International credit rating agency Standard & Poor's Ratings Services has announced that it has lowered its corporate credit rating for Indian steelmaker Tata Steel to 'BB-' from 'BB' because it expects the company's operating and financial performance to remain subdued over the next two to three years, while the company outlook is stable. In addition, the credit rating agency has lowered its long-term corporate credit rating for Tata Steel’s subsidiary Tata Steel UK Holdings Ltd (TSUKH) to 'B+' from 'BB-', while the outlook for the subsidiary is also stable. At the same time, S&P affirmed its 'B' short term corporate credit rating for the UK-based company. The stable outlook for TSUKH reflects the outlook for the company's parent.
S&P stated that the stable outlook for Tata Steel reflects the expectation that the company's operating performance will recover over the next 12-15 months. Profitability at Tata Steel's India operations are likely to improve as mining operations revert to past levels and as demand and steel prices pick up.
S&P also indicated that Tata Steel's plan to restructure some of its operations in Europe could ensure operating stability for TSUKH and improve the company's margins. However, the credit rating agency believes any improvement in TSUKH's profitability continues to have significant downside risks.