Standard & Poor's: Tata Power's proposed sale of a stake is likely to be credit positive

(Singapore, Feb. 5, 2014) --Tata Power Co. Ltd.'s proposed sale of a stake in an Indonesian coal mine could be credit positive if the company uses the proceeds to repay its debt, in Standard & Poor's Ratings Services view. Tata Power (B+/Negative/--) announced that it would sell its 30% stake in PT Arutmin Indonesia. We are awaiting more information and greater clarity from Tata Power to fully assess any impact that the transaction may have on our ratings on Tata Power and the company's outstanding notes.

"In our opinion, the sale could ease the pressure on Tata Power's liquidity if the company uses the proceeds to repay its large bullet debt maturities totaling about US$670 million due in April, July, and November 2014, and April 2015," said Standard & Poor's credit analyst Rajiv Vishwanathan.

Our initial assessment suggests that the sale could marginally improve Tata Power's credit ratios. The lower debt burden and consequent interest savings will likely offset the loss of operating cash flows from Arutmin in the fiscal year ending March 31, 2014. We are also still evaluating the sale's potential impact on Tata Power's negotiations with lenders to its power project at Mundra to cure a breach in its loan covenants. (ends)