion of debt refinancing associated with the Corus acquisition, thereby removing a material near-term challenge for the rating," Moody's Senior Vice President Terry Fanous said in a statement today.

The agency has affirmed the 'Ba1' speculative grade corporate family rating to Tata Steel.

According to Moody's, the stable outlook is based on its expectation that Corus integration would continue to be manageable and that steel prices in both Asia and Europe would remain relatively robust for the coming 12-18 months.

The outlook was previously revised to negative in September 2007 due to concerns surrounding the USD 3.1-billion of bridge loans, which have been repaid principally from equity rights issuance and the establishment of long-term debt, the statement added.

Further, Moody's noted the rating might experience an upward trend if the company demonstrates continued progress in integrating Corus and manages its capital and capacity expansion in a prudent manner.

On the other hand, the rating could also be downgraded if Tata Steel faces delays or cost over-runs in executions of its expansion projects.

Undertaking of "material capital investment plans that are debt-funded", major delay or failure in integrating the Corus business and realising synergies could also pressure the rating, the statement said.