Tata Steel’s plans to sell the UK business will help reduce pressure on the steelmaker’s operating performance, Moody’s Investors Service said today.
However, pending finalisation of the restructuring plan and uncertainty around the extent of improvement in the credit profiles of Tata Steel and Tata Steel UK Holdings Ltd (TSUK Holdings) there is no immediate impact on the ratings of both the companies, it said in a statement.
“Potential sale of UK operations is credit positive for Tata Steel and TSUK Holdings, because it would dispose of loss making assets, against the backdrop of a challenging operating environment,” said Moody’s Vice President and Senior Analyst Kaustubh Chaubal.
He said depressed steel prices and a situation where global supply continues to exceed demand have impacted operations of the firm.
“If divestment of loss-making UK business is successful, it will provide some respite to TSUK Holding’s weak operating performance and drive improvement in Tata Steel’s consolidated operating and financial metrics,” Chaubal added.
Tata Steel, one of the flagship firm of the over $100-billion Indian conglomerate Tata group, earlier this week said it has put entire UK business on the block.
The move has threatened over 15,000 jobs amid a deepening crisis in the UK’s once-storied sector that the Indian firm had entered nearly a decade ago with a $14-billion takeover with much fanfare.
Tata Steel, which operates the country’s biggest steel plant at Port Talbot in south Wales, is losing 1 million pounds ($1.4 million) a day in its UK operations.
Tatas had entered the British steel sector, which once dominated the British economy, in early 2007 with acquisition of Anglo-Dutch steelmaker Corus after a fiercely fought takeover battle — which till date remains the biggest ever overseas acquisition by an Indian group.