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January 9, 2008 |
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TATA MOTORS: Long-Term Debt Ratings on CRISIL's Negative Watch Credit Rating Information Services of India Limited, on Jan. 7, placed its ratings on Tata Motors Limited's non-convertible debenture programme and cash credit facilities on 'Rating Watch with Negative Implications': INR0.50 Billion Non-Convertible Debenture Issue: AA+ INR40 Billion Cash Credit Limit: AA+ The ratings on the company's short-term debt programme and non- fund based bank limits have been reaffirmed at 'P1+'. The rating action follows the announcement by Ford Motor Company (rated 'B/Stable/B-3' by Standard & Poor's) that it is committed to focused negotiations with Tata Motors on the potential sale of its combined Jaguar and Land Rover business units. This large acquisition, if successful, would give Tata Motors access to the luxury car segment, and to markets and technology that could benefit its automotive business over the long run. However, if it involves a high level of debt, the transaction would have an adverse impact on Tata Motors' financial risk profile over the short to medium term. It would also pose challenges to Tata Motors' business risk profile, since a significant proportion of the consolidated revenues will be driven by the acquired businesses where Tata Motors has yet to build and demonstrate its capabilities. CRISIL will take a final view on the rating once the sale is announced in favour of Tata Motors and details of the potential acquisition cost, future investments, and mode of funding, emerge. CRISIL will have detailed discussions with Tata Motors' management to better understand the implications of the acquisition for the company's business and financial profile. The deal is expected to be a complex one, and could encounter several obstacles; if it does not go ahead, CRISIL is likely to remove the ratings from watch and reaffirm them with a 'Stable' outlook. |
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