/raid1/www/Hosts/bankrupt/TCRAP_Public/200116.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, January 16, 2020, Vol. 23, No. 12
Headlines
C H I N A
CENTRAL CHINA REAL: Fitch Affirms BB- LT IDR, Outlook Stable
CHINA: Debt-Asset Ratio at Central SOEs Down in 2019
KAISA GROUP: Fitch Assigns B Rating to New USD Sr. Unsec. Notes
LANDSEA GREEN: Fitch Affirms 'B' LT IDR, Alters Outlook to Stable
LANDSEA GREEN: Fitch Assigns B Rating to Proposed USD Sr. Notes
QINGHAI PROVINCIAL: S&P Cuts ICR to 'D' on US Dollar Bond Default
SEAZEN GROUP: S&P Rates New US Dollar Senior Unsecured Notes 'BB-'
I N D I A
BALAJEE MINI: Ind-Ra Withdraws 'BB' Bank Loan Rating
DSTR INFRASTRUCTURES: Insolvency Resolution Process Case Summary
EMPEE POWER: Insolvency Resolution Process Case Summary
GLISTER HOSPITALITY: Insolvency Resolution Process Case Summary
INDIA: Economy Faces Severe Challenges
INDIA: Likely To Take More Steps to Deal w/ Fin'l. Sector Proble
KOHINOOR PRECISION: Insolvency Resolution Process Case Summary
KRISHNA ESTATE: Insolvency Resolution Process Case Summary
MANAPPURAM FINANCE: Fitch Rates USD300MM Sr. Sec. Notes Final 'BB-'
NAG (INDIA): Insolvency Resolution Process Case Summary
OCTAL SALES: Ind-Ra Migrates 'B-' Issuer Rating to Non-Cooperating
OM GRAM: Ind-Ra Maintains 'D' Bank Loan Rating in Non-Cooperating
PITHAMPUR POLY: Insolvency Resolution Process Case Summary
SAIBABA SOLVENT: Ind-Ra Migrates BB- LT Rating to Non-Cooperating
SHREE KHODAL: Insolvency Resolution Process Case Summary
SMS PARYAVARAN: Insolvency Resolution Process Case Summary
SRI BIR ISPAT: Insolvency Resolution Process Case Summary
SRK DEVBUILD: Insolvency Resolution Process Case Summary
WALL ROCK: Insolvency Resolution Process Case Summary
I N D O N E S I A
INDONESIA: Trade Pressure Eases in December as Deficit Narrows
LIPPO KARAWACI: Moody's Assigns B3 Rating to New Sr. Unsec. Notes
S R I L A N K A
DFCC BANK: S&P Alters Outlook to Negative & Affirms 'B' ICR
SRI LANKA: S&P Affirms 'B' Credit Ratings, Alters Outlook to Neg.
SRILANKAN AIRLINES: Fitch Affirms B Rating to $175MM Unsec. Bonds
V I E T N A M
SHINHAN BANK: S&P Assigns 'BB' LT ICR, Outlook Stable
- - - - -
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C H I N A
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CENTRAL CHINA REAL: Fitch Affirms BB- LT IDR, Outlook Stable
------------------------------------------------------------
Fitch Ratings affirmed Central China Real Estate Limited's
Long-Term Issuer Default Rating at 'BB-'. The Outlook is Stable.
Fitch has also affirmed the senior unsecured rating at 'BB-' and
the ratings on CCRE's outstanding foreign-currency senior unsecured
bonds at 'BB-'.
CCRE's ratings are supported by the company's position as a market
leading homebuilder in China's Henan province, and the company's
healthy leverage. However, CCRE remains less geographically
diversified and has lower margins than higher-rated peers, which
constrains the rating at the current level.
KEY RATING DRIVERS
Strong Presence in Henan: CCRE's record supports its plan to
increase its market share in Henan to 15% in the next three years,
from 10.7% in 1H19 and 9% in 2018. CCRE has been developing
residential properties almost entirely in the province for more
than 27 years and it has projects in 18 prefecture-level cities and
an established reputation. CCRE's lower average selling price (ASP)
of CNY7,233 per sq m in 1H19 and CNY7221 in 2018, compared with
peers' ASP of above CNY11,000/sq m, reflects its wide product
exposure, which includes projects in smaller cities.
While the focus on Henan affords CCRE a stronger regional market
position relative to its overall scale, it also exposes it to any
cyclicality in the province compared to more geographically
diversified homebuilders.
Growth In Line With Market: CCRE's total contracted sales,
excluding the asset-light business, in 2019 rose 34% yoy to CNY71.8
billion, driven by strong sales from lower-tier cities in Henan.
Fitch expects CCRE's project pipeline to drive an increase in
annual contracted sales to CNY82 billion-89 billion in 2020-2021,
which should be supported by solid demand in the province.
CCRE's contracted sales from asset-light projects increased by 57%
to CNY29.3 billion in 2019 from CNY18.6 billion in 2018. CCRE had
131 projects under the asset-light business during 1H19 compared to
110 in 2018. Fitch expects CCRE to have generated more than CNY860
million of revenue from the asset-light business model in 2019
compared with CNY723 million in 2018, with gross margin higher than
85%. Fitch views this project management business as beneficial to
CCRE's brand recognition but it has limited impact on the company's
business or financial profile.
Leverage to Decline: Fitch expects CCRE's leverage, measured by net
debt/adjusted inventory on a proportionately consolidated basis, to
have stayed at 31% at end-2019, but to fall to 24% in 2020, thanks
to rapid growth in contracted sales. Fitch also expects the company
to be flexible on land acquisitions in the next 12-24 months. Land
bank attributable to CCRE exceeded 47 million sq m at end-1H19,
which is sufficient for development over the next four to five
years.
CCRE acquired 13.5 million sq m in attributable gross floor area of
land for CNY17.0 billion in 2018 and expected to spend CNY18
billion on buying land in 2019. Fitch believes the company achieved
a land acquisition/contracted sales value ratio of 0.27x in 2019,
in line with the 0.2x-0.3x in previous years.
Stablising Margins: Fitch estimates CCRE's EBITDA margin (excluding
capitalised interest from cost of sales) was 22% in 2019, in line
with 'BB-' peers but lower than that of 'BB' peers, compared with
17%-22% in 2017-2018. Increasing land and construction costs were
offset by CCRE's higher residential property ASP. Fitch also
expects the company to gradually increase sales contribution from
Zhengzhou, the capital of Henan province, implying higher ASP in
the next 12-24 months and better margin in the next 12 months.
Fitch also expects the growing revenue contribution from project
management to also result in margin improvement from 2020.
Guarantee to Related Parties: In December 2019, CCRE provided a
two-year, CNY500 million financial guarantee to Henan Hongdao for
the latter to obtain a bank loan. Henan Hongdao is owned by CCRE's
chairman and largest shareholder, and its subsidiary is a supplier
to CCRE. The company said it is not providing additional guarantees
to related parties that focus on non-property development
businesses. Fitch will consider negative rating action if there is
increased related-party transactions and financial guarantees.
DERIVATION SUMMARY
CCRE's total contracted sales of CNY71.8 billion in 2019 are
comparable with those of 'BB-' rated peers, although it has
maintained a healthier financial profile. Yuzhou Properties Company
Limited (BB-/Stable) had contracted sales of CNY75.1 billion in
2019 and KWG Group Holdings Limited (BB-/Stable) had CNY86.1
billion.
CCRE's leverage ratio, measured by net debt/adjusted inventory on a
proportionately consolidated basis, likely remained at 31% in 2019,
same as 2018, well below the 'B+' and 'B' rated peers' ratio of
40%-60% and in line with 'BB-' rated peers' ratio of 20%-45%. Fitch
expects CCRE to deleverage to 24% in 2020.
CCRE's EBITDA margin, excluding capitalised interest, of 22% in
2018-2019, is in line with 'BB-' peers' range of 18%-25% due to the
company's low land cost in the past. Fitch expects CCRE's EBITDA
margin to reach 23.5%-24.5% in 2020-2021, as revenue from projects
with higher contracted sales ASP will be recognised, although that
will be offset by growing land and construction costs.
CCRE is rated one-notch lower than Logan Property Holdings Company
Limited (BB/Stable), which has larger attributable contracted sales
and better margins. Logan's operations are concentrated in the
Greater Bay Area, but the concentration risk has reduced after it
expanded into new areas such as the Yangtze River Delta, Hong Kong
and Singapore, in the last 12-24 months. Fitch expects the
contribution from the Greater Bay Area to Logan's sales to drop to
around 50% in 2020-2021. In comparison, all of CCRE's sales are
from Henan.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Total contracted sales by gross floor area to increase by 7% in
2020 and 5% in 2021
- Average selling price for contracted sales to increase by up to
3% a year in 2020-2021
- EBITDA margin (excluding capitalised interest) to reach
23.5-24.5% in 2020-2021
- Annual land acquisition budget to be 30% of total contracted
sales in 2020-2021 for the company to maintain its land bank at
approximately 4-5 years of contracted sales (27%-30% in
2018-2019).
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Leverage, measured by net debt/adjusted inventory on a
proportionately consolidated basis, persistently at 30% or below,
while the company achieves diversification, with 20% of contracted
sales generated outside of Henan province
- EBITDA margin sustained above 25%
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- A decline in contracted sales for a sustained period
- Leverage at 40% or above for a sustained period
- EBITDA margin at below 18% for a sustained period
- Any increase in financial guarantees to related parties on non
property development businesses
LIQUIDITY AND DEBT STRUCTURE
Ample Liquidity: The company had total cash of CNY23.8 billion
(including restricted cash of CNY4.6 billion) as of June 2019,
sufficient to cover short-term debt of CNY7.0 billion maturing in
one year.
Diversified Funding Channels: CCRE had total debt of CNY25.8
billion as of June 2019, consisting of bank loans, other loans,
senior notes and corporate bonds, and unutilised banking facilities
of CNY24.1 billion. CCRE is listed on the Hong Kong stock exchange
and raised about CNY800 million in an equity placement in 2018.
Stable Funding Cost: The average cost of borrowing was 7.0% in
2018, slightly higher than the 6.8%-6.9% in 2016-2017.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
CHINA: Debt-Asset Ratio at Central SOEs Down in 2019
----------------------------------------------------
Xinhua News reports that the debt-to-asset ratio at China's
centrally-administered state-owned enterprises (SOEs) headed
downward for the third consecutive year in 2019, official data
showed.
At the end of last year, the average debt-to-asset ratio of central
SOEs stood at 65.1 percent, down 0.6 percentage points from the
beginning of 2019, the State-owned Assets Supervision and
Administration Commission (SASAC) told a press conference,
according to Xinhua News.
The ratios of state firms in the sectors such as metallurgy, power,
mining and construction fell by more than one percentage point from
the beginning of 2019, the report relays.
"The overall solvency of central SOEs was stable as their average
ratio of interest-bearing liability to assets dropped by 1.1
percentage points year on year to 38.2 percent," said SASAC
spokesperson Peng Huagang, the report notes.
China has set a timetable for SOE deleveraging as part of its
efforts to defuse financial risks, the report says.
The average debt-to-asset ratio of SOEs should be reduced by two
percentage points by the end of 2020, as compared with that at the
end of 2017, according to guidelines released in September 2018,
the report adds.
KAISA GROUP: Fitch Assigns B Rating to New USD Sr. Unsec. Notes
---------------------------------------------------------------
Fitch Ratings assigned China-based homebuilder Kaisa Group Holdings
Limited's (B/Stable) proposed US dollar senior unsecured notes a
rating of 'B' with a Recovery Rating of 'RR4'. The proceeds will be
used to refinance medium- to long-term offshore debt, which is due
within one year.
The proposed notes are rated at the same level as Kaisa's senior
unsecured rating as they constitute the company's direct and senior
unsecured obligations.
Kaisa's ratings are underpinned by a strong asset base that
supports scale expansion, which is at a level comparable with 'BB'
category homebuilders. The company had a large and well-located
land bank consisting of 167 projects in 47 cities across five major
economic regions at end-1H19. Its geographical diversification
mitigates project and region-related risks and gives it more
flexibility when launching new projects to support sales growth.
Kaisa's ratings are constrained by high leverage - measured by net
debt/adjusted inventory (urban renewal projects (URP) and
investment properties at original cost) - of 72% at end-1H19,
although this is mitigated by high profitability.
Fitch believes Kaisa will start deleveraging from 2020, supported
by its enlarged scale and increased margin, with more high-margin
URPs being recognised. Kaisa is able to secure a large land bank at
low cost in China's Greater Bay Area through its URP business,
which supports its high EBITDA margin of over 30%. The wider margin
of the URP business, at over 40%, will help deleveraging. However,
Kaisa's leverage will remain high if it expands its scale at the
same pace as in 2017 and 2018, as URPs only contributed 30%-35% of
contracted sales.
KEY RATING DRIVERS
URPs a Business Strength: Fitch believes Kaisa's URP business
offers operational flexibility, as its high profitability enables
the company to sustain price cuts in a market downturn. Kaisa can
also sell stakes in its URPs, if needed, at a profit because of
their low land cost. Kaisa's long experience in the URP business
has enabled it to secure a large land bank with a high gross profit
margin of over 40%, supporting the company's EBITDA margin,
excluding capitalised interest in cost of goods sold (COGS), of
30%-35%. A large URP pipeline of 128 projects, covering a site area
of 32 million sq m, also allows for a consistent stream of projects
entering the sales phase.
Kaisa has converted an average gross floor area (GFA) of 940,000 sq
m a year for the past 10 years; this offers some operational
flexibility with land replenishment. Nevertheless, the URP business
has limited scope to build scale and will become a less important
driver at higher rating levels. URPs require a longer development
cycle and thus funds will be trapped for a longer period and incur
higher funding without immediate cash flow generation or profit
contribution, raising Kaisa's leverage above that of peers without
as large an exposure to URPs. The nature of the business and the
high profitability mean Kaisa can operate at a higher leverage than
other Chinese homebuilders for a sustained period.
High Leverage Constrains Ratings: Fitch estimates that Kaisa's
leverage, measured by net debt/adjusted inventory, stayed above 70%
in 2019, but will fall below that level thereafter. Kaisa's sales
scale in 2019 would be insufficient to support deleverage due to
its high tax and interest burden. Reliance on the non-URP
homebuilding business, which has a lower margin, and growth at the
business that is faster than Fitch expects, may limit Kaisa's
capacity to deleverage. However, Fitch thinks there may be
improvement once the company's attributable sales rise above CNY100
billion from 2020, as its sales efficiency - contracted sales/gross
debt - will exceed 0.8x and support stronger fund flow from
operation.
Large and Premium Land Bank: Fitch believes Kaisa's quality land
bank will support robust sales growth in the next two years. Its
premium asset base can also buffer liquidity if conversion of its
URP land bank takes longer than the company expects, as it can
easily find buyers for its well-located URPs, especially in
Shenzhen. Kaisa's land bank totalled 25.8 million sq m (estimated
sellable resources of CNY501 billion) at end-1H19, of which 14.1
million sq m, or 54.6%, was in the Greater Bay Area and 3.2 million
sq m in Shenzhen.
Robust Contracted Sales Growth: Fitch thinks Kaisa will continue to
see robust sales growth due to the supportive policies in the
Greater Bay Area and the company's well-located land bank. Kaisa's
total contracted sales rose by 26% to CNY88.1 billion in 2019,
supported by GFA growth of 21% and average selling price increase
of 4%. This followed a sales growth of 57% in 2018 and 50% in
2017.
DERIVATION SUMMARY
Kaisa's attributable sales scale in 2019 was comparable with that
of 'BB' category peers, such as Logan Property Holdings Company
Limited (BB/Stable) and China Aoyuan Group Limited (BB-/Positive),
and exceeded the CNY40 billion-50 billion sales of Yuzhou
Properties Company Limited (BB-/Stable), KWG Group Holdings Limited
(BB-/Stable) and Times China Holdings Limited (BB-/Stable). Over
half of Kaisa's land bank GFA is in the Greater Bay Area, a similar
level to that of Logan, China Aoyuan and Times China. Kaisa's
EBITDA margin of over 30% is at the higher end of 'BB' category
peers due to its high-margin URPs.
Kaisa's leverage of over 70% is at a similar level to that of
Oceanwide Holdings Co. Ltd. (B-/Stable), Xinhu Zhongbao Co., Ltd.
(B-/Stable) and Tahoe Group Co., Ltd. (B-/Stable). Kaisa's business
profile is much stronger than that of Oceanwide and Xinhu, with a
larger sales scale and more diversified land bank. Its churn,
measured by contracted sales/total debt, of 0.64x is also healthier
than the ratios of the two peers, which are below 0.25x. Kaisa and
Tahoe, whose land bank is more exposed to the Pan-Bohai Area, the
Yangtze River Delta and Fujian province, have similar scale and
margin. However, Tahoe's shorter land-bank life of two to three
years pressures its leverage and Tahoe's liquidity is much tighter
than that of Kaisa.
Kaisa's closest peer among 'B' category issuers is Yango Group Co.,
Ltd. (B+/Stable). Yango's sales scale is larger than that of Kaisa
and its land bank is also more diversified, although Yango's EBITDA
margin, excluding capitalised interest, of around 28% is narrower
than Kaisa's more than 30%. Yango's leverage, measured by net
debt/adjusted inventory, of below 65% in 2019 is lower than its
expectation of Kaisa's leverage. Yango's moderately stronger
business and financial profiles justifies the one-notch
difference.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Attributable contracted sales to rise by 20% in 2020 (2019:
26%)
- Attributable land premium/contracted sales at 28% in 2019 and
31% in 2020 (2018: 23%)
- Cash collection rate of around 80% in 2019 and 85% in 2020
(2018: 75%)
- Construction cost/sales proceeds at around 30% in 2019 and 2020
(2018: 30%)
- Dividend payout ratio of 20% of net income (2018: 19%)
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- Leverage, measured by net debt/adjusted inventory, sustained
below 60%
- EBITDA margin, excluding capitalised interest in COGS,
sustained above 30%
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Leverage, measured by net debt/adjusted inventory, above 75%
for a sustained period
- EBITDA margin, excluding capitalised interest in COGS, below
25% for a sustained period
LIQUIDITY
Cash Meets Short-Term Obligations: Kaisa had cash and cash
equivalents of CNY28 billion at end-1H19, including restricted cash
of CNY7 billion, against CNY22 billion in short-term debt. The
company also had total credit lines of CNY165 billion, of which
CNY119 billion was unused. In addition, Kaisa obtained a CNY11.1
billion asset-backed securities quota by end-2019, of which CNY2.6
billion was issued. Kaisa's average funding cost stayed flat at
8.6% in 1H19.
LANDSEA GREEN: Fitch Affirms 'B' LT IDR, Alters Outlook to Stable
-----------------------------------------------------------------
Fitch revised the Outlook on China-based homebuilder Landsea Green
Properties Co., Ltd.'s Long-Term Issuer Default Rating to Stable
from Positive and affirmed the IDR at 'B'. At the same time, Fitch
has affirmed Landsea's senior unsecured rating and the rating on
its outstanding US dollar senior notes at 'B' with a Recovery
Rating of 'RR4'.
The revision of the Outlook reflects its expectation of higher
leverage in the next one to three years due to persistent land
replenishment need given Landsea's short land-bank life and slower
growth in non-property development businesses than Fitch estimated.
The rating affirmation is premised on Landsea's quality land bank
in China and the US, which should maintain contracted sales at
above CNY12 billion and healthy profitability.
Fitch uses the consolidated financials of Landsea Group Co. Ltd,
which holds a 50.1% equity interest in Landsea. Fitch regards the
linkage between the two entities to be strong, due to high senior
management overlap, strong parental control over Landsea's board,
and historical intragroup asset transfers, in line with its Parent
and Subsidiary Rating Linkage criteria.
KEY RATING DRIVERS
Leverage to Remain High: Fitch estimates that Landsea Group's
leverage, as measured by lease-adjusted net debt/adjusted
inventory, rose to around 45% in 2019 due to land replenishment
pressure and continuous capex required to expand its long-term
rental-apartment business. Fitch believes Landsea, which undertakes
the majority of Landsea Group's property development activities,
had a land-bank life of 2.5 years at end-2019, lower than the
three-year minimum level required to support sustained business
development.
Landsea Group's persistent interest in expanding its long-term
rental-apartment business could also pressure its leverage. The
group has 40,000 rooms spread across 14 tier one and two cities,
including Shanghai, Shenzhen and Chengdu.
Quality Land Bank: Fitch estimates Landsea Group's quality land
bank will support sales growth of 10%-15% yoy in 2019 and 2020.
Landsea has one million square metres (sq m) of attributable land
bank in China and 0.6 million sq m in the US. Projects in China are
well located in core tier two and strong tier three cities in the
Yangtze River Delta (45% of Chinese land bank) and
Chongqing-Chengdu (40%), where Fitch thinks fundamental demand
remains strong. Landsea's US projects are located in California
(50% of US land bank), where supply is low and housing prices are
the second-highest nationwide, and in Arizona (40%), where housing
markets are supported by rising demand from millennials and influx
of young professionals.
Stable Margin: Fitch expects Landsea Group's EBITDA margin,
excluding capitalised interest from cost of sales, to stay healthy
at around 18%-20% in the next one to three years, based on its
stabilised property-development business, though profitability
would be partially offset by the loss-making long-term rental
apartment business. Fitch forecasts that around two thirds of its
property-development revenue will come from its Chinese operation,
with a gross profit margin of 20%-25%, and the rest from the US,
with a gross profit margin of 16%-18%. Fitch estimates an average
land cost of around CNY5,000-5,500/sq m in 2019, or less than 30%
of its estimated contracted average selling price, supporting the
company's profitability.
Non-Development EBITDAR Rating Neutral: Fitch believes the rating
contribution from non-development EBITDAR is not meaningful at
current stage; Fitch forecasts Landsea Group's non-development
business, including project management, investment properties,
long-term rental-apartment and senior living, to generate
CNY700-800 million in EBITDAR during 2019-2021, covering net
interest and rental expenses at 0.5x-0.6x.
The asset-light property management segment is likely to be the
major revenue and profit contributor; Fitch estimates that Landsea
booked more than CNY1 billion in revenue and CNY500 million in
EBITDA from the segment in 2019, which could provide some buffer
for debt servicing. However, Fitch views the non-property
development segment would need to be larger and more stable before
Fitch would regard it as supporting the rating.
Strong Linkage: Fitch assesses the linkage between Landsea and
Landsea Group as strong. This is in view of strong parental control
over Landsea's board and high level senior management overlap.
Landsea Group has maintained its shareholding over Landsea above
50%, and showed strong support to Landsea. This is evident in the
group's injection of quality asset into Landsea, the absorption of
Landsea's loss-making businesses and the provision of financial
support through interest-free shareholder loans, which accounted
for 12% of Landsea's total borrowings at end-1H19 (before 2018:
around 20% and above). Landsea Group and Landsea also share the
same bank credit lines in onshore borrowing.
DERIVATION SUMMARY
Landsea has a shorter land-bank life than 'B' rated peers.
Land-bank replenishment is likely to increase group-consolidated
leverage to around 45%; the mid-range of Fitch 'B' rated peers,
such as China South City Holdings Limited (B/Stable) and LVGEM
(China) Real Estate Investment Company Limited (B/Stable), and
higher than Hopson Development Holdings Limited's (B+/Stable)
around 40%. Landsea's quality land-bank in China and
diversification in the US will help the company sustain its
contracted sales scale of above CNY12 billion.
The adoption of an asset-light strategy and the monetising of its
experience in green-technology homes differentiate Landsea from
traditional homebuilders. Fitch estimates non-development EBITDAR
from project-management services, investment properties, long-term
rental and senior-living businesses to be around 0.5x of Landsea's
cash interest in the next one to two years, exceeding that of most
of 'B' rated peers, though not reaching a meaningful level to
support the rating.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Annual attributable contracted sales of CNY13 billion-16
billion during 2019-2021;
- Land acquisition expenditure to account for 45%-50% of sales
proceeds during 2019-2021;
- Construction expenditure to account for 45%-50% of sales
proceeds during 2019-2021;
- Cash collection rate of China business at 85%-90% a year during
2019-2021.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- Landsea Group's consolidated net debt/adjusted inventory
sustained below 50% (2018: 21%, 2019E: 45%)
- Landsea Group's EBITDA margin sustained above 20% (2018: 23%,
2019E: 20%)
- Landsea Group's non-development EBITDAR/(net interest + rent)
sustained above 1.5x (2018: 1.0x, 2019E: 0.6x)
- Landsea Group's shareholding in Landsea significantly
decreases, while Landsea's sustained improvement in its financial
profile justifies a higher rating
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Landsea Group's consolidated net debt/adjusted inventory above
60% for a sustained period
- Landsea Group's EBITDA margin below 15% for a sustained period
- Insufficient land bank for two years of sales (2019E: 2.5
years)
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch estimates that Landsea Group maintained a
comfortable cash/short-term debt ratio of above 2x in 2019 on the
back of strong sales and well-managed debt maturities. Landsea
Group has had sufficient liquidity in the previous three years,
with cash covering short-term debt at above 1x. It had CNY5.4
billion in available cash on hand at end-June 2019, which exceeded
short-term debt of CNY1.7 billion.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
LANDSEA GREEN: Fitch Assigns B Rating to Proposed USD Sr. Notes
---------------------------------------------------------------
Fitch Ratings assigned a 'B' rating and a Recovery Rating of 'RR4'
to China-based property developer Landsea Green Properties Co.,
Ltd.'s (B/Stable) proposed US dollar senior notes. The notes are
rated at the same level as Landsea's senior unsecured rating, as
they represent its direct, unconditional, unsecured and
unsubordinated obligations.
Landsea's rating is supported by its quality land bank in China and
the US, which should maintain contracted sales at above CNY12
billion and healthy profitability.
Fitch uses the consolidated financials of Landsea Group Co. Ltd,
which holds a 50.1% equity interest in Landsea. Fitch regards the
linkage between the two entities to be strong, due to high senior
management overlap, strong parental control over Landsea's board,
and historical intragroup asset transfers, in line with its Parent
and Subsidiary Rating Linkage criteria.
KEY RATING DRIVERS
Leverage to Remain High: Fitch estimates that Landsea Group's
leverage, as measured by lease-adjusted net debt/adjusted
inventory, rose to around 45% in 2019 due to land replenishment
pressure and continuous capex required to expand its long-term
rental-apartment business. Fitch believes Landsea, which undertakes
the majority of Landsea Group's property development activities,
had a land-bank life of 2.5 years at end-2019, lower than the
three-year minimum level required to support sustained business
development.
Landsea Group's persistent interest in expanding its long-term
rental-apartment business could also pressure its leverage. The
group has 40,000 rooms spread across 14 tier one and two cities,
including Shanghai, Shenzhen and Chengdu.
Quality Land Bank: Fitch estimates Landsea Group's quality land
bank will support sales growth of 10%-15% yoy in 2019 and 2020.
Landsea has one million square metres (sq m) of attributable land
bank in China and 0.6 million sq m in the US. Projects in China are
well located in core tier two and strong tier three cities in the
Yangtze River Delta (45% of Chinese land bank) and
Chongqing-Chengdu (40%), where Fitch thinks fundamental demand
remains strong. Landsea's US projects are located in California
(50% of US land bank), where supply is low and housing prices are
the second-highest nationwide, and in Arizona (40%), where housing
markets are supported by rising demand from millennials and influx
of young professionals.
Stable Margin: Fitch expects Landsea Group's EBITDA margin,
excluding capitalised interest from cost of sales, to stay healthy
at around 18%-20% in the next one to three years, based on its
stabilised property-development business, though profitability
would be partially offset by the loss-making long-term rental
apartment business. Fitch forecasts that around two thirds of its
property-development revenue will come from its Chinese operation,
with a gross profit margin of 20%-25%, and the rest from the US,
with a gross profit margin of 16%-18%. Fitch estimates an average
land cost of around CNY5,000-5,500/sq m in 2019, or less than 30%
of its estimated contracted average selling price, supporting the
company's profitability.
Non-Development EBITDAR Rating Neutral: Fitch believes the rating
contribution from non-development EBITDAR is not meaningful at
current stage; Fitch forecasts Landsea Group's non-development
business, including project management, investment properties,
long-term rental-apartment and senior living, to generate
CNY700-800 million in EBITDAR during 2019-2021, covering net
interest and rental expenses at 0.5x-0.6x.
The asset-light property management segment is likely to be the
major revenue and profit contributor; Fitch estimates that Landsea
booked more than CNY1 billion in revenue and CNY500 million in
EBITDA from the segment in 2019, which could provide some buffer
for debt servicing. However, Fitch views the non-property
development segment would need to be larger and more stable before
Fitch would regard it as supporting the rating.
Strong Linkage: Fitch assesses the linkage between Landsea and
Landsea Group as strong. This is in view of strong parental control
over Landsea's board and high level senior management overlap.
Landsea Group has maintained its shareholding over Landsea above
50%, and showed strong support to Landsea. This is evident in the
group's injection of quality asset into Landsea, the absorption of
Landsea's loss-making businesses and the provision of financial
support through interest-free shareholder loans, which accounted
for 12% of Landsea's total borrowings at end-1H19 (before 2018:
around 20% and above). Landsea Group and Landsea also share the
same bank credit lines in onshore borrowing.
DERIVATION SUMMARY
Landsea has a shorter land-bank life than 'B' rated peers.
Land-bank replenishment is likely to increase group-consolidated
leverage to around 45%; the mid-range of Fitch 'B' rated peers,
such as China South City Holdings Limited (B/Stable) and LVGEM
(China) Real Estate Investment Company Limited (B/Stable), and
higher than Hopson Development Holdings Limited's (B+/Stable)
around 40%. Landsea's quality land-bank in China and
diversification in the US will help the company sustain its
contracted sales scale of above CNY12 billion.
The adoption of an asset-light strategy and the monetising of its
experience in green-technology homes differentiate Landsea from
traditional homebuilders. Fitch estimates non-development EBITDAR
from project-management services, investment properties, long-term
rental and senior-living businesses to be around 0.5x of Landsea's
cash interest in the next one to two years, exceeding that of most
of 'B' rated peers, though not reaching a meaningful level to
support the rating.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Annual attributable contracted sales of CNY13 billion-16
billion during 2019-2021;
- Land acquisition expenditure to account for 45%-50% of sales
proceeds during 2019-2021;
- Construction expenditure to account for 45%-50% of sales
proceeds during 2019-2021;
- Cash collection rate of China business at 85%-90% a year during
2019-2021.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- Landsea Group's consolidated net debt/adjusted inventory
sustained below 50% (2018: 21%, 2019E: 45%)
- Landsea Group's EBITDA margin sustained above 20% (2018: 23%,
2019E: 20%)
- Landsea Group's non-development EBITDAR/(net interest + rent)
sustained above 1.5x (2018: 1.0x, 2019E: 0.6x)
- Landsea Group's shareholding in Landsea significantly
decreases, while Landsea's sustained improvement in its financial
profile justifies a higher rating
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Landsea Group's consolidated net debt/adjusted inventory above
60% for a sustained period
- Landsea Group's EBITDA margin below 15% for a sustained period
- Insufficient land bank for two years of sales (2019E: 2.5
years)
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fitch estimates that Landsea Group maintained a
comfortable cash/short-term debt ratio of above 2x in 2019 on the
back of strong sales and well-managed debt maturities. Landsea
Group has had sufficient liquidity in the previous three years,
with cash covering short-term debt at above 1x. It had CNY5.4
billion in available cash on hand at end-June 2019, which exceeded
short-term debt of CNY1.7 billion.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
QINGHAI PROVINCIAL: S&P Cuts ICR to 'D' on US Dollar Bond Default
-----------------------------------------------------------------
On Jan. 14, 2020, S&P Global Ratings lowered the long-term issuer
credit rating on Qinghai Provincial Investment Group Co. Ltd.
(QPIG) and the issue rating on the company's senior unsecured bonds
to 'D' from 'CCC-'.
S&P said, "We lowered the rating on QPIG because the company missed
an interest payment due on Jan. 10, 2020, on its US$300 million
bonds maturing on July 10, 2021. We believe the company will not be
able to make full payment within the five-business-day imputed
grace period. Since the U.S. dollar bond does not have a stated
grace period, we apply the five-business-day imputed grace period
based on our criteria.
"In our view, QPIG does not have the financial capacity to make
timely and full payment on its debt obligations. We also do not
expect the Qinghai provincial government to provide timely support
to help QPIG meet its obligations. This underpins our assessment
that QPIG's general default is commensurate with a rating of 'D'
instead of 'SD'."
QPIG currently has three outstanding offshore bonds totaling US$850
million:
-- US$300 million bonds maturing on Feb. 22, 2020
-- US$250 million bonds maturing on Mar. 22, 2021
-- US$300 million bonds maturing on July 10, 2021
A missed coupon payment on the US$300 million bonds maturing on
July 10, 2021 is considered an event of default (EOD) for the other
two bonds (cross-default). Upon the occurrence of an EOD, the
bondholders of the other two U.S. dollar bonds may--by written
notice to the issuer--demand their principal and unpaid interest to
be immediately due and payable. If the bondholders of at least 25%
in aggregate principal outstanding demand for such early repayment,
an acceleration of payment for all the principal and unpaid
interest of the U.S. dollar bonds will automatically take place.
SEAZEN GROUP: S&P Rates New US Dollar Senior Unsecured Notes 'BB-'
------------------------------------------------------------------
S&P Global Ratings assigned its 'BB-' long-term issue rating to the
proposed U.S. dollar-denominated senior unsecured notes that Seazen
Group Ltd. (BB/Stable/--) will unconditionally and irrevocably
guarantee. New Metro Global Ltd., a special purpose financing
vehicle of Seazen Group, will issue the notes.
The rating on the notes is subject to S&P's review of the final
issuance documentation. The China-based property developer intends
to use the proceeds to refinance its existing debt, in particular
US$350 million senior unsecured notes due in February 2020.
S&P rates the notes one notch below the issuer credit rating on
Seazen Group to reflect subordination risk, similar to the
company's outstanding senior unsecured notes. As of June 30, 2019,
Seazen Group's capital structure consisted of Chinese renminbi
(RMB) 59.6 billion of secured debt and RMB45 billion of unsecured
debt. Seazen Group has about RMB104 billion in total reported debt,
and its ratio of secured debt to total debt was 57% as of June 30,
2019, above S&P's issue notching down threshold of 50%. Moreover,
the total priority debt will be materially higher and account for
over 80% of the group's total borrowings. This is because there is
a significant amount of unsecured debt at the subsidiary level,
such as issuances from Seazen Holdings Co. Ltd., its A-share
platform subsidiary.
On Jan. 14, Seazen Group raised over HK$2.7 billion (about US$350
million) from a new share placement of up to 5.01% of its enlarged
equity base. The shareholding of founder Mr. Wang Zhenhua and his
son Mr. Wang Xiaosong will be diluted to 67.77% following this
transaction, while Seazen Group's ownership of Seazen Holdings will
not be affected. According to Seazen Group, proceeds of the equity
raising will be used for the company's business development and
general working capital. In S&P's view, this transaction highlights
the additional financing capability enabled by Seazen Group's
unconventional ownership structure and dual-listing on both the
Hong Kong and Shanghai stock exchange.
S&P said, "We affirmed our ratings on Seazen Group and removed them
from CreditWatch with negative implications in December 2019. The
stable outlook reflects our expectation that Seazen Group will
maintain steady sales and revenue as well as its operating scale in
the next 12 months. We believe the company's leverage will remain
stable even as access to financing continues to improve because a
material debt increase is unlikely and funding costs will be
higher."
=========
I N D I A
=========
BALAJEE MINI: Ind-Ra Withdraws 'BB' Bank Loan Rating
----------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Balajee Mini
Steels & Rerolling Private Limited's bank loans in 'IND BB (ISSUER
NOT COOPERATING)' in the non-cooperating category and has
simultaneously withdrawn it.
The instrument-wise rating actions are:
-- The 'IND BB' rating on the INR13.4 mil. Term loan* due on
March 2018 maintained in non-cooperating and withdrawn;
-- The 'IND BB' rating on the INR250 mil. Fund based limit*
maintained in non-cooperating and withdrawn; and
-- The 'IND A4+' rating on the INR 50 mil. Non-fund based
limit*** maintained in non-cooperating and withdrawn.
*Maintained in 'IND BB (ISSUER NOT COOPERATING)' before being
withdrawn.
***Maintained in 'IND A4+ (ISSUER NOT COOPERATING)' before being
withdrawn.
KEY RATING DRIVERS
The ratings have been maintained in the non-cooperating category
because the issuer did not participate in the rating exercise
despite continuous requests and follow-ups by Ind-Ra.
Ind-Ra is no longer required to maintain the ratings, as it has
received a no-objection certificate from the lender. This is
consistent with the Securities and Exchange Board of India's
circular dated March 31, 2017, for credit rating agencies.
COMPANY PROFILE
Balajee Mini Steels & Rerolling manufactures rods and thermos
mechanical treatment (TMT) bars. The company is a part of the
Balmukund Group, which also promotes flagship steel product
manufacturer Balmukund Sponge & Iron Pvt Ltd.
DSTR INFRASTRUCTURES: Insolvency Resolution Process Case Summary
----------------------------------------------------------------
Debtor: DSTR Infrastructures & Projects LLP
Registered office as per MCA:
L II-143B LIG Flat
Kalkaji New Delhi
South Delhi 110019
India
Insolvency Commencement Date: January 6, 2020
Court: National Company Law Tribunal, Delhi Bench
Estimated date of closure of
insolvency resolution process: July 4, 2020
(180 days from commencement)
Insolvency professional: Dharm Vir Gupta
Interim Resolution
Professional: Dharm Vir Gupta
D-701, Antriksh Apartment
Plot No. 26, Sector-4
Dwarka, New Delhi 110078
E-mail: dvgupt@hotmail.com
- and -
Garg Ashok & Company
A-263/1, First Floor
Derawal Nagar, Delhi 110009
E-mail: cirpdstinfra@gmail.com
Last date for
submission of claims: January 21, 2020
EMPEE POWER: Insolvency Resolution Process Case Summary
-------------------------------------------------------
Debtor: Empee Power Company (India) Limited
Empee Tower, No. 59
Harris Road
Pudupet Chennai
TN 600002
IN
Insolvency Commencement Date: January 6, 2020
Court: National Company Law Tribunal, Chennai Bench
Estimated date of closure of
insolvency resolution process: July 5, 2020
Insolvency professional: R Lalitha
Interim Resolution
Professional: R Lalitha
Flat F Hnumanthpuri Apts.
No. 2 Bharathi Colony
Thirunagar, Valasaravakkam
Chennai 600087
E-mail: lalitharca@gmail.com
Last date for
submission of claims: January 20, 2020
GLISTER HOSPITALITY: Insolvency Resolution Process Case Summary
---------------------------------------------------------------
Debtor: Glister Hospitality Gurgaon Private Limited
223, 2nd Floor, Good Earth City Centre
Sector 47-50, Gurgaon
Haryana 122001
Insolvency Commencement Date: January 8, 2020
Court: National Company Law Tribunal, Delhi Bench
Estimated date of closure of
insolvency resolution process: July 6, 2020
Insolvency professional: Atul Mittal
Interim Resolution
Professional: Atul Mittal
174, BALCO Apartments
Plot No. 58, IP Extn.
Patparganj, Delhi 110092
E-mail: a.mittalmc@gmail.com
- and -
163, BALCO Apartments
Plot No. 58, IP Extn.
Patparganj, Delhi 110092
E-mail: ghgpl.ipamittal@gmail.com
Last date for
submission of claims: January 23, 2020
INDIA: Economy Faces Severe Challenges
--------------------------------------
globalinsolvency.com reports that India's economy is experiencing a
sharp slowdown -- to the consternation of many observers. The
Financial Times reported that for several years, analysts and
organizations such as the IMF and World Bank have touted India as
the fastest-growing major economy, with the world's brightest
medium-term outlook, according to globalinsolvency.com.
But in December, the Reserve Bank of India, the central bank, cut
its forecast for 2019 growth in gross domestic product to 5 per
cent. That headline figure actually understates the slowdown, the
report notes. High-frequency indicators show that in the first
eight months of the current fiscal year, non-oil exports and
imports have fallen, as has production of investment goods, the
report relays.
Production of consumer goods and real government tax receipts have
both grown by only 1 per cent, the report adds.
INDIA: Likely To Take More Steps to Deal w/ Fin'l. Sector Proble
----------------------------------------------------------------
The Economic Times reports that the Indian government is likely to
take more measures to deal with the problem of financial sector,
NITI Aayog vice chairman Rajiv Kumar said. Speaking at the book
release of former Sebi chairman U K Sinha, Kumar said this is a
very different type of situation that the country is facing,
according to The Economic Times.
"Credit markets are jammed. It continues despite government's best
efforts in the sense of assuring people . . . I believe some other
steps are now in pipeline for further such adverse impact not to
take place," he said.
"This is something that all of us in the government and outside who
are interested in India's economic development need to go very deep
into it. I don't think there are no easy answers here. I don't
think there are short-cut solutions here because what's happening
to credit growth, what's happening to bond markets, what's
happening to NBFCs . . . ," Kumar added.
The government since August has taken several steps, including
liquidity support to housing finance companies, one-time partial
credit guarantee to public sector banks for purchase of high-rated
pooled assets of non-banking finance companies (NBFCs) and mega
merger of public sector banks, the report notes.
Pointing out that there are 92,000 urban and rural credit
cooperative in the country, Kumar said it is fragmented and only
top 500 are functional, the report says.
"I think this requires very deep study. I suppose the research
department of (the) RBI would be very well placed to do so. This
is time to study this issue much more carefully than what we have
done in the past," he said, the report relays.
Referring to the changes made in the Finance Act, Kumar said, "I am
amazed to find Sebi's financial autonomy is now being challenged
and threatened . . . all the funds and fee it collects has to be
put to Consolidated Fund of India. Imagine what it will do the
Sebi's autonomy when it will have to ask for the fund from the
government," the report notes.
As per the Finance Act 2019, Securities and Exchange Board of India
will have to transfer 75 per cent of its surplus from the general
fund every year to the Consolidated Fund of India, the report
says.
An announcement to this effect was made in the Budget via a
proposed amendment to SEBI Act 1992, the report notes.
Kumar pitched for convergence of regulators in the financial sector
for effective and efficient regulation, the report relays.
He said there are 20 regulators are in financial sector space
alone, the report adds.
KOHINOOR PRECISION: Insolvency Resolution Process Case Summary
--------------------------------------------------------------
Debtor: Kohinoor Precision Component Limited
Narendra Chhaya, Gat No. 480
Koregaon Bhima, Tal. Shirur
Pune MH 412216
IN
Insolvency Commencement Date: January 2, 2020
Court: National Company Law Tribunal, Pune Bench
Estimated date of closure of
insolvency resolution process: June 29, 2020
(180 days from commencement)
Insolvency professional: Anagha Anasingaraju
Interim Resolution
Professional: Anagha Anasingaraju
1-2, Aishwarya Sankul
17 G.A. Kulkarni Path
Opp. Joshi's Railway Museum
Kothrud, Pune 411038
E-mail: rp.anagha@kanjcs.com
Last date for
submission of claims: January 17, 2020
KRISHNA ESTATE: Insolvency Resolution Process Case Summary
----------------------------------------------------------
Debtor: M/s Krishna Estate Developers Private Limited
85, Radhey Shyam Park
Krishna Nagar
New Delhi 110051
Insolvency Commencement Date: January 4, 2020
Court: National Company Law Tribunal, New Delhi Bench
Estimated date of closure of
insolvency resolution process: July 2, 2020
Insolvency professional: Rakesh Kumar Jain
Interim Resolution
Professional: Rakesh Kumar Jain
Flat J-6 2nd Floor
Pocket 9A Jasola
New Delhi 110025
E-mail: sirshree.rakesh@gmail.com
irp.krishnaestate@gmail.com
Classes of creditors: Real Estate Investors
Insolvency
Professionals
Representative of
Creditors in a class: Mr. Rajeev Lochan
243, 1st Floor, AGCR Enclave
New Delhi
E-mail: csrajeevlochan@gmail.com
Mr. Vijay Kumar
Flat No. 264, Plot No. 8
Chopra Apartment
Sector-23, Dwarka
New Delhi 110077
E-mail: vk_hv@yahoo.co.in
Ms. Vandana Pankaj
E7/12, LGF
Malviya Nagar
New Delhi 110017
E-mail: fcsvandana@gmail.com
Last date for
submission of claims: January 21, 2020
MANAPPURAM FINANCE: Fitch Rates USD300MM Sr. Sec. Notes Final 'BB-'
-------------------------------------------------------------------
Fitch Ratings assigned Manappuram Finance Limited's (BB-/Stable)
USD300 million 5.9% senior secured notes due 2023, which carry a
fixed-rate coupon payable semi-annually, a final rating of 'BB-'.
This follows the receipt of final documentation conforming to
information previously received. The final rating is in line with
the expected rating assigned on January 6, 2020.
The notes are secured by MFIN collateral, which includes all the
issuer's standard assets, stage-1 and stage-2 assets, and excludes
all non-performing assets or stage-3 assets. The notes are also
subject to maintenance-based covenants that require MFIN to ensure
the security coverage ratio is at or greater than 1x at all times.
The issuer is using the net proceeds of the notes for onward
lending and general corporate purposes in accordance with approvals
granted by the Reserve Bank of India and directions on external
commercial borrowings.
KEY RATING DRIVERS
MFIN's US dollar-denominated senior secured notes are rated at the
same level as the company's Long-Term Foreign-Currency Issuer
Default Rating (IDR), in accordance with Fitch's rating criteria.
Fitch regards the senior secured notes as an obligation whose
non-payment would best reflect uncured default of the issuer, as
most of MFIN's debt is secured. The company can issue unsecured
debt in the overseas market, but such debt is likely to constitute
a small portion of its funding and thus cannot be viewed as its
primary financial obligation.
RATING SENSITIVITIES
The rating on the notes will move in tandem with MFIN's Long-Term
Foreign-Currency IDR. MFIN's IDR is sensitive to rising leverage
(if debt/equity breaches 5x). Post issue of the notes, MFIN's
leverage is not expected by Fitch to increase materially from
current levels (3.6x at end-September 2019).
NAG (INDIA): Insolvency Resolution Process Case Summary
-------------------------------------------------------
Debtor: M/s Nag (India) Private Limited
48, SIPCOT Industrial Complex
Ranipet, TN 632403
Insolvency Commencement Date: January 6, 2020
Court: National Company Law Tribunal, Coimbatore Bench
Estimated date of closure of
insolvency resolution process: July 4, 2020
(180 days from commencement)
Insolvency professional: CA. Mahalingam Suresh Kumar
Interim Resolution
Professional: CA. Mahalingam Suresh Kumar
M/s SPP & Co, Chartered Accountants
No. 27/9, Nivedh Vikas
Pankaja Mill Road
Puliyakulam
Coimbatore 641045
E-mail: msureshkumar@icai.org
Last date for
submission of claims: January 20, 2020
OCTAL SALES: Ind-Ra Migrates 'B-' Issuer Rating to Non-Cooperating
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Octal Sales
Private Limited's (OSPL) Long-Term Issuer Rating to the
non-cooperating category. The issuer did not participate in the
rating exercise despite continuous requests and follow-ups by the
agency. Therefore, investors and other users are advised to take
appropriate caution while using these ratings. The rating will now
appear as 'IND B- (ISSUER NOT COOPERATING)' on the agency's
website.
The instrument-wise rating action is:
-- INR70 mil. Fund-based limits migrated to non-cooperating
category with IND B- (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
February 13, 2019. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in 1997, OSPL trades jute. It forayed into the mining
of stones in 2017. The company is managed by Sajan Bajaj and has
its registered office in Kolkata.
OM GRAM: Ind-Ra Maintains 'D' Bank Loan Rating in Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Om Gram Udyog
Samiti's bank facilities in the non-cooperating category. The
issuer did not participate in the rating exercise, despite
continuous requests and follow-ups by the agency. Therefore,
investors and other users are advised to take appropriate caution
while using these ratings. The rating will continue to appear as
'IND D (ISSUER NOT COOPERATING)' on the agency's website.
The instrument-wise rating actions are:
-- INR9.74 mil. Term loan (long-term) due on July 2021 maintained
in the non-cooperating category with IND D (ISSUER NOT
COOPERATING) rating; and
-- INR15 mil. Working capital facility (long-term) maintained in
non-cooperating category with IND D (ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 11, 2017. Ind-Ra is unable to provide an update as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Om Gram Udyog Samiti was registered under the Registrar of
Societies in May 2001.
PITHAMPUR POLY: Insolvency Resolution Process Case Summary
----------------------------------------------------------
Debtor: Pithampur Poly Products Limited
Registered office:
115, Sector-ITI
Industrial Area, Pithampur
Dhar, Madhya Pradesh
India
Insolvency Commencement Date: January 3, 2020
Court: National Company Law Tribunal, Indore Bench
Estimated date of closure of
insolvency resolution process: July 1, 2020
(180 days from commencement)
Insolvency professional: Mr. Jagdish Kumar
Interim Resolution
Professional: Mr. Jagdish Kumar
B56, Wallfort City
Bhatagaon, Ring Road No. 1
Raipur, Chattisgarh 492001
E-mail: jkparulkar@yahoo.co.in
- and -
AAA Insolvency Professionals LLP
E-10A, Kailash Colony
Greater Kailash-1
New Delhi 110048
E-mail: pithampurpoly@aaainsolvency.com
Last date for
submission of claims: January 22, 2020
SAIBABA SOLVENT: Ind-Ra Migrates BB- LT Rating to Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Saibaba Solvent
Industries LLP's Long-Term Issuer Rating to the non-cooperating
category. The issuer did not participate in the rating exercise
despite continuous requests and follow-ups by the agency.
Therefore, investors and other users are advised to take
appropriate caution while using the rating. The rating will now
appear as 'IND BB- (ISSUER NOT COOPERATING)' on the agency's
website.
The instrument-wise rating actions are:
-- INR52.79 mil. Term loan due on March 2022 migrated to non-
cooperating category with IND BB- (ISSUER NOT COOPERATING)
rating;
-- INR25 mil. Fund-based limits migrated to non-cooperating
category with IND BB- (ISSUER NOT COOPERATING) rating;
-- INR0.73 mil. Non-fund-based limits migrated to non-cooperating
category with IND A4+ (ISSUER NOT COOPERATING) rating; and
-- INR109.2 mil. Proposed fund-based limits migrated to non-
cooperating category with Provisional IND BB- (ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
January 16, 2019. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Incorporated in July 2014, Saibaba Solvent Industries manufactures
rice bran crude oil and de-oiled cakes in Nagpur. The firm is
partnered by Mr. Santulal Kewalram Jamtani, Mr. Pradeep Sushilkumar
Saraogi, and Ms. Lata Tulsidas Tajpuria.
SHREE KHODAL: Insolvency Resolution Process Case Summary
--------------------------------------------------------
Debtor: Shree Khodal Cot-Gin Pvt. Ltd.
Survey No. 1/2/1, Hadmitya Road
Chanol Fatepar Bypass
Fatepar, Tal. Paddhari
Dist. Rajkot Paddari
Rajkot GJ 360110
Insolvency Commencement Date: January 1, 2020
Court: National Company Law Tribunal, Ahmedabad Bench
Estimated date of closure of
insolvency resolution process: June 29, 2020
Insolvency professional: Prawincharan Prafulcharan Dwary
Interim Resolution
Professional: Prawincharan Prafulcharan Dwary
407, Akchhat Tower
Pakwan Cross Road
S.G. Highway
Bodakdev, Ahmedabad
Gujarat 380015
E-mail: dwaryprawin@gmail.com
- and -
9B, Vardan Tower
Nr. Vimal House
Lakhudi Circle
Navrangpura, Ahmedabad
Gujarat 380014
Last date for
submission of claims: January 17, 2020
SMS PARYAVARAN: Insolvency Resolution Process Case Summary
----------------------------------------------------------
Debtor: SMS Paryavaran Limited
SH-2, Vardhman Grand Plaza
Plot 7, Mangalam Place
Sector-3, Rohini
New Delhi 110085
Insolvency Commencement Date: January 3, 2020
Court: National Company Law Tribunal, New Delhi Bench
Estimated date of closure of
insolvency resolution process: July 1, 2020
(180 days from commencement)
Insolvency professional: Sajeve Bhusan Deora
Interim Resolution
Professional: Sajeve Bhusan Deora
606, New Delhi House
27, Barakhamba Road
New Delhi 110001
E-mail: sajeve.deora@deora.com
in.smsparyavaran.sbd@gmail.com
Mobile: 9811903450
Tel: 011-43542784
Last date for
submission of claims: January 17, 2020
SRI BIR ISPAT: Insolvency Resolution Process Case Summary
---------------------------------------------------------
Debtor: Sri Bir Ispat Private Limited
Dumri Road, P.S. & P.O. Giridih
Dist. Giridih-1
Jharkand 815301
Insolvency Commencement Date: January 6, 2020
Court: National Company Law Tribunal, Kolkata Bench
Estimated date of closure of
insolvency resolution process: July 4, 2020
(180 days from commencement)
Insolvency professional: CA IP Sanjay Kumar Agarwal
Interim Resolution
Professional: CA IP Sanjay Kumar Agarwal
Draupadi Mansion, 3rd Floor
11, Brabourne Road
Kolkata 700001
E-mail: sanjaycal@hotmail.com
cirp.birispat@gmail.com
Last date for
submission of claims: January 20, 2020
SRK DEVBUILD: Insolvency Resolution Process Case Summary
--------------------------------------------------------
Debtor: SRK Devbuild Private Limited
18/2, Lasudia Mori
Dewas Naka, A.B. Road
Indore, M.P. 452010
Insolvency Commencement Date: January 3, 2020
Court: National Company Law Tribunal, Ahmedabad Bench
Estimated date of closure of
insolvency resolution process: July 8, 2020
Insolvency professional: Mr. Ravi Kapoor
Interim Resolution
Professional: Mr. Ravi Kapoor
402, 4th Floor, Shaival Plaza
Gujarat College Road
Ellisbridge
Ahmedabad 380006
E-mail: ravi@ravics.com
ipsrkdevbuild@ravics.com
Last date for
submission of claims: January 24, 2020
WALL ROCK: Insolvency Resolution Process Case Summary
-----------------------------------------------------
Debtor: Wall Rock Infrahome Private Limited
301, Neelkanth Chamber II
Plot No. 14, Local Shopping Complex
Saini Enclave, Delhi 110092
Insolvency Commencement Date: December 17, 2019
Court: National Company Law Tribunal, New Delhi Bench
Estimated date of closure of
insolvency resolution process: June 14, 2020
(180 days from commencement)
Insolvency professional: Vijay Kumar Gupta
Interim Resolution
Professional: Vijay Kumar Gupta
408, New Delhi House
27 Barakhamba Road
Connaught Place
New Delhi 110001
E-mail: vkgupta2004@yahoo.co.in
vijaykumargupta.ip@gmail.com
Classes of creditors: Allottees under real estate project
Insolvency
Professionals
Representative of
Creditors in a class: Mr. Jitender Wadhwa
Mr. Deepak Kumar Tulsiyan
Mr. Naresh Kumar Goel
Last date for
submission of claims: January 21, 2020
=================
I N D O N E S I A
=================
INDONESIA: Trade Pressure Eases in December as Deficit Narrows
--------------------------------------------------------------
Adrian Wail Akhlas at The Jakarta Post, citing Statistics
Indonesia, reports that Indonesia booked a smaller trade deficit in
December as exports of non-oil and gas products picked up while
imports fell.
A US$30 million trade deficit was recorded in December, a stark
contrast to the $1.33 billion deficit recorded in November, which
was the highest in seven months, according to BPS data, The Jakarta
Post notes.
Imports fell much faster than the slight increase in exports seen
in December, the report relays. Exports totaled $14.47 billion in
December, an increase of 1.28 percent year-on-year (yoy), while
total imports were $14.5 billion, a decrease of 5.62 percent yoy,
the report says.
"We recorded an increase in agricultural and manufacturing exports
while imports of raw materials and capital goods fell compared to
December of last year," BPS chairman Suhariyanto said during a
press briefing in Jakarta, according to the report.
An increase in prices of several commodities including palm oil had
boosted the county's exports in December, he added, the report
relays.
Indonesia's non-oil and gas exports rose 5.78 percent yoy in
December, but oil and gas shipments slumped 31.93 percent, the
report notes.
Meanwhile, imports of non-oil and gas products including
agriculture and manufacturing goods fell 7.28 percent yoy despite
an increase in shipments of oil and gas products by 5.33 percent,
the report says.
In 2019, Indonesia recorded exports worth a total of $167.53
billion and imports worth a total of $170.72 billion, making
Indonesia's trade deficit $3.2 billion last year -- much lower than
the $8.7 billion deficit recorded in 2018, the report adds.
LIPPO KARAWACI: Moody's Assigns B3 Rating to New Sr. Unsec. Notes
-----------------------------------------------------------------
Moody's Investors Service assigned a backed senior unsecured rating
of B3 to the proposed senior unsecured notes to be issued by Theta
Capital Pte. Ltd. The proposed notes are guaranteed by Lippo
Karawaci Tbk (P.T.) (B3 stable) and some of its subsidiaries, and
rank pari passu with its 2022 and 2026 notes.
The rating outlook is stable.
Lippo Karawaci will use the net proceeds to partially redeem the
2022 notes and for general corporate purposes.
RATINGS RATIONALE
"The proposed notes are not exposed to either legal or structural
subordination risk, therefore the rating is aligned with Lippo
Karawaci's B3 corporate family rating," says Jacintha Poh, a
Moody's Vice President and Senior Credit Officer.
At September 30, 2019, nearly all of Lippo Karawaci's consolidated
borrowings were held at the holding company and around 92% of these
borrowings were unsecured. Moody's analyzed the holding company's
position using Lippo Karawaci's consolidated financials, including
intercompany transactions, with the exception of the financials of
Siloam International Hospitals Tbk (P.T.) and Lippo Cikarang Tbk
(P.T.).
"We view Lippo Karawaci's plan to refinance its 2022 notes ahead of
the notes' maturity, with a mix of US dollar debt and Indonesian
rupiah loans as credit positive," adds Poh. "By planning ahead,
Lippo Karawaci is demonstrating proactive capital management and
reducing its exposure to foreign exchange risk."
In July 2019, Lippo Karawaci completed its rights issue, raising a
total of IDR11.2 trillion ($788 million).The company has also made
progress on its (1) debt reduction initiatives by repaying up to
around $186 million of outstanding debt as of September 30, 2019;
(2) investment initiatives by restarting construction work on
existing projects and subscribing to Lippo Cikarang's pre-emptive
rights, with the proceeds used to fund the Meikarta project.
However, Lippo Karawaci stated that the sale of its Lippo Mall Puri
to Lippo Malls Indonesia Retail Trust (Ba3 stable) will be delayed
to mid-2020 from the end of 2019, due to a regulatory
strata-titling process. While Moody's expects that liquidity at the
holding company will remain adequate over the next 12 months,
further delays to the completion of its mall sale will pressure
liquidity.
Lippo Karawaci's B3 rating takes into account the company's
reliance on asset sales and external funding, which stems from its
weak core property development business, because it has not
launched a new project since 2016 at the holding company level.
While external funding and asset sales will alleviate liquidity
risk at the holding company level over the next 12 months, Moody's
views that successful new project launches are required to support
a fundamental improvement in Lippo Karawaci's credit quality.
With respect to Environmental, Social and Governance risks, Moody's
has considered Lippo Karawaci's weak execution track record, which
resulted in liquidity pressure that was recently relieved by an
IDR11.2 trillion rights issue backed by the Riady family. Moody's
has also considered the founding family's concentrated ownership of
Lippo Karawaci. However, the risk is mitigated by the oversight
exercised through the presence of strategic minority shareholders
on the board and partially balanced by demonstration of support
from its key shareholder.
The stable outlook on Lippo Karawaci's ratings reflects Moody's
expectation that the company will have sufficient cash to fund its
operating cash needs and service its debt obligations over the next
12 months.
Lippo Karawaci's ratings are unlikely to be upgraded, as long as
the company's ability to service its debt is contingent upon its
ability to execute assets sales. However, positive momentum could
build, if the company's core property development business
improves, such that successful project launches result in higher
operating cash flow at the holding company level.
Moody's could downgrade the ratings if (1) operating cash flow
deteriorates at the holding company level and results in a
weakening of Lippo Karawaci's liquidity; and (2) there are signs of
cash leakage from Lippo Karawaci to affiliated companies, for
example, through intercompany loans, aggressive cash dividends or
investments in affiliates.
Moody's could also downgrade Lippo Karawaci's senior unsecured bond
rating if its subsidiaries incur debt.
The principal methodology used in this rating was Homebuilding And
Property Development Industry published in January 2018.
=================
S R I L A N K A
=================
DFCC BANK: S&P Alters Outlook to Negative & Affirms 'B' ICR
-----------------------------------------------------------
S&P Global Ratings said that it had revised its outlooks on DFCC
Bank and National Savings Bank (NSB) to negative from stable. At
the same time, S&P affirmed the 'B' long-term and 'B' short-term
issuer credit ratings on both these Sri Lankan banks.
S&P said, "We revised the outlooks on DFCC and NSB to negative
following the revision in the sovereign rating outlook on Sri Lanka
to negative from stable because of rising fiscal and external
imbalances in the country. (See: "Sri Lanka Outlook Revised To
Negative On Fiscal Deterioration; Ratings Affirmed At 'B/B',"
published today on RatingsDirect.)
"We consider it unlikely that Sri Lankan financial institutions
would be immune to increasing credit pressures on the sovereign and
the broader operating environment. We reflect these risks in our
view that the economic risk trend and industry risk trend for Sri
Lanka's banking sector has become negative."
The weak operating environment could manifest in various forms and
make the banks more susceptible to exogenous shocks. It may lead to
rising credit risk in Sri Lanka, particularly if the country's
economic growth is lower than our current base-case expectations.
It may also lead to lack of investor confidence in the banking
system and hurt banks' prospects of raising external debt. The
funding profile of the system may also deteriorate, leading to
increased competition for funds. All of these factors could affect
banks' profitability, and therefore the competitive dynamics of the
banking system.
Moreover, as economic risk in Sri Lanka increases, the capital that
banks in the country need to hold to maintain their risk-adjusted
capital ratio will increase. That's because S&P calibrates risk
weights for banks based on the economic risk in that country.
S&P said, "In our view, sovereign credit factors are specifically
relevant for financial institutions in Sri Lanka because: (1) these
entities are subject to government policy and regulation; (2) they
invest a sizable portion of their assets in government securities
or loans to the sovereign; (3) a high proportion of their revenue
comes from domestic operations that are susceptible to
deterioration in a macroeconomic environment typically associated
with sovereign stress; and (4) some rely on the government for
foreign currency to repay or hedge their foreign currency
liabilities.
"We affirmed the ratings on DFCC because we expect the bank's
funding base to continue to strengthen. However, we see heightened
risk of deterioration in DFCC's asset quality over the next 12
months.
"We affirmed the ratings on NSB to reflect an almost certain
likelihood of government support.
"Our ratings on DFCC and NSB are the same as the sovereign credit
rating on Sri Lanka. We do not rate financial institutions in Sri
Lanka above the sovereign because of the direct and indirect
influence that the sovereign in distress would have on their
operations, including their ability to service foreign-currency
obligations.
"We will lower our long-term ratings on DFCC and NSB if we
downgrade Sri Lanka. In this scenario, we believe that the systemic
risks facing Sri Lankan banks would also increase and we would
likely revise our starting point for rating Sri Lankan banks to 'b'
from 'b+'. We expect to revise the rating outlook on DFCC and NSB
to stable if the above risks subside."
DFCC
S&P said, "The negative outlook on DFCC reflects the rising fiscal
and external headwinds facing Sri Lanka and the asset quality and
profitability issues in the banking system. We believe DFCC is not
immune to such challenges in its operating environment. Overall, we
see at a least a one-in-three chance that the bank's
creditworthiness will deteriorate over the next 12 months.
"We will downgrade DFCC if we lower the sovereign rating on Sri
Lanka or if operating conditions in the banking sector
deteriorate.
"We would revise our outlook on DFCC to stable if the headwinds
facing the Sri Lanka sovereign and the banking system abate."
NSB
The negative outlook on NSB reflects the outlook on its parent, the
government of Sri Lanka. S&P expects the bank's critical role for,
and link to, the government to remain unchanged over the next 12
months.
The most likely change (up or down) to S&P's rating and outlook
will be from a change in the creditworthiness of the government of
Sri Lanka.
RATINGS LIST
Ratings Affirmed; CreditWatch/Outlook Action
To From
DFCC Bank
Issuer Credit Rating B/Negative/B B/Stable/B
National Savings Bank
Issuer Credit Rating B/Negative/B B/Stable/B
BICRA SCORE SNAPSHOT
To From
BICRA 9 9
Economic Risk* 9 9
Economic Risk Trend Negative Stable
Economic Resilience** 5 5
Economic Imbalances** 5 5
Credit Risk In The Economy** 5 5
Industry Risk* 8 8
Industry Risk Trend Negative Stable
Institutional Framework** 5 5
Competitive Dynamics** 4 4
Systemwide Funding** 5 5
*On a scale of 1 (lowest risk) to 10 (highest risk).
**On a scale of 1 (lowest risk) to 6 (highest risk).
SRI LANKA: S&P Affirms 'B' Credit Ratings, Alters Outlook to Neg.
-----------------------------------------------------------------
S&P Global Ratings revised its outlook on the Sri Lanka sovereign
credit rating to negative from stable. S&P affirmed its 'B'
long-term and 'B' short-term foreign and local currency credit
ratings on Sri Lanka. The transfer and convertibility assessment is
affirmed at B.
Outlook
S&P said, "The negative outlook reflects our view that Sri Lanka's
fiscal trajectory over the next two to three years could deviate
from a fiscal consolidation path. The sizable deficits will add to
Sri Lanka's already-large debt stock at a faster pace.
"We could lower our ratings over the next 12 months if we believe
that the fiscal position could deteriorate further from our current
forecast, either due to policy changes or growth underperforming
expectations. This will further weaken fiscal sustainability and
increase the risks of sudden shifts in investor sentiment or
changes in global credit conditions.
"We could revise the outlook to stable if we see credible
improvements in the fiscal and debt metrics on a sustained basis."
Rationale
S&P said, "Our ratings on Sri Lanka reflect the country's
macroeconomic imbalances, namely weak external profile, sizeable
fiscal deficits, and extremely high government indebtedness.
Counterbalancing these factors are higher growth prospects. While
political risks have not lifted completely, a government with a
clear mandate following the parliamentary elections that are likely
to be held in the first half of 2020 could improve investor
sentiment and boost growth, in our view."
Institutional and economic profile: Growth prospects have improved
while political uncertainty will likely ease following
parliamentary elections
-- Economic growth is likely to improve from its current cyclical
weak patch, driven by recovering tourist arrival as well as
stronger consumption and investment spending.
-- Parliamentary elections could help alleviate uncertainty
associated with the persistent factionalism within the current
parliament.
Sri Lanka's economy has been consistently growing below potential
in recent years due to a confluence of exogenous shocks and
intractable political difficulties. After a brisk uptick in the
first quarter of 2019, economic growth was again derailed after the
Easter Sunday attacks. Meanwhile, persistent fiscal deficits, a
large debt stock, and rising interest servicing cost eroded policy
buffers and reduced fiscal capacity to support a slowing economy.
S&P forecasts growth in 2019 will slow to 2.7%, the lowest rate in
decades.
Barring further unforeseeable exogenous shocks, S&P expects growth
to pick up appreciably to 4% in 2020. This will be supported by
several factors. Chiefly, the fiscal stimulus implemented by the
interim Cabinet--including steep cuts to the value-added tax (VAT)
rate and the elimination of several tax items--is expected to boost
private consumption and investment activity.
The tourism sector, which has boomed in recent years, is also
likely to see a stronger recovery in the coming quarters. Following
sharp declines in arrivals after the attacks, tourist numbers were
down merely 4.5% year-on-year in December 2019, which typically
marks the start of peak travel season. This will contribute to
export performance, which has already benefited from the
restoration of the European Union's Generalized System of
Preference Plus facility for the textiles and garments sector this
year.
S&P said, "Finally, we believe that parliamentary elections,
scheduled to be held in the coming months, could help improve
government processes and legislative efficiency, and resolve to a
large degree, political uncertainty in the country associated with
deep-rooted factionalism within the government. Persistent
political infighting has hindered responsiveness and predictability
in policymaking in recent years, and weighed particularly on
business confidence, investment plans, and overall growth
prospects, in our view.
"Nevertheless, even with a new government at the helm, we believe
Sri Lanka's institutional settings will remain a credit weakness
due to concerns over the sustainability of public finances,
centralized policy decision-making and uncertain checks and
balances between institutions. Perceived widening divisions in
civil society in recent years, particularly along ethnic and
religious lines also increase the risk to political stability, in
our view.
"We estimate real per capita income to reach about US$4,200 in 2020
and real GDP growth to average 3.8% in 2019-2022. This translates
to real GDP per capita growth of 3.0% on a 10-year weighted average
basis. Although this growth rate is in line with peers at a similar
income level, it is substantially below Sri Lanka's growth
potential."
Flexibility and performance profile: Fiscal position has
deteriorated and risk on debt sustainability has increased
-- Sri Lanka's fiscal position deteriorated following the Easter
Sunday attacks. Although a recovery is expected, S&P expects a
widening of the fiscal deficit following the implementation of
wide-ranging tax cuts.
-- This will likely worsen the government's heavy indebtedness and
add to repayment burdens.
-- The external profile remains weak given that the high share of
dollar-denominated debt exposes the government to sudden shifts in
risk sentiments.
Persistent deficits in Sri Lanka's fiscal and external positions
have been rating constraints. The heavy government debt limits its
ability to accumulate policy buffers, which are crucial in times of
stress. The government's fiscal position has weakened over the past
year as the Easter Sunday attacks stymied economic activity and
reduced tourism earnings. As a result, government revenue growth
came in significantly below initial expectations of a sizeable
increase due to the implementation of the Inland Revenue Act (IRA).
At the same time, government expenditure also increased due to
higher security-related and election spending.
S&P said, "We believe this one-off underperformance on both the
revenue and expenditure fronts will now continue over the next few
years if the wide-ranging tax cuts announced by the interim Cabinet
are implemented without sufficient offsetting measures. The main
components of the tax cuts--which involve lowering the VAT rate to
8% from 15% for most sectors, increasing the turnover threshold for
VAT by four-fold, and removing the 2% National Building Tax--will
likely reduce revenue earnings significantly, in our view. This
will be temporarily cushioned by the government's intention to
curtail expenditure, such as the purchase of vehicles, as well as
sizable reduction in the capital expenditure.
"We estimate that the overall impact of the tax measures will
further widen the fiscal deficit by about 0.8%-1.0% of GDP in 2020,
even after taking into account benefits from higher growth
prospects. Beyond 2020, we believe it could be difficult for the
government to sustain a fiscal consolidation path without new
revenue measures. As a base case, we estimate the change in net
general government debt to reach 6.7% of GDP on average over
2019-2022. While the risk of large increases in the fiscal deficit
could be mitigated by a faster rate of growth, the pace of
consolidation will slow. The tax cuts could also jeopardize
progress under the IMF Extended Fund Facility (EFF), which counts
the IRA as a key achievement in improving the country's fiscal
settings.
"A weaker fiscal position will add to the government's extremely
high debt stock. We do not expect the government to start paring
down its debt stock at least until after 2020, depending on the new
government's budget and medium-term fiscal plans. We estimate net
general government debt to reach 83.1% of GDP in 2020 while general
government interest expenditure is expected to account for 46.1% of
revenues. This is the third-highest ratio among the sovereigns we
currently rate, trailing only Lebanon and Egypt.
"We assess the government's contingent liabilities from state-owned
enterprises and its relatively small financial system as limited.
However, risks continue to rise, particularly if the automatic fuel
pricing formula that has helped to stem losses at Ceylon Petroleum
Corp. is removed. Moreover, the effectiveness of this formula in
generating fiscal savings depends on the passage of an automatic
formula on electricity pricing as well. Without this second step in
energy subsidies reform, the risks to the financial sustainability
of Ceylon Electricity Board could intensify and increase the burden
on the government's resources. The country's financial sector also
has a limited capacity to lend more to the government without
possibly crowding out private-sector borrowing, owing to its large
exposure to the government sector of more than 20%.
"Compared to our last review, the external position has improved
marginally. We expect the current account deficit (CAD) to narrow
to 2.7% of GDP in 2019, compared with 3.2% in 2018, despite much
lower tourism earnings, due to the robust performance in industrial
goods exports, and a severe contraction in import expenditure.
"The government's external financing conditions remain challenging,
in our view, due to the large share of external debt and
sensitivity to external shocks, such as rising oil prices. With
more than 40% of total public debt denominated in foreign currency,
the external position is vulnerable to adverse exchange rate
movements and shifts in global credit conditions, which could
result in a sharp deterioration in the government's access to
external financing. However, at the moment, we believe that the
government has sufficient funds to cover its near-term external
debt obligations, partly due the issuance of two international
sovereign bonds sized at a combined US$4.4 billion in 2019.
"Sri Lanka's external liquidity, as measured by gross external
financing needs as a percentage of current account receipts (CAR)
plus useable reserves, is projected to average 117% over 2019-2022.
We also forecast that Sri Lanka's external debt (net of official
reserves and financial sector external assets) will average 148% of
CAR from 2019-2022, a slight improvement from 157% expected in our
previous review."
Sri Lanka's monetary settings remain a credit weakness, although
there have been structural improvements in recent years, as the
Central Bank of Sri Lanka (CBSL) prepares to transition to a
flexible inflation-targeting regime under the proposed Monetary Law
Act. The passage of this Act that enshrines the central bank's
autonomy and capacity will be crucial to improving the quality and
effectiveness of monetary policy, in S&P's view.
SRILANKAN AIRLINES: Fitch Affirms B Rating to $175MM Unsec. Bonds
-----------------------------------------------------------------
Fitch Ratings affirmed SriLankan Airlines Limited's USD175 million
government guaranteed 7% unsecured bonds due June 25, 2024 at 'B'.
KEY RATING DRIVERS
The airline's bonds are rated at the same level as SLA's parent,
the government of Sri Lanka (B/Negative), due to the unconditional
and irrevocable guarantee provided by the government. The state
held 99.5% of SLA as at end-March 2019 through direct and indirect
holdings.
DERIVATION SUMMARY
Fitch has rated SLA's US dollar bonds at the same level as the
sovereign due to the unconditional and irrevocable guarantee
provided by the government. The rating is not derived from the
issuer's standalone credit profile, and is therefore not comparable
with that of industry peers.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- An upgrade of the sovereign rating
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- A downgrade of the sovereign rating
For the sovereign rating of Sri Lanka, the following sensitivities
were outlined by Fitch in the agency's Ratings Action Commentary of
December 18, 2019:
The main factors that individually, or collectively, could trigger
a downgrade are:
- Failure to place the gross general government debt/GDP ratio on
a downward path due to wider budget deficits or the crystallisation
on the sovereign balance sheet of contingent liabilities that are
linked to state-owned entities or government-guaranteed debt.
- Increase in external sovereign funding stresses that threaten
the government's ability to meet upcoming debt maturities,
particularly in the event of a loss of confidence by international
investors.
- A further deterioration in policy coherence and credibility,
leading to lower GDP growth and/or macroeconomic instability.
The main factors that, individually or collectively, could lead to
a revision of the Outlook to Stable:
- Stronger public finances, underpinned by a credible medium-term
fiscal strategy that places gross general government debt/GDP on a
downward path, accompanied by higher government revenue.
- Improvement in external finances, supported by lower net
external debt or a reduction in refinancing risk; for example, from
a lengthening of debt maturities or increased foreign-exchange
reserves.
- Improved macroeconomic policy coherence and credibility,
evidenced by more predictable policy-making and a track record of
meeting previously announced economic and financial targets.
Criteria Variation
The rating on SLA's bonds is derived from the rating of an entity
covered by a group that does not assign Recovery Ratings. As a
result, no Recovery Rating was assigned to SLA's bond.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of 3. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or to the way in which they are being
managed by the entity.
=============
V I E T N A M
=============
SHINHAN BANK: S&P Assigns 'BB' LT ICR, Outlook Stable
-----------------------------------------------------
S&P Global Ratings assigned its 'BB' long-term and 'B' short-term
issuer credit ratings to Shinhan Bank Vietnam (SHBVN). The outlook
on the long-term rating is stable. SHBVN is a Vietnam-based bank
affiliate of Shinhan Financial Group Co. Ltd. (SFG).
S&P said, "The ratings on SHBVN reflect our view that the bank will
remain integral to SFG's overseas business expansion strategy. We
view SHBVN as a highly strategic subsidiary of the group and
believe SFG has the capacity and willingness to support SHBVN in
almost all circumstances." The ratings on SHBVN are constrained by
the sovereign credit ratings on Vietnam (BB/Stable/B). If the
ratings were not constrained, the issuer credit rating would be one
notch lower than the group credit profile of 'a+'.
SHBVN plays an integral role in the group's business expansion in
Southeast Asia. Vietnam is a key growth market for the group, given
that various Korean corporates are expanding their production base
and operations in the country. Against this backdrop, SHBVN has
steadily grown its business and become one of the largest foreign
banks by assets in Vietnam as of Sept. 30, 2019.
The bank leads the group's expansion strategy in Vietnam by
coordinating with other nonbanking affiliates in the country across
consumer finance, brokerage, and life insurance to increase
cross-selling opportunities. SHBVN is the largest overseas earnings
contributor for Shinhan Bank, the parent bank of SHBVN and the
primary operating entity within SFG. Shinhan Bank generated about
14% of its total net income from overseas business during
January-September 2019; SHBVN contributed to about one-third of
this figure. SHBVN's average return on average assets has been
about 2.0% over the past five years, higher than the average of its
rated Vietnamese bank peers of about 1.0%.
S&P said, "We believe SFG has a strong and long-term commitment to
SHBVN. SHBVN has strengthened the group's presence in Vietnam
through organic and inorganic business growth. In 2011, SHBVN fully
acquired and merged with Shinhan Vina Bank Ltd., which was a 50%
joint venture with the Bank for Foreign Trade of Vietnam. It also
bought ANZ Bank (Vietnam) Ltd.'s retail business in 2017. We expect
SHBVN to gradually expand its retail business to maintain the
balance between the corporate and retail segments in its loan
portfolio. In addition to those customers who are employees of
Korean-based corporate subsidiaries in Vietnam, the bank aims to
grow its local retail customer base.
"The group will likely remain supportive of the bank's
capitalization. We anticipate that SHBVN is unlikely to pay
dividends to the group in the coming few years to support its
business growth in Vietnam. The bank has not paid any dividends
over the past decade.
"In our view, the extent of extraordinary group support to SHBVN
may be somewhat weaker than that for other rated subsidiaries that
we consider core to the group, such as Shinhan Card Co. Ltd.
(A-/Stable/A-2) and Shinhan Investment Corp. (A-/Stable/A-2). This
is because SHBVN's size relative to the group remains small. As of
Sept. 30, 2019, the bank represented only about 2% of shareholders'
equity and about 1% of total assets of SFG. In addition, we do not
view SHBVN's operations and administration as fully integrated with
the parent. SHBVN's capital management system is less rigorous, in
our opinion, compared with the parent bank in Korea which is under
Basel III jurisdiction. SHBVN adopted Basel II standards from Oct.
1, 2019.
"The stable outlook on SHBVN reflects the outlook on Vietnam. The
ratings on SHBVN remain constrained by the creditworthiness of
Vietnam. In addition, we believe that SHBVN will maintain its high
strategic importance to SFG for the next 18-24 months.
"We could downgrade SHBVN if we lower the sovereign credit ratings
on Vietnam.
"We could upgrade SHBVN if we raise the sovereign credit ratings on
Vietnam."
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
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