S&P affirms Tata Motors

Standard & Poor's said it affirmed the BB corporate credit rating on Tata Motors Ltd. and removed it from CreditWatch.

The outlook is negative.

S&P said the rating was lowered on April 4 to BB from BB+ after Tata Motors announced its agreement with Ford Motor Co. (B-/Watch negative) for the purchase of Jaguar and Land Rover.

The negative outlook reflects deteriorating market conditions, weakening domestic market demand, increase in debt, slowdown in the vehicle loan securitization market and capital expenditure, resulting in weakening of the company's financial profile, the agency said.

The outlook also reflects uncertainties on the pending finalization of the long-term financing for a short-term bridge facility of $3 billion due in June 2009, used to fund the purchase of Jaguar and Land Rover as well as provide for some future operational investment and working capital requirements, the agency noted.

The rating is supported by Tata Motors' completing its $800 million issue of shares, and constrained by limited deterioration in Tata Motors' key financial metrics, considering the cyclical demand for commercial vehicles in India, S&P said.

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