TRIS Rating Announces “Developing” CreditAlert for Company Rating of “SSI”

TRIS Rating Co., Ltd. has placed the company rating of Sahaviriya Steel Industries PLC (SSI) on CreditAlert with “developing” implication. The action follows the announcement of SSI on 27 August 2010 that SSI signed a memorandum of understanding (MOU) with Corus UK Ltd. (Corus). SSI announced plans to acquire one of Corus’s integrated iron & steel making plants, Teesside Cast Products (TCP), which includes iron-making, steel-making, and power generation facilities. The transaction will cost SSI approximately US$500 million. Currently, SSI is in the process of conducting due diligence and arranging financing. SSI and Corus will continue their negotiations to reach a definitive sale and purchase agreement.

TRIS Rating said, the CreditAlert placement reflects uncertainties regarding the financing structure of the proposed transaction and uncertainties surrounding the costs and benefits of the acquisition. SSI expects this strategic investment will, among other benefits, result in more efficient inventory management and will ultimately reduce SSI’s working capital requirement. However, the improving business profile is weighted against deterioration in SSI’s financial profile if the company decides to use a substantial amount of debt financing to complete the acquisition.

Corus is Europe’s second largest steel producer, with its major steel-making operations primarily in the UK and the Netherlands. It is a subsidiary of Tata Steel Group, one of the world’s top ten steel producers. TCP is an integrated iron- and steel-making plant located in northeast of England with an annual capacity of 3.5 million tonnes of steel slab. The acquisition of TCP is in line with SSI’s long-term strategy toward fully integrated steel production. Sahaviriya Group has shown its intention to invest in iron making in Thailand since 2005. However, the development of the project has progressed very slowly.

TRIS Rating will conduct an extensive analysis to determine the full impact of the transaction on SSI’s credit profile and will resolve CreditAlert once crucial terms and conditions of the transaction are finalized. -- End

Company Rating: BB+ CreditAlert Designation: Developing Copyright 2010, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.