Standard & Poor's (S&P) Ratings Services today said it had kept its 'BB' issue rating on the 3.67 billion pound sterling senior secured debt of Tata Steel UK Ltd. (TSUK) on CreditWatch, where it was placed with negative implications on February five.
''We have kept the issue rating on CreditWatch pending a review of our recovery analysis on TSUK. This review will factor in the impact on our simulated default scenario, and in turn our estimate of the stressed enterprise value at default, following: (1) a recent agreement with banks to amend the covenants on the company's senior secured debt; (2) the significant deterioration in the operating environment; and (3) the measures that TSUK undertakes to manage the currently challenging environment,'' said Standard & Poor's credit analyst Yasmin Wirjawan in a release here.
The issue rating is two notches above the corporate credit rating because of the recovery rating of '1', which indicated very high recovery in the event of a payment default.
The agreement with lenders has resulted in the testing of earnings-related covenants to be largely suspended until March 2010.
Testing would resume with significantly higher flexibility compared with the original covenants. Under the agreement, parent Tata Steel Ltd. (BB-/Negative/--) will inject 425 million pound sterling into TSUK in a phased manner.
TSUK would use about 200 million pound sterling to make prepayments on its debt.
TSUK is the intermediate parent holding company of U.K.-based steel manufacturer Corus Group PLC and is a wholly owned subsidiary of Tata Steel.