Rating Agencies turn in favor as Tata Steel announces UK resolution plan

27 Sep 2023 , 10:50 AM

Credit rating agencies turned positive on Tata Steel’s resolution plan for its UK operations, citing the outcome as strengthening the steelmaker’s cash position and limiting the drain on earnings at a consolidated level while allowing its credit profile to remain stable even if steel prices fall.

Moody’s raised the company’s long-term issuer rating to investment grade ‘Baa3’ on Monday, while CreditSights stated that the transaction would be a ‘mild credit positive’ for Asia’s oldest manufacturer of the alloy.

Tata Steel announced the long-awaited resolution plan for its UK operations earlier this month. The local government will pay the corporation 500 million pounds as it builds a three-million-tonne electric arc furnace in Port Talbot to switch to a sustainable steel-making method.

The UK operations recorded a 127-million-pound operational deficit in 2022-23 (April-March). Overall results in Europe have also been unpredictable, pulling the company’s credit profile down.

Creditsights, a financial research and credit analysis business, described the purchase as a ‘mild credit positive,’ stating that the UK government’s support package will provide clarity over the unit’s activities as a going concern.

For feedback and suggestions, write to us at [e-mail]