Tata Steel's $ 500 mn loan gets BBB rating by S

Mumbai, Mar 30 (UNI) Tata Steel, India's second largest integrated steel company, has decided to raise USD 500 million equivalent seven-year senior unsecured bank loan facility in yen to fund production capacity expansion and acquisitions.

The loan has been assigned "BBB" rating by global rating agency, Standard&Poor's. It comprises USD five million and yen quivalent of USD 495 million.

Tata Steel's capital expenditure is expected to be considerable at about Rs 9,000 crore in the three years to March 2008. The company has finished steel capacity of 5 million metric tons per year. For the nine months ended December 31, 2005, the company reported revenues of Rs 12,540 crore and net profit of Rs 272 crore.

''The rating on Tata Steel reflects its globally competitive position in the steel industry, its fairly diverse product mix, and its overall moderate financial profile,'' said S&Poor's credit analyst Nancy Koh from Singapore. ''The rating, however, remains constrained by the inherent industry risk and large capital commitments for its steel operations.'' As the expansion project will be completed by 2008, incremental revenue from this is only expected to come on-stream over 2008-2009, the rating agency said, adding the company's internal funding in the medium term should remain adequate, with the ratio of net cash flow to capital expenditure projected to average above 100 per cent.

''The stable outlook reflects the expectation of a successful expansion of Tata Steel's domestic operations, which should strengthen future cash flows and provide some cost savings due to economies of scale,'' said Ms Koh. ''However, a sharp downturn in the steel industry cycle, or decline in cash flow protection measures due to increased dependence on external debt for capital expenditure or acquisitions could weigh on the ratings.'' UNI SN SA SKB2036