Moody's Investor Service has said that the agreement between Tata Steel UK Limited's and Greybull Capital, a United Kingdom based Investment Company, is credit positive for Tata Steel, said the media report.
Nevertheless, as per the Moody's note, the contract will not straightaway have an impact on the ratings for Tata Steel and Tata Steel UK Holdings. The comment was based on the information available on the amount of liabilities and debt that is to be relocated.
The Moody's Investor Service said that the sale of the long products business amongst a perplexing economic situation is credit positive. It also added that an opportune and continuous divestment of the UK biz is an important rating sensitivity.
Earlier yesterday, Tata Steel had signed a deal to sell its European businesses for a small fee, in lieu of Greybull acquiring the complete long products business, together with the resources and appropriate legal responsibility, and safeguarding an apt funding suite for the divested business.
Tata Steel's business in Europe stated EBITDA losses for the 9-months ending December 2015.
The deal involving the long products business will include the Scunthorpe steel plant, 2 beam mills in Teeside, an engineering factory in Workington, a design consultancy in York, a mill in northern France and the related supply facilities.
Terms preceding the divestment consist of the transfer of agreements, procurement of essential government sanctions and conclusion of the financing activities.
In the month of April, Tata Steel declared its objective to reorganise/divest its UK business in totality.
With Tata Steel selling its long products business to Greybull, the remaining of its UK business contains largely of its processes at Port Talbot, which builds blocks, hot rolled up coils, cold rolled up coils and galvanized rolls.
As per the Moody's Investor Service, the effect of the deal on TSUK Holdings' corporate family rating will be subject to the proceeds-if any-to be picked up on a possible divestment of its Port Talbot processes.