Update: S&P places Corus on ''positive'' watch list, Tata Steel on ''negative''

Credit ratings agency Standard & Poor's, UK, has placed Corus Group PLC's 'BB' long-term corporate credit rating on CreditWatch with positive implications after Tata Steel's offer for the Anglo-Dutch steel maker.

The CreditWatch placement indicates that the rating for Corus, which is two rungs below investment-grade, could be raised if the takeover goes ahead, as the Indian company has a higher credit quality. Some commentators expect a final decision on the offer by Tata Steel to be announced by the end of the week.

Interestingly, earlier in the day S&P, Singapore, had announced downgrading the 'BBB' long-term corporate credit ratings on Tata Steel Ltd on CreditWatch with negative implications after its offer for the Anglo-Dutch steel maker. (See: Tata Steel On S&P's 'negative watch' list following Corus offer).

It had cited the "size of the acquisition and the potential cash outflow of about $10 billion that Tata Steel may make in its offer to Corus could have an adverse impact on its financial risk profile" as the reason for the downgrade.

While S&P, UK, has also placed Corus's 'BB+' senior secured bank loan ratings; its 'BB-' senior unsecured debt ratings; and 'B' short-term corporate credit rating on CreditWatch with positive implications; the Singapore arm has placed the 'BBB' foreign currency rating on Tata Steel's senior unsecured bank loans of $750 million and $500 million on CreditWatch with negative implications.

The rating placement on the two steel makers indicates the higher ratings and credit quality that the much smaller Tata Steel, enjoys over its acquisition target. Tata Steel produces annually 5-million tonnes of steel, while Corus makes 18-million tonnes per annum.