S&P raises Tata Steel ratings to BB on significant expected deleveraging

Singapore, August 4 : S&P Global Ratings has raised its long-term issuer credit rating on Tata Steel and its subsidiary ABJA Investment Company to BB from BB-minus.
It also raised the long-term issue rating on the senior unsecured notes issued by ABJA to BB from BB-minus.
S&P expects Tata Steel's debt levels to decline materially over the next two years on the company's commitment to deleverage, supported by strong operating cash flows.
Continued strength in steel prices has accelerated the company's deleveraging. "In our base case, we expect Tata Steel's adjusted debt to decline by more than 30 per cent by March 2023 from its March 2021 level."
S&P said the stable outlook reflects view that Tata Steel can adequately deleverage to reduce volatility in credit metrics during industry downturns.
The stable outlook also reflects continued favorable financial policies, especially toward leverage.
The commissioning of ongoing 5 million tonnes per year capacity expansion at the Kalinganagar facility will significantly strengthen the company's credit profile over the next three to four years, said S&P.
This is especially so since the facility will be added without material debt and will improve Tata Steel's profitability with accompanying cold-rolled mill and pellet plant facilities also being set up.
"In addition, we expect the company's European operations to be EBITDA positive in the forecast period, although its contribution to the group's overall earnings will be small."