Tata Steel writedown sparks fund-raising worries

Mumbai/Bangalore, May 14 2013:--



Tata Steel said late on Monday it will write-down its goodwill and assets by $1.6 billion for the financial year that ended March 31, mainly to reflect the weak economic and market conditions in Europe, its main market.



Its shares fell as much as 3 percent in early trade in Mumbai, but later recovered and by 12.15 p.m. (0645 GMT) were trading at 303.55 rupees, down just 0.6 percent.



Earlier this month, Tata sold S$300 million ($242 million)worth of bonds due 2023 in the longest-dated bond from an Indian private sector company in that currency.



There was little reaction on the bonds since most are held by overseas Indians who invest on the basis of name familiarity, although credit analysts were downbeat. The bonds are trading at 99.6 cents on the dollar, just below the issue price of 100, for a yield of 5 percent.



\"Our view is that its European business is on a knife\'s edge, but benefits from parent support. If the depleted balance sheet makes it hard to arrange finance, it could be an issue for its rating,\" said Alan Greene, an analyst at Moody\'s, which has a negative outlook on its rating of Ba3, three notches below investment grade.



The $500-billion-a-year steel industry has been hit hard by a drop in demand from Europe and slowing growth in China. Earlier this month, ArcelorMittal, the world\'s largest steelmaker, said European steel demand was almost 30 percent below peak-2007 levels and set to fall further in 2013.



Tata, which operates nearly two-thirds of its 28 million-tonne capacity in Europe, has posted a loss or lower profit for the past three quarters. Its March quarterly results are due on May 23.


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