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The agency has assigned the company a corporate credit rating of 'BB' (non-investment grade or junk rating) while maintaining that the outlook on the company is negative.
"The negative outlook rating on Tata Motors reflects deteriorating market conditions in the US and Europe, weakening domestic market demand and increase in debt, specially short term," S&P said in a statement.
S&P said there was a higher working capital requirement, and slowdown in the vehicle loan securitisation market and capital expenditure, resulting in weakening the company's financial profile.
The rating agency had lowered Tata Motors' rating to 'BB' from a slightly better 'BB+' in April, after it sealed a deal to acquire Jaguar and Land Rover from Ford Motor Co.
"The rating could face downward pressure if the uncertainty related to the rollover or refinancing of its short-term debt is unresolved by March 2009," S&P credit analyst Mehul Sukkawala said.
The agency said the rating is currently supported by the company successfully completing its simultaneous unlinked rights issues aggregating about 800 million dollars, the proceeds of which are to be used to partly repay a 3 billion dollar bridge loan that Tata Motors had taken for JLR acquisition.
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