Singapore: Moody’s Investors Service has placed under review for downgrade Tata Steel Ltd’s Ba2 corporate family rating (CFR).
At the same time, Moody’s has downgraded Tata Steel’s wholly-owned subsidiary Tata Steel UK Holdings Ltd’s (TSUKH) CFR to B3 from B2 and placed the CFR under review for further downgrade. The outlooks have been revised to ratings under review from stable.
The rapid and widening spread of coronavirus outbreak, deteriorating global economic outlook, falling oil prices and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets.
Moody’s said the combined credit effects of these developments are unprecedented. The steel sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment.
More specifically, the weaknesses in the credit profiles of Tata Steel and TSUKH, including their exposure to steel demand for manufacturing and volatile material costs, have left them vulnerable to shifts in market sentiment in these unprecedented operating conditions, and they remain vulnerable to the outbreak continuing to spread.
Moody’s said it regards the coronavirus outbreak as a social risk under its environmental, social and governance framework, given the substantial implications for public health and safety. The action reflects the impact on the companies of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered.
