The Hindu Business Line : Fitch upgrades Corus

Mumbai, July 4 Global rating agency Fitch Ratings has upgraded Corus Group Plc’s long-term issuer default rating to ‘BB’ from ‘BB-’ with a stable outlook.

“The rating implies speculative. It indicates that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade,” said Mr R Jaikumar, COO, Fitch Ratings India.

Fitch has also affirmed Corus short-term issuer default rating at ‘B’, which means “speculative. Minimal capacity for timely payment of financial commitments, plus vulnerability to near term adverse changes in financial and economic conditions,” he said.

Revision in Corus rating comes after Tata Steel officials provided additional information on Corus future plans and financial performance to Fitch. The Tatas have also explained the synergies and operational benefits post-acquisition.

Fitch said it has also factored in the ratings a higher than previously anticipated level of parental support, despite the Corus acquisition debt remaining legally non-recourse to Tata Steel, and said it has greater confidence regarding the future standalone financial performance and credit metrics of Corus.

The ratings agency said it has assessed the consolidated financials of Tata Steel and Corus in assigning the rating, saying while the acquisition is partly funded by debt on a non-recourse basis, the strong management and strategic ties between the two entities outweigh the weak legal ties.

The rating agency has also assigned a long-term foreign currency issuer default rating of ‘BBB-’ to Tata Steel Ltd with a stable outlook.

“Good credit quality. This rating indicates that there are currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.

The acquisition of European steelmaker Corus Group Plc gives Tata Steel a foothold in the stable European market with access to value-added products and an established distribution network, Fitch said.