S&P changes Jaguar to stable

Standard & Poor's said it revised its outlook on Jaguar Land Rover Automotive plc to stable from positive and affirmed its BB long-term corporate credit rating.

The agency also affirmed its BB issue ratings on the company’s senior unsecured notes. The recovery rating remains 3, indicating that recovery expectations are in the upper half of the 50%-70% range in the event of a payment default.

The outlook revision on Jaguar follows that on its India-based parent company Tata Motors Ltd. and reflects S&P’s view that it no longer expects Jaguar’s cash flows and leverage metrics to be sufficiently strong to support a higher rating on Tata Motors. This is because the agency expects Jaguar to demonstrate negative free operating cash flow during fiscal years 2016 and 2017 (ending March 31), as it continues to undertake significant capital expenditures (capex), against the backdrop of lower volumes of new cars being sold in China.

S&P envisages Jaguar to have continued success with new models across its Jaguar, Land Rover and Range Rover brands in other regions, which is offsetting the reduction in China. It therefore continues to expect volume growth in fiscal 2016 and 2017.

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