London: S&P said on Wednesday it had downgraded its credit rating on Jaguar Land Rover, and its owner, even deeper into junk and put it on review for a possible further downgrade due to the growing risks of a no-deal Brexit and US import tariffs.
S&P cut its rating on senior unsecured notes of Jaguar (JLR), Britain's biggest carmaker, and its owner India's Tata Motors Ltd to 'B+' from 'BB-' following JLR's weaker than expected third-quarter results.
It said it could lower the JLR rating further, most likely by one notch, if the carmaker fails to meet the base-case expectations for full-year results, Britain leaves the EU without a deal or Washington slaps new import tariffs on cars.
Fitch ratings agency also put Jaguar under review in early February.
The moves, which usually increase a company's funding costs, highlight growing concerns about disruption to industrial groups with complex supply chains spread across the EU and beyond from Britain's potentially chaotic departure from the bloc.
"The ongoing CreditWatch reflects that JLR needs to have a strong finish to fiscal year 2019 in order to maintain a 'B+' rating, while macroeconomic and geopolitical risks to JLR's business, such as a potential no-deal Brexit and/or US tariffs, remain high," it said.
In a separate note, S&P said JLR's woes are depressing profitability and causing a high cash burn rate for Tata.
The agency said it expects Tata to suffer negative cash flow for at least the next 12-18 months before its Chinese operations stabilise and cost cuts restore its financial health.