S&P lifts Tata Steel to investment grade

S&P lifts Tata Steel to investment grade

Tata Steel’s dollar bonds climbed by the most in 18 months after S&P Global Ratings returned the company to investment-grade status after 14 years.
The ratings firm lifted Tata Steel’s credit score for a third-consecutive time this year on Thursday. S&P raised the Mumbai-based steelmaker’s rating two levels to BBB- from BB, citing its expectation that Tata Steel’s largest shareholder Tata Sons will likely provide extraordinary financial support if required in times of financial stress.
Standard and Poor’s (S&P) has also upgraded the global ratings for Tata Motors and Jaguar Land Rover Automotive PLC (JLR) following the reassessment of influence and potential for extraordinary financial support from Tata Sons to group entities.

It revised the rating for Tata Steel and its 100 per cent-owned financing subsidiary ABJA Investment Co from “BB” to “BBB-“. The outlook is stable. Also, it upgraded the rating for Tata Motors and its 100 per cent subsidiary TML Holdings from “B” to “BB-“ with a stable outlook. JLR’s rating has been revised from “B” to “B+”. The outlook is stable.
The ratings have also been removed from CreditWatch.
The upgrades reflect the view that the credit profiles of the Tata Group entities are strengthened by their importance to Tata Sons, with potential for financial support, if required.
The incorporation of group support into the ratings follows a revision to approach treating Tata Sons as a conglomerate rather than as an investment holding company.

There is a greater influence of Tata Sons on the strategy and financial policies of the group companies, although they operate independently with professional directors and management. For example, group companies have prioritised debt reduction, in line with Tata Sons’ policy.
Key Tata Group companies enjoy a legacy status within the Tata Group and account for a sizable share of the group’s EBITDA and assets. They are also closely linked to Tata Sons’ reputation and risk management.
A greater demonstration of ongoing support and operational linkages within the group could lead to a stronger assessment in the future.

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