/raid1/www/Hosts/bankrupt/TCRAP_Public/200330.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
Monday, March 30, 2020, Vol. 23, No. 64
Headlines
A U S T R A L I A
CLARENDON PRESTIGE: Second Creditors' Meeting Set for April 6
EEMS TECHNOLOGIES: First Creditors' Meeting Set for April 6
FIRSTMAC MORTGAGE 1-2020: S&P Assigns Prelim BB Rating on E Notes
FLEXI ABS 2018-1: Fitch Affirms BB+sf Rating on Class E Notes
KIRCHNER CONSTRUCTIONS: Second Creditors' Meeting Set for April 6
MACKAY CITY: First Creditors' Meeting Set for April 7
NT WALLS: Second Creditors' Meeting Set for April 6
SKOPE GROUP: Second Creditors' Meeting Set for April 3
STORM FINANCIAL: Federal Court Confirms Directors Breached Duties
SYDNEY CITY PRESTIGE: Second Creditors' Meeting Set for April 6
TACE PTY: Second Creditors' Meeting Set for April 2
VIRGIN AUSTRALIA: Fitch Lowers IDR to B-; On Rating Watch Negative
VIRGIN AUSTRALIA: S&P Lowers ICR to 'CCC' on Fleet Grounding
C H I N A
JIANGSU LINYANG: Fitch Withdraws 'BB+' LongTerm IDR
SHANXI ROAD & BRIDGE: S&P Affirms 'BB-' LT Issuer Credit Rating
TIANQI LITHIUM: Moody's Cuts CFR to Caa1 & Unsec. Rating to Caa2
[*] Global Consumer Default Wave Just Getting Started in China
I N D I A
AGARWAL LIFE: Ind-Ra Affirms BB+ LT Issuer Rating, Outlook Stable
ANTARIKSH INFRABUILD: CRISIL Moves B Debt Rating to Not Cooperating
ATHULITHA LABORATORIES: Ind-Ra Moves BB- Rating to Non-Cooperating
BALA VENKATA: CRISIL Moves B+ on INR5.5cr Loan in Not Cooperating
BHARAT ENTERPRISES: CRISIL Moves B+ Debt Rating to Not Cooperating
BLUE STAR: CRISIL Lowers Rating on INR12.5cr Cash Loan to 'D'
CHAPHEKAR AND COMPANY: CRISIL Moves D Ratings to Not Cooperating
DELHI INT'L AIRPORT: Moody's Cuts Corp. Family Rating to Ba3
DEVKI NANDAN: CRISIL Moves D on INR7cr Debt to Not Cooperating
EMPIRE MULTIPACK: CRISIL Moves B+ on INR5cr Debt to Not Cooperating
FINOLITE CERAMIC: CRISIL Migrates D Debt Ratings to Not Cooperating
FRISCO GLOBAL: CRISIL Moves B on INR50cr Loans to Not Cooperating
GAJANANA TRADERS: CRISIL Lowers Rating on INR8.77cr Loan to D
GARUDA VENKATA: CRISIL Moves B+ on INR5.5cr Loan to Not Cooperating
GEOMAX MINES: CRISIL Moves B on INR15cr Credit to Not Cooperating
GREEN LEAF: Ind-Ra Migrates BB- Issuer Rating to Non-Cooperating
HYDERABAD INT'L AIRPORT: Moody's Puts Ba1 CFR on Review
J.S.R. CONSTRUCTIONS: CRISIL Moves D Debt Rating to Not Cooperating
KAMESWARI JEWELLERS: CRISIL Cuts Rating on INR10cr Loan to B+
KARNA PAINTS: CRISIL Lowers Rating on INR3.5cr Loan to B+
KK FINECOT: CRISIL Lowers Rating on INR10cr Cash Loan to B+
MACROTECH DEVELOPERS: Fitch Withdraws 'CCC' Issuer Default Rating
MANAS FLOUR: CRISIL Lowers Rating on INR13cr Term Loan to B+
MANJUSHREE HARDWARES: CRISIL Keeps 'D' Rating in Not Cooperating
MARUDHAR FASHIONS: CRISIL Cuts Rating on INR13cr LT Loan to B+
METRO SPARE: CRISIL Lowers Rating on INR6cr Cash Loan to B+
NEELSON OVERSEAS: CRISIL Cuts Rating on INR1.40cr Loan to B+
NOBLE EDUCATIONAL: CRISIL Lowers Rating on INR1cr Loan to B+
NORTHPOLE INDUSTRIES: CRISIL Cuts Rating on INR5cr Loan to B+
NURAY CHEMICALS: CRISIL Lowers Rating on INR23cr LT Loan to B+
OPTO CIRCUITS: Insolvency Resolution Process Case Summary
SAFETY CONTROLS: Ind-Ra Lowers & Moves LT Issuer Rating to 'BB+'
SARAF TRADING: Ind-Ra Affirms B- LT Issuer Rating, Outlook Stable
SHELL LIFESCIENCES: CRISIL Assigns B Rating to INR7cr Cash Loan
TATA MOTORS: Moody's Puts 'Ba3' CFR on Review for Downgrade
I N D O N E S I A
GEO ENERGY: Fitch Lowers LongTerm Issuer Default Rating to CC
J A P A N
SOFTBANK GROUP: Moody's Cuts CFR & Senior Unsec. Rating to Ba3
UNIVERSAL ENTERTAINMENT: Fitch Puts B+ LT IDR on Rating Watch Neg.
S I N G A P O R E
HOOQ DIGITAL: Starts Creditors' Voluntary Liquidation
T H A I L A N D
[*] Thai Airlines to Seek THB16 Billion Government Bailout
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A U S T R A L I A
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CLARENDON PRESTIGE: Second Creditors' Meeting Set for April 6
-------------------------------------------------------------
A second meeting of creditors in the proceedings of Clarendon
Prestige Holdings Pty Ltd has been set for April 6, 2020, at 11:30
a.m. at the offices of Farnsworth Carson, Suite 1.4, Level 1, at
135 Victoria Road, in Drummoyne, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 2, 2020, at 5:00 p.m.
Adam Edward Farnsworth of Farnsworth Carson was appointed as
administrator of Clarendon Prestige on March 2, 2020.
EEMS TECHNOLOGIES: First Creditors' Meeting Set for April 6
-----------------------------------------------------------
A first meeting of the creditors in the proceedings of EEMS
Technologies Pty Ltd will be held on April 6, 2020, at 11:00 a.m.
at 51 Robinson Street, in Dandenong, Victoria.
Peter Robert Vince and Paul William Langdon of Vince & Associates
were appointed as administrators of EEMS Technologies on March 26,
2020.
FIRSTMAC MORTGAGE 1-2020: S&P Assigns Prelim BB Rating on E Notes
-----------------------------------------------------------------
S&P Global Ratings assigned preliminary ratings to seven of the
eight classes of prime residential mortgage-backed securities
(RMBS) to be issued by Firstmac Fiduciary Services Pty Ltd. as
trustee for Firstmac Mortgage Funding Trust No.4 Series 1-2020.
The ratings reflect:
-- S&P's view of the credit risk of the underlying collateral
portfolio, including the fact that this is a closed portfolio,
which means no further loans will be assigned to the trust after
the closing date.
-- S&P's view of the credit support, which is sufficient to
withstand the stresses we apply. Credit support for the rated notes
comprises note subordination, excess spread, and lenders' mortgage
insurance on 6.2% of the portfolio.
-- S&P's expectation that the various mechanisms to support
liquidity within the transaction, including a liquidity reserve
equal to 1.1% of the outstanding note balance, subject to a floor
of A$968,000, and the principal draw function are sufficient to
ensure timely payment of interest.
-- The extraordinary expense reserve of A$150,000, funded from day
one by Firstmac Ltd., available to meet extraordinary expenses. The
reserve will be topped up via excess spread if drawn.
-- The fixed- to floating-rate interest-rate swap provided by
National Australia Bank Ltd. to hedge the mismatch between receipts
from fixed-rate mortgage loans and the variable-rate RMBS.
S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. Some
government authorities estimate the pandemic will peak about
midyear, and we are using this assumption in assessing the economic
and credit implications. We believe the measures adopted to contain
COVID-19 have pushed the global economy into recession.
PRELIMINARY RATINGS ASSIGNED
Firstmac Mortgage Funding Trust No.4 Series 1-2020
Class Rating Amount (mil. A$)
A-1 AAA (sf) 748.00
A-2 AAA (sf) 61.60
AB AAA (sf) 30.80
B AA (sf) 13.20
C A (sf) 11.00
D BBB (sf) 6.60
E BB (sf) 3.60
F NR 5.20
NR--Not rated.
FLEXI ABS 2018-1: Fitch Affirms BB+sf Rating on Class E Notes
-------------------------------------------------------------
Fitch Ratings has affirmed the ratings on twelve tranches from two
Flexi ABS trusts. The transactions are securitisations of
small-balance unsecured consumer loans originated by Certegy
Ezi-Pay Pty Ltd, whose ultimate parent is FlexiGroup Limited
(flexigroup). The notes were issued by Perpetual Corporate Trust
Limited in its capacity as trustee of the respective trusts.
Outstanding note balances for Flexi ABS Trust 2018-1 and Flexi ABS
Trust 2019-1 were AUD62.9 million and AUD155.8 million,
respectively, at the December 2019 payment date.
RATING ACTIONS
Flexi ABS Trust 2018-1
Class A2 AU3FN0041968; LT AAAsf Affirmed; previously at AAAsf
Class A2-G AU3FN0041976; LT AAAsf Affirmed; previously at AAAsf
Class B-G AU3FN0041984; LT AAAsf Affirmed; previously at AAAsf
Class C AU3FN0041992; LT AA-sf Affirmed; previously at AA-sf
Class D AU3FN0042008; LT BBB+sf Affirmed; previously at BBB+sf
Class E AU3FN0042016; LT BB+sf Affirmed; previously at BB+sf
Flexi ABS Trust 2019-1
Class A2 AU3FN0046868; LT AAAsf Affirmed; previously at AAAsf
Class A2-G AU3FN0046876; LT AAAsf Affirmed; previously at AAAsf
Class B-G AU3FN0046884; LT AA+sf Affirmed; previously at AA+sf
Class C-G AU3FN0046892; LT A+sf Affirmed; previously at A+sf
Class D AU3FN0046900; LT BBB+sf Affirmed; previously at BBB+sf
Class E AU3FN0046918; LT BB+sf Affirmed; previously at BB+sf
KEY RATING DRIVERS
Obligor Default Risk: The coronavirus and the measures put in place
to reduce its spread are affecting Australia's economy, with many
businesses temporarily shut down with little or no income. Fitch
expects this to affect Flexi ABS transactions. Fitch has increased
the base default probability of both transactions by 1.6x based on
consumer delinquencies in the US in 2008 as a result of the global
financial crisis for the purpose of this review. Fitch has also
reviewed the ability of transactions to survive a significant
proportion of borrowers being offered and taking up a payment
holiday. Both deals benefit from significant excess spread and can
withstand 65% of borrowers receiving payment holidays before
needing to draw on liquidity support. The liquidity reserve for
both transactions are sufficient to cover more than four months of
expenses, swap payments and interest costs for the class A to E
notes at the current bank-bill spot rate should there be no
interest collections.
The base-case gross-loss default expectation over the remaining
life applied in Fitch's cash-flow modelling is 4.6% for 2018-1
(from 3.1% at the last review) and 6.5% for 2019-1 (up from 4.5% at
closing). Recovery assumptions are unchanged at 0%.
Performance of the underlying assets and losses have been tracking
lower than Fitch's base-case expectations to date. Cumulative
losses at end-2019 were 2.6% and 1.7% for 2018-1 and 2019-1,
respectively, while 30+ day arrears were 2.2% and 2.1%; above
Fitch's 4Q19 Dinkum ABS Index of 1.9%.
The Stable Outlook is based on the notes' ability to withstand the
higher default rate applied to take into account the effects of the
coronavirus pandemic.
These transactions will be part of a larger transaction review for
the ongoing impact of the pandemic.
Cash Flow Dynamics: Fitch completed full cash-flow modelling for
2018-1 and 2019-1, and determined that full and timely payment of
principal and interest was made to the notes in all modelled
scenarios at the proposed rating levels.
The aggregate note balance of each transaction has amortised down
by AUD76.9 million and AUD144.2 million, for 2018-1 and 2019-1,
respectively, as at end-2019 since the previous review. Credit
enhancement available for Flexi 2019-1 has increased for each note,
with the class A2 credit enhancement percentage at 37.7%, up from
24.2% at closing. Flexi 2018-1's credit enhancement percentages
have not changed materially since the previous review, as it
continues to pay principal collections on a pro rata basis. This
limits additional build-up of subordination and exposes the
transaction to default at the tail end. Conditions for switch back
to sequential payment would be met if the average 60+ day arrears
rate over six months is greater than 4% of the pool, a charge-off
occurs or the transactions are not called on their respective call
dates.
Excess spread for both transactions has been strong and relatively
stable since closing. Net annualised excess spreads of 18.7% and
7.7% have been generated by 2018-1 and 2019-1, respectively, as of
end-2019. Excess spread has covered all losses incurred to date.
Servicer, Operational Risks: Fitch reviewed Certegy's servicing
capabilities and found that the operations were comparable with
those of other consumer-finance lenders. Certegy's servicing and
collections teams in Adelaide and Manila are currently working
remotely, with no disruption to servicing procedures at present.
Certegy is not rated and servicer disruption risk is mitigated
through back-up arrangements. The nominated back-up servicer is
illion Australia Pty Ltd, which has live access to Certegy's
systems and can step in immediately upon servicer termination.
Structural Risk: Structural risk has been evaluated in the initial
transaction analysis through the review of transaction
documentation, legal opinion and structural features. There have
been no changes to either transaction since closing.
Counterparty Risk: Counterparty risk has been evaluated in the
initial transaction analysis through the review of transaction
documentation, legal opinion and structural features. There have
been no changes to either transaction since closing.
Residual Value Risk: There is no residual value risk.
RATING SENSITIVITIES
Fitch conducted sensitivity analysis by increasing gross default
levels over the life of the transaction.
Flexi ABS Trust 2018-1
Notes class: A2/A2-G/B-G/C/D/E
Current rating: AAAsf/AAAsf/AAAsf/AA-sf/BBB+sf/BB+sf
Impact on note ratings of increased defaults:
Increase defaults by 10%: AAAsf/AAAsf/AAAsf/AA-sf/BBB+sf/BB+sf
Increase defaults by 25%: AAAsf/AAAsf/AAAsf/AA-sf/BBB+sf/BBsf
Increase defaults by 50%: AAAsf/AAAsf/AAAsf/Asf/BBB-sf/B+sf
Flexi ABS Trust 2019-1
Notes class: A2/A2-G/B-G/C-G/D/E
Current rating: AAAsf/AAAsf/AA+sf/A+sf/BBB+sf/BB+sf
Impact on note ratings of increased defaults:
Increase defaults by 10%: AAAsf/AAAsf/AA+sf/A+sf/BBBsf/BBsf
Increase defaults by 25%: AAAsf/AAAsf/AA+sf/Asf/BBB-sf/B+sf
Increase defaults by 50%: AAAsf/AAAsf/A+sf/BBBsf/BBsf/B-sf
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. There were no findings that were
material to this analysis. Fitch has not reviewed the results of
any third-party assessment of the asset portfolio as part of its
ongoing monitoring.
Prior to closing, Fitch sought to receive a third-party assessment
conducted on the asset portfolio information, but none was made
available to Fitch for the transactions.
As part of its ongoing monitoring, Fitch reviewed a small targeted
sample of flexigroup's origination files and found the information
contained in the reviewed files to be adequately consistent with
the originator's policies and practices and the other information
provided to the agency about the asset portfolio.
KIRCHNER CONSTRUCTIONS: Second Creditors' Meeting Set for April 6
-----------------------------------------------------------------
A second meeting of creditors in the proceedings of Kirchner
Constructions Pty Ltd has been set for April 6, 2020, at 11:30 a.m.
at the offices of Hamilton Murphy, Level 1, at 255 Mary Street, in
Richmond, Victoria.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 3, 2020, at 4:00 p.m.
Richard Rohrt of Hamilton Murphy was appointed as administrator of
Kirchner Constructions on
Feb. 28, 2020.
MACKAY CITY: First Creditors' Meeting Set for April 7
-----------------------------------------------------
A first meeting of the creditors in the proceedings of Mackay City
Couriers and Transport Pty Ltd will be held on April 7, 2020, at
11:00 a.m. at Level 10, 388 Queen Street, in Brisbane, Queensland.
Leon Lee of Morton's Solvency Accountants was appointed as
administrator of Mackay City on March 26, 2020.
NT WALLS: Second Creditors' Meeting Set for April 6
---------------------------------------------------
A second meeting of creditors in the proceedings of NT Walls &
Ceilings Pty Ltd has been set for April 6, 2020, at 11:00 a.m. at
the offices of Rodgers Reidy, Unit13, at 16 Charlton Court, in
Woolner, NT.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 3, 2020, at 5:00 p.m.
S G Reid of Rodgers Reidy was appointed as administrator of NT
Walls on March 2, 2020.
SKOPE GROUP: Second Creditors' Meeting Set for April 3
------------------------------------------------------
A second meeting of creditors in the proceedings of Skope Group Pty
Ltd has been set for April 3, 2020, at 11:00 a.m. at the offices of
Cor Cordis, One Wharf Lane, Level 20, 171 Sussex Street, in Sydney,
NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 2, 2020, at 4:00 p.m.
Alan Walker and Andre Lakomy of Cor Cordis were appointed as
administrators of Skope Group on
Feb. 28, 2020.
STORM FINANCIAL: Federal Court Confirms Directors Breached Duties
-----------------------------------------------------------------
Australian Securities and Investments Commission said the Full
Federal Court has confirmed that the directors of Storm Financial,
Emmanuel and Julie Cassimatis, breached their duties as directors.
These proceedings were an appeal by the Cassimatises against the
original judgment handed down in August 2016. ASIC sought to
dismiss the appeal with costs. In its 150-page judgment, the full
Federal Court, by a majority of two to one, dismissed the appeal.
Since around 1994, Storm Financial operated a system created by the
Cassimatises, in which "one-size-fits-all" investment advice was
recommended to clients. The advice required clients to invest
substantial amounts in index funds, using "double gearing" (Storm
Model). This approach involved taking out both a home loan, as well
as, a margin loan in order to purchase units in index funds. Once
initial investments took place, "Stormified" clients would be
encouraged to take "step" investments over time.
By the time of Storm's collapse in early 2009, approximately 3,000
of its 14,000 clients had been "Stormified". In late 2008 and early
2009, many of Storm's clients were in negative equity positions,
sustaining significant losses.
The case that ASIC advanced centered around specific investors who
were advised to invest in accordance with the Storm Model. ASIC
alleged that the advice Storm provided to those investors was
inappropriate to their personal circumstances. The majority of
investors were retired or approaching and planning for retirement,
had little or limited income, few assets and had little or no
prospect of rebuilding their financial position in the event of
suffering significant loss.
ASIC alleged that the Cassimatises were responsible for the
day-to-day significant decisions in relation to the provision of
financial services to Storm's clients and exercised a high degree
of control over its systems and processes. Their failure to take
reasonable steps to prevent Storm from giving this inappropriate
advice meant that they had not exercised their powers as directors
with the degree of care and diligence that a reasonable person
would have exercised in that situation.
The Federal Court found that as directors of an Australian
Financial Services Licensee the Cassimatis' "responsibilities
included ensuring that investors obtained from Storm (and
particularly retail investors exhibiting the five characteristics
of vulnerability [. . .]), consideration and investigation of the
subject matter of the advice to be given to them (and given to
them), as was reasonable in all of the circumstances and that,
having regard to those matters, the advice given to those investors
was appropriate to each of the 11 investors in question."
Commissioner John Price said, 'This important decision reaffirms
ASIC's view of the importance of directors' duties and the
obligations on financial services licensees. We hope that, with
this decision, the aftermath of the Storm Financial collapse is now
at an end.'
ASIC commenced the original civil penalty proceeding against the
Cassimatises in late 2010. The trial took place between May 30 and
June 30, 2016. The Federal Court found against the Cassimatises in
August 2016 and imposed civil penalties in March 2018.
In September 2012, ASIC entered into a settlement agreement with
the Commonwealth Bank of Australia to make available up to AUD136
million as compensation for losses suffered on investments made
through Storm. The AUD136 million was in addition to payments of
approximately AUD132 million, and other benefits that CBA had
already provided to Storm investors under its Resolution Scheme.
In May 2013, ASIC secured AUD1.1 million in compensation on behalf
of two former Storm investors, Barry and Deanna Doyle.
In May 2013, ASIC intervened in the application for Court approval
of the settlement of the related class action brought against
Macquarie Bank in respect of Storm as it had concerns about the
fairness of the settlement arrangements. On Aug. 12, 2013, the Full
Federal Court agreed that the distribution of the settlement sum
was not fair and reasonable to all group members
(http://storm.asic.gov.au/settlements/richards-settlement/). Under
a revised settlement, Macquarie Bank agreed to pay AUD82.5 million
by way of compensation and costs.
In September 2014, ASIC entered into a settlement agreement with
the Bank of Queensland Limited to pay approximately AUD17 million
as compensation for losses suffered on investments made through
Storm.
SYDNEY CITY PRESTIGE: Second Creditors' Meeting Set for April 6
---------------------------------------------------------------
A second meeting of creditors in the proceedings of Sydney City
Prestige Wholesale Pty Limited has been set for April 6, 2020, at
11:00 a.m. at the offices of Farnsworth Carson, Suite 1.4, Level 1
135 Victoria Road, in Drummoyne, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 2, 2020, at 5:00 p.m.
Adam Edward Farnsworth of Farnsworth Carson was appointed as
administrator of Sydney City on
March 2, 2020.
TACE PTY: Second Creditors' Meeting Set for April 2
---------------------------------------------------
A second meeting of creditors in the proceedings of Tace Pty. Ltd.
As Trustee For Summerfield (1987) Unit Trust has been set for April
2, 2020, at 11:00 a.m. at Central Park, Level 43, 152-158 St
Georges Terrace, in Perth, WA.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by April 1, 2020, at 4:00 p.m.
David Hodgson and Andrew Hewitt of Grant Thornton were appointed as
administrators of Tace Pty on Feb. 26, 2020.
VIRGIN AUSTRALIA: Fitch Lowers IDR to B-; On Rating Watch Negative
------------------------------------------------------------------
Fitch Ratings has downgraded Australian airline Virgin Australia
Holdings Limited's (VAH) Long-Term Foreign-Currency Issuer Default
Rating (IDR) to 'B-' from 'B+' and placed the rating on Rating
Watch Negative (RWN). The action follows the sharp drop in demand
in the aviation market due to coronavirus as well as the removal of
the one notch of shareholder support included in the rating. The
RWN reflects its expectations of increased liquidity pressures over
the coming months. The RWN will be resolved as Fitch evaluates the
development of the outbreak and VAH's liquidity.
The longer the restrictions remain in place, the larger the impact
on VAH. In particular, VAH's liquidity could come under pressure
quicker than Fitch previously anticipated should the restrictions
on travel be longer than three months or demand remains subdued
over the longer term, without the airline obtaining additional
liquidity over the coming months. The airline's prompt actions to
cut capacity in line with demand and government regulations, as
well as taking action on staffing levels, has significantly reduced
cash outflows. Nevertheless, a high level of fixed costs will
remain over the short term. Fitch understands that the airline has
further levers available to it in the near term, such as keeping
aircraft grounded for longer, handing back leased aircraft and
selling aircraft - although there is some time lag associated with
implementing the latter two options. Longer term, the airline can
delay or cancel aircraft deliveries to preserve cash.
Fitch has also removed the one-notch uplift in VAH's rating, which
previously reflected its expectation that the airline would receive
financial support from shareholders, in particular Singapore
Airlines (not rated). VAH has stated that it does not expect
financial support from shareholders during the ongoing COVID-19
outbreak. Furthermore, Singapore Airlines' recent announcement that
it would reduce its capacity by 96% and cut costs indicates that it
may not have the financial capacity to provide support to VAH as it
seeks to maintain its own liquidity.
The RWN reflects the continued uncertainty over the length of the
government restrictions on travel throughout Australia and
globally. Fitch does not include any government support in VAH's
rating under its methodology. However, Fitch has included the
impact of the relief that the Australian Government has provided to
the aviation sector so far. The government has announced that it
will refund airlines' airport charges from February 1, 2020 for 12
months, which it initially expected would be around AUD720 million
in support to the sector, with a payment of around AUD190 million
to be received by the airlines in the short term - however, with
the fleet groundings , this support package could end up being
significantly lower. Still, the government has also stated that it
will ensure Australian airlines receive the support they need to
manage through this situation and it remains committed to ensuring
there are two viable airlines in the country.
KEY RATING DRIVERS
COVID-19-Related Impact: VAH's liquidity stress has been amplified
due to the unprecedented travel restrictions both in Australia and
globally and commensurate declines in demand as a result of the
COVID-19 outbreak. Quarantine measures implemented by various
Australian state and territory governments effectively prohibit all
non-essential travel between cities in Australia. In response, VAH
has suspended international operations and announced on March 25,
2020 that it is reducing its domestic capacity by 90% until
mid-June 2020 and is standing down 80% of its workforce until at
least the end of May 2020. Fitch expects this to have a significant
impact on cash-flow generation in the financial year ending June
2020 (FY20), with negative flow-on effects in FY21 reflecting that
a full recovery will take a few months as travel restrictions are
lifted and confidence returns.
Coronavirus Assumptions : Fitch now forecasts domestic capacity to
be down by 90%, alongside a decline in passenger load factors, for
the remainder of FY20, before recovering from August to December
2020, both in terms of capacity being reinstated and load factors
recovering towards historical levels. Variable costs associated
with grounded aircraft have been removed from profit, with these
costs returning in line with the reinstatement of capacity in
1HFY21. As a result, Fitch forecasts VAH's leverage to rise to
12.9x by FYE20, before recovering to 7.9x by FYE21 and below 5.0x
by FYE22. Fitch currently assumes the impact of the outbreak will
be temporary and anticipate revenue passenger kilometres (RPK) and
available seat kilometres (ASK) to gradually recover to close to
its previous estimates.
Liquidity Pressure: Fitch expects VAH to experience significant
working capital outflows for the remainder of FY20 as customers
seek refunds and forward bookings fall significantly, alongside
cash outflows for aircraft rent, staff costs and other charges. As
a result, VAH's liquidity could come under pressure and this
underscores one notch of its downgrade of VAH's IDR, alongside the
removal of one notch in shareholder support. Should the travel
restrictions remain in place and demand remains subdued for longer
than Fitch currently envisages, and if additional funding is not
secured over the next few months, this would lead to further
negative rating action.
VAH has taken steps in cutting capacity (including fuel and other
costs), staff and salary reductions and implementation of
initiatives to further cuts in expenses in its domestic and
short-haul businesses and pausing key supplier agreements. These
actions, combined with its cash on hand of around AUD1 billion,
provides VAH with some headroom to manage through the effective
shut down. Once operations normalise, VAH plans to bring back
capacity in line with demand recovery and this will be critical in
maintaining sufficient liquidity over the remainder of the year.
Fitch also notes that VAH has further levers available to it that
Fitch has not specifically incorporated into its short-term
liquidity forecasts, including grounding aircraft for longer,
handing back leased aircraft and selling or borrowing against owned
aircraft. Fitch believes these measures, which would have a lasting
impact and affect VAH's ability to recover, would be VAH's last
line of defence. In addition, Fitch has not included any potential
further relief from the Australian Government to the aviation
sector in its forecasts.
Reset of Strategy: Fitch expects VAH's profitability to improve
once its operations normalise, as Fitch believes that the airline
will bring back profitable routes and re-align its cost structure
to its revenue-base and strategy as it focuses on improving
efficiencies. In its view, the airline remains committed to taking
necessary actions to achieve these goals - this has been evidenced
by the response to the COVID-19 restrictions and statements from
the company. The public commitment to these targets supports its
view, and Fitch believes that the government relief received, and
any future government relief, will increase VAH's accountability to
deliver.
Entrenched Position in Australia: VAH's position in the Australian
aviation market is supported by the infrastructure it has in place
- including strong access to Australian capital city airports,
which Fitch understands has been guaranteed for both domestic
airlines as their fleets remain grounded. Furthermore, Fitch
believes that the Australian Government wants to ensure that
Australia has two viable domestic airlines to avoid a monopolistic
market. A competitive airlines sector is beneficial to Australia's
tourism, and top of mind for the government given that 8% (based on
latest government data from 2016-17) of Australia's workforce was
employed in the tourism sector. Fitch believes VAH's infrastructure
will ensure its entrenched position and provide barriers to entry,
limiting any risk of loss of market share to new or existing
competitors as a result of the current travel restrictions.
DERIVATION SUMMARY
VAH's rating compares well with that of Public Joint Stock Company
Aeroflot - Russian Airlines (Aeroflot, BB/Negative). Aeroflot
benefits from its position as Russia's flagship carrier, as well as
the diversification of its route network, favourable hub position
and competitive cost structure. VAH's business profile is
comparable with that of Aeroflot as well. VAH has a strong market
position as a result of the structure of the Australian aviation
market and the end-of-the-line protection of its main domestic
operations.
The main factors underscoring the four-notch differential are
Aeroflot's rating benefits from a two-notch uplift under Fitch's
Government-Related Entities Rating Criteria, with the remaining two
notches attributable to Aeroflot's better business profile due to
larger scale and the deterioration of VAH's financial profile -
which has led to one of the two-notch downgrade - as it responds to
the pandemic.
Latin American peers, GOL Linhas Aereas Inteligentes S.A. (B/RWN)
and LATAM Airlines Group S.A. (B+/RWN) have also been downgraded to
account for strong cash-flow burn associated with the pandemic. The
rating differential with VAH's reflects the stronger liquidity
position of the LATAM peers.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- COVID-19-Related Assumptions: Domestic ASK to reduce by 90%
and load factors and price to fall in 4QFY20. ASK capacity
cuts to reduce during 1HFY21, with load factors and prices
to recover towards FY19 levels from August 2020. Domestic
ASK to reflect FY19 levels in FY22.
International ASK to reduce by 100% in 4QFYE20. ASK capacity to
gradually be replaced in 1HFY21, however, overall ASK to be
reinstated to be below historical levels. Load factors and prices
to recover to FY19 levels.
Associated cost saves from grounding of aircraft to be achieved,
aircraft reinstated in 1HFY21 in line with ASK reinstatements.
- Group capacity to expand by low single digits in FY23 across
all group airlines, with group-wide load factors to improve
to around 82.5% by FY23.
- Velocity revenue to stabilise in FY21 and increase by 5% to
10% a year from FY22 to FY23.
- Jet fuel requirements to move in line with changes in ASK.
Prices are based on Gulf Coast Jet Fuel Platts swap prices
from September 2019 to February 2023.
- VAH to realise guided annual AUD75 million in employee cost
savings and other supplier savings by FYE21.
- Capex of AUD400 million in FY20, AUD326 million in FY21,
AUD517 million in FY22 and AUD650 million in FY23.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- If VAH is able to improve liquidity through additional
funding, then Fitch may look to review the rating watch.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- If VAH is unable to obtain additional liquidity support over
the next three months, Fitch may look to downgrade the IDR.
LIQUIDITY AND DEBT STRUCTURE
Liquidity Pressures: Fitch expects free cash flow to be negative in
FY20 and FY21 and put liquidity under pressure as it responds to
the COVID-19-related disruption. Fitch believes that actions taken
so far to reduce cash outflows, in particular the prompt grounding
of fleet, has given VAH additional time to manage through the
situation. However, liquidity will increasingly come under pressure
the longer travel restrictions remain in place and VAH's access to
additional funding over the coming months will remain crucial to
its ongoing viability.
VAH reported unrestricted cash of AUD900 million and had AUD166
million in undrawn committed facilities at end-1HFY20. The
airline's next significant debt maturity is a USD350 million
facility in October 2021. The airline has aeronautical finance
facilities in place; however, Fitch understands that VAH has
limited unencumbered assets against which it can raise further
secured debt to shore up liquidity.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
VIRGIN AUSTRALIA: S&P Lowers ICR to 'CCC' on Fleet Grounding
------------------------------------------------------------
S&P Global Ratings, on March 26, 2020, lowered its issuer credit
rating on Virgin Australia to 'CCC' from 'B-', and lowered its
related issue ratings on the airline's debt to 'CCC-' from 'CCC+'.
At the same time, S&P placed all ratings on CreditWatch with
developing implications. Recovery ratings on the debt remain
unchanged at '5'.
S&P lowered its ratings on Virgin Australia to reflect its view
that the company's cash outflow and liquidity pressures have
intensified. This follows Virgin Australia's decision to
temporarily ground 125 aircraft, reduce domestic capacity by 90%,
as well as suspend international flights and Tigerair Australia in
response to heightened government-led COVID-19-related
restrictions. The airline will also defer certain supplier
payments.
Despite management initiating decisive measures to preserve cash,
we nevertheless believe the scale of the COVID-19 exogenous shock
has created an immediate and sizable cash outflow. S&P estimates
that up to half of Virgin Australia's operating costs are fixed and
that a reduction in variable costs will not offset the collapse in
revenue. In addition, the positive working capital benefit provided
by forward bookings and the Velocity Frequent Flyer business is now
likely to partially unwind. As a consequence, Virgin Australia's
previous A$900 million unrestricted cash buffer is likely to
materially reduce in the very near term.
The prospect of timely and coordinated equity support now appears
unlikely. Virgin Australia is 90%-owned by Etihad Airways,
Singapore Airlines, Nanshan Group, HNA Group, and Virgin Group. To
varying extents, each shareholder is experiencing their own
challenging industry conditions.
S&P said, "Our analysis does not incorporate any extraordinary
support from the Australian government. Given the temporary nature
of this crisis, we believe that the government may have an
incentive to support Australian carriers. We note that the
government has taken steps to waive aviation fuel excise, air
navigation charges, and security fees. In addition, the government
has made public statements signaling that it is carefully
considering further support measures. We note that Virgin Australia
currently employs about 10,000 people, although about 8,000 have
recently been stood down.
"In our opinion, Virgin Australia is fundamentally well managed and
that the Australian domestic market dynamic is fundamentally sound.
The airline has successfully repositioned itself as a full service
carrier, has the youngest domestic fleet, a dual-brand strategy,
and integrated frequent-flyer business. In our opinion, management
has taken decisive action to improve the long-term viability of the
airline, including resetting the cost base in loss-making parts of
the business such as Tigerair Australia, as well as exiting
underperforming international routes and operating bases. Absent
the COVID-19 shock, we consider that management had appropriately
focused its efforts on cash generation and maintained liquidity
levels in line with most of its major Australian corporate and
international airline peers'.
"The CreditWatch developing placement reflects our view that a
default or distressed exchange appears increasingly likely over the
next 12 months, absent timely government, or other support, and/or
a swift reversal of the COVID-19 outbreak.
"We could lower the rating if Virgin Australia's liquidity
deteriorates to such an extent that a default or distressed
exchange eventuates or appears almost certain.
"Conversely, we could raise the rating if the Australian government
or other parties provide timely financial support that buttresses
the group's liquidity or there is a reversal of the COVID-19
outbreak to the extent that domestic passenger volumes swiftly
recover."
=========
C H I N A
=========
JIANGSU LINYANG: Fitch Withdraws 'BB+' LongTerm IDR
---------------------------------------------------
Fitch Ratings has affirmed and withdrawn China-based solar farm
operator Jiangsu Linyang Energy Co., Ltd.'s (Linyang) Long-Term
Issuer Default Rating and senior unsecured rating of 'BB+'. The
Outlook on the Long-Term IDR is Stable.
Fitch has chosen to withdraw the ratings for commercial reasons.
The ratings of Linyang were withdrawn for commercial reasons.
KEY RATING DRIVERS
The affirmation reflects Fitch's assessment that there are no
material changes to Linyang's credit profile since the last rating
action on December 6, 2019.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant as the ratings have
been withdrawn.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
SHANXI ROAD & BRIDGE: S&P Affirms 'BB-' LT Issuer Credit Rating
---------------------------------------------------------------
S&P Global Ratings, on March 26, 2020, affirmed its 'BB-' long-term
issuer credit rating on Shanxi Road & Bridge Construction Group Co.
Ltd. (SXRB), a 100% subsidiary of Shanxi Transportation Holdings
Group Co. Ltd. (SXTH).
S&P said, "We affirmed the rating on SXRB because we expect the
company to manage its short-term liquidity requirements. This is
despite reduced revenue after a moratorium on road toll collection
in China following the COVID-19 outbreak.
"We continue to assess SXRB's stand-alone credit profile at 'b-',
and believe the company's role as a strategically important
subsidiary of SXTH will stay over the next 12 months. SXTH is the
large state-owned enterprise (SOE) controlled by the Shanxi
provincial government and primarily engaged in highway development
in the province.
"SXRB's liquidity is less than adequate, in our view. The company's
large debt maturities and capex will continue to add pressure on
its liquidity position over the next 12 months. In particular, SXRB
has about Chinese renminbi (RMB) 15.5 billion principal repayments
due in 2020. This represents close to a quarter of its total
outstanding debt."
The revenue loss due to the toll moratorium will further strain
SXRB's liquidity. However the company's progress in refinancing
maturing debt, its reasonable access to credit market, and a likely
lifeline from the parent if needed should provide some cushion for
its liquidity.
SXRB's business model heavily depends on debt financing to sustain
its highly leveraged capital structure. The company has been
transforming from primarily an engineering and construction (E&C)
company for road construction to focus on a broader scope of
construction, investment, and operation of highways, mainly in the
Shanxi province.
SXRB's ability to access bank facilities and the bond market will
be key to its liquidity and credit profile. The company is actively
tapping the market to meet its refinance needs. It has refinanced
about RMB6 billion until mid-March, 2020. This includes a RMB1.35
billion private placement closed in March with a coupon rate less
than 5% for a two-year tenor.
S&P said, "We estimate the nationwide moratorium on toll collection
will reduce the company's cash flow by RMB920 million in 2020.
However, the hit to SXRB is smaller than for most other toll-road
operators in China. As of end-2019, SXRB has three toll roads that
contribute about 10% to the company's revenue and 22% to its
EBITDA.
"We forecast a 50% drop in SXRB's toll revenue in 2020, based on
our assumption that the toll moratorium will be in force until the
middle of the year. Lower traffic volumes due to the novel
coronavirus outbreak and the extended toll-free period on passenger
cars during the Chinese Lunar New Year would also reduce toll
revenue.
"SXRB's operating margin is likely to compress temporarily in 2020
because the company's toll-road operating costs are mainly
staff-related. We believe SXRB has limited ability to reduce labor
costs due to the lack of flexible compensation arrangements and
potential negative social implications for such adjustments.
"In our opinion, the China government could unveil supportive
measures to help ease toll operators' financial strain over the
longer term. However, we have not factored these in our base case.
"Our analysis also does not factor any direct financial support
from the parent. We expect SXTH to coordinate with creditors and
share part of its bank facilities with SXRB, if the subsidiary were
under financial stress.
"S&P Global Ratings acknowledges a high degree of uncertainty about
the rate of spread and peak of the coronavirus outbreak. Some
government authorities estimate the pandemic will peak in June or
August, and we are using this assumption in assessing the economic
and credit implications. We believe measures to contain COVID-19
have pushed the global economy into recession and could cause a
surge of defaults among nonfinancial corporate borrowers. As the
situation evolves, we will update our assumptions and estimates
accordingly.
"The stable outlook reflects our expectation that SXRB will remain
a strategically important subsidiary of SXTH in the next 12 months,
and receive timely support from the parent. We believe SXRB will be
able to manage its liquidity needs through timely access to banks
and capital markets.
"We could downgrade SXRB if its capital structure worsens and
liquidity position weakens significantly. This could happen if: (1)
the company's debt maturity profile shortens; and (2) its banking
relationship or access to capital markets deteriorates
significantly, such that its funding costs go up or its dependence
on short-term or off-balance-sheet funding alternatives increases.
"We could also downgrade SXRB if its status within the group
diminishes significantly, for example, if SXRB ceases to be the
primary road constructor in the province.
"We see low chance of a rating upgrade over the next 12 months,
given SXRB's high leverage and less than adequate liquidity."
TIANQI LITHIUM: Moody's Cuts CFR to Caa1 & Unsec. Rating to Caa2
----------------------------------------------------------------
Moody's Investors Service has downgraded to Caa1 from B2 Tianqi
Lithium Corporation's corporate family rating. Moody's has also
downgraded the senior unsecured rating on the bonds issued by
Tianqi Finco Co., Ltd and guaranteed by Tianqi Lithium to Caa2 from
B2.
The ratings outlook remains negative.
RATINGS RATIONALE
"The ratings downgrade reflects Tianqi Lithium's very strained
capital structure as a result of its high debt burden, elevated
leverage and weak liquidity," says Gerwin Ho, a Moody's Vice
President and Senior Credit Officer.
"These factors have increased refinancing risk, in particular with
regard to the November 2020 maturity of part of the loan associated
with its acquisition of a stake in Sociedad Quimica y Minera de
Chile S.A. (SQM, Baa1 stable)," adds Ho.
Refinancing risk is further exacerbated by the rapid and widening
spread of the coronavirus outbreak, deteriorating global economic
outlook, falling oil prices, and asset price declines that are
creating a severe and extensive credit shock across many sectors,
regions and markets. The combined credit effects of these
developments are unprecedented.
Tianqi Lithium's leverage has increased significantly following its
acquisition of a 23.8% stake in SQM in December 2018, which brought
its total stake in the company to 25.9%.
Moody's expects Tianqi Lithium's financial leverage — as measured
by total debt to EBITDA — will remain elevated at about 8.8x over
the next 12 months, with SQM accounted for on an equity method
basis.
At the same time, volatility in lithium chemical prices and a
slower than expected ramp-up at its lithium chemical production
operations in Australia could weaken cash flow generation and delay
deleveraging.
Tianqi Lithium's liquidity is weak. At 30 September 2019, the
company's cash reserves - including restricted cash - of RMB1.7
billion were insufficient to cover its short-term debt of RMB3.1
billion.
Tianqi Lithium has yet to make progress in improving its capital
structure, including the repayment of the portion of its
acquisition loan due in November 2020, since it completed a rights
issue in December 2019.
Tianqi Lithium's rating is constrained by its product concentration
in lithium minerals and lithium chemicals, with limited revenue
scale, and exposure to regulatory risks. These weaknesses offset
the company's strong position in the lithium chemical industry and
good profitability, driven by its supply of low-cost lithium
minerals.
Tianqi Lithium's senior unsecured bond rating is one notch lower
than it would otherwise be because of the risk of structural and
legal subordination. This risk reflects the facts that (1) the
majority of claims are at the operating subsidiaries; and (2) a
large share of the company's debt is secured debt due to the SQM
acquisition. These claims have priority over Tianqi Lithium's
senior unsecured claims in a bankruptcy scenario. In addition, the
holding company lacks significant mitigating factors for structural
subordination. As a result, the expected recovery rate for claims
at the holding company will be lower.
The negative outlook reflects the uncertainty related to Tianqi
Lithium's refinancing plans, weak liquidity position and weakened
operations.
Environmental, social and governance (ESG) issues are material to
the ratings and were assessed as follows.
The company benefits from global trends to reduce carbon emissions,
because lithium is a core input into the manufacture of electric
vehicles. Its mining and chemical production operations are also
exposed to environmental and safety risks. Nonetheless, Moody's is
not aware of any major environmental or safety incidents.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The action also reflects the impact on Tianqi Lithium
of the breadth and severity of the shock, and the broad
deterioration in credit quality the event has contributed to.
From a governance perspective, Tianqi Lithium's ownership is
concentrated and only a minority of its board consists of
independent directors. Moreover, the company's debt-funded
acquisition of a 23.8% stake in SQM hints at an aggressive
financial policy.
The outlook on Tianqi Lithium's ratings could return to stable if
the company executes its refinancing plan and improves its
liquidity position and capital structure significantly.
Conversely, the ratings could be downgraded if the company fails to
execute its refinancing plan or fails to significantly strengthen
its liquidity position and capital structure.
The principal methodology used in these ratings was Chemical
Industry published in March 2019.
Headquartered in Chengdu, Sichuan Province, Tianqi Lithium
Corporation is a leading lithium chemicals producer that mines,
makes and sells lithium minerals and lithium chemicals.
The company owns a 51% stake in the Greenbushes lithium mine in
Western Australia. It also owns a 25.9% stake in Chilean chemical
producer, Sociedad Quimica y Minera de Chile S.A.
[*] Global Consumer Default Wave Just Getting Started in China
--------------------------------------------------------------
Bloomberg News reports that like millions of people around the
world, Zhang Chunzi borrowed money she thought she'd be able to
repay before the coronavirus changed everything.
Now laid off from her job at an apparel exporter in Hangzhou -- one
of China's most prosperous cities -- the 23-year-old is missing
payments on CNY12,000 ($1,700) of debt from her credit card and an
online lending platform operated by Jack Ma's Ant Financial. "I'm
late on all the bills and there's no way I can pay my debt in
full," Bloomberg quotes Ms. Zhang as saying.
Her story is playing out in similar ways across China, where the
virus outbreak has been taking lives and ravaging the economy for
more than three months, according to Bloomberg. As Covid-19 works
its way through the rest of Asia, Europe and the Americas --
forcing countries into lockdown, driving up unemployment and
pummeling small-business owners -- analysts said it's only a matter
of time before stretched households globally start to default on
their loans, Bloomberg says.
Bloomberg relates that the early indicators from China aren't
pretty. Overdue credit-card debt swelled last month by about 50%
from a year earlier, Bloomberg discloses citing executives at two
banks who asked not to be named discussing internal figures. Qudian
Inc., a Beijing-based online lender, said its delinquency ratio
jumped to 20% in February from 13% at the end of last year. China
Merchants Bank Co., one of the country's biggest providers of
consumer credit, said this month that it "pressed the pause button"
on its credit-card business after a "significant" increase in
past-due loans, Bloomberg relays. An estimated 8 million people in
China lost their jobs in February.
"These issues in China are a preview of what we should expect
throughout the world," Bloomberg quotes Martin Chorzempa, a
research fellow at the Peterson Institute for International
Economics in Washington, as saying.
While the extent of the squeeze on consumers and their lenders will
depend on the effectiveness of government efforts to contain the
virus and shore up economies, the scope for pain is immense,
Bloomberg states.
Household debt-to-GDP ratios in countries including France,
Switzerland, New Zealand and Nigeria have never been higher,
according to a January report from the Institute of International
Finance, relays Bloomberg.
In Australia, which has the highest household debt levels among G20
nations, the country's largest lender said on March 26 that its
financial assistance lines are receiving eight times the normal
call volume, according to Bloomberg. A similar surge in queries
has flooded lenders in the U.S., where credit-card balances swelled
to an unprecedented $930 billion last year and 3.28 million people
filed for jobless benefits during the week ended March 21 --
quadruple the previous record, Bloomberg relates.
According to Bloomberg, few places have seen a bigger jump in
consumer borrowing in recent years than China, where household debt
including mortgages soared to a record CNY55 trillion in 2019.
That figure has nearly doubled since 2015, thanks to a housing boom
and the rise of online lenders like Ant Financial. While the firm's
risk models rely on reams of payments data, they've yet to be
tested by a major economic downturn. Many consumers who take out
these short-term, high-interest loans -- typically funded by banks
through Ant's Alipay smartphone app -- have minimal income and
virtually no credit history.
"Since 2015, banks have kept lowering their criteria to compete,"
Bloomberg quotes Zhang Shuaishuai, an analyst at China
International Capital Corp, as saying. "The virus outbreak
accelerated their exposure to risks. It will only get worse if
unemployment climbs further."
Consumer default rates at some banks have already increased to as
high as 4% from about 1% before the outbreak, according to Zhao
Jian, head of Atlantis Financial Research, who cited a survey of
lenders, Bloomberg relays. An executive at one major Chinese bank
said his firm is taking steps to tighten credit card loans or even
drop some clients after seeing a rapid increase in overdue
payments.
With corporate delinquencies rising as well, banks could face a
CNY5.2 trillion surge in total nonperforming loans and an
unprecedented 39% slump in profits this year, according to a
worst-case scenario outlined by UBS Group AG analysts this month.
Bloomberg says massive government stimulus will help ease the blow.
According to the report, most countries have announced plans for
economic support measures in recent months, including a $2 trillion
package in the U.S. that will provide direct payments to lower- and
middle-income Americans. Some of the biggest U.S. lenders have
pledged to offer grace periods for mortgage borrowers affected by
the crisis.
In China, authorities have flooded the financial system with
liquidity and encouraged banks to step up their lending to small
businesses that employ about 80% of the nation's workforce,
Bloomberg says.
While most banks have yet to offer debt relief to consumers outside
those living in cities like Wuhan that were hit especially hard by
the virus, UBS predicts China's government will do more if needed
to help people find jobs and pay their bills. Bloomberg Economics
estimates that about 85% of the economy was back online in the week
ending March 20, excluding the original virus epicenter in Hubei
province.
"A large scale increase in unemployment, and resulting high
delinquencies on retail loans won't be tolerated by authorities as
social stability is their bottom line," Bloomberg quotes May Yan, a
Hong Kong-based analyst at UBS, as saying.
Yet stimulus is unlikely to tide over everyone, particularly in
places like China where household finances are stretched like never
before, the report states. The country's consumer debt-to-income
ratio surged to 92% at the end of 2018 from 30% a decade ago,
surpassing Germany and closing in on levels in the U.S. and Japan,
according to IIF. The risk is that a prolonged economic slump and
weak real estate market will force more people to renege on their
loans, adds Bloomberg.
=========
I N D I A
=========
AGARWAL LIFE: Ind-Ra Affirms BB+ LT Issuer Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Agarwal Life
Sciences Private Limited's (Agarwal Life) Long-Term Issuer Rating
at 'IND BB+'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR60 mil. Fund-based working capital limits affirmed with IND
BB+/Stable/IND A4+ rating; and
-- INR10 mil. Non-fund-based working capital limits affirmed with
IND A4+ rating.
KEY RATING DRIVERS
The affirmation reflects Agarwal Life's continued low revenue base
due to its small scale of operations. The revenue rose to INR296
million in FY19 (FY18: INR221 million) due to an increase in
quantum of sales to 1,385 million tons in FY19 (1,221 million
tons). The company recorded a revenue of INR249 million in 9MFY20.
Ind-Ra expects the company to witness a modest revenue growth in
FY20. The company is also susceptible to the risk of product
diversification.
The ratings factor in the company's limited bargaining power owing
to intense competition in the active pharmaceutical ingredients
(API) industry. The same is reflected in the company's volatile
EBITDA margins that ranged from 5%-9% over FY16-FY19 mainly driven
by fluctuations in the crude oil prices which the company is unable
to pass on to its customers. The company achieved a healthy EBITDA
margin of 7% in 9MFY20 (FY19: 5.5%, FY18: 8.8%). Agarwal Life's
return on capital employed stood at 17% in FY19.
The ratings, however, are supported by the company's strong credit
metrics. Its net leverage (total adjusted net debt/operating
EBITDAR) improved to 1.4x in 9MFY20 (FY19: 2.3x) and interest
coverage (operating EBITDA/gross interest expense) to 8.6x(3.7x)
due to improvement in absolute EBITDA. The company's absolute
EBITDA rose to INR18.2 million in 9MFY20 (FY19: INR18 million) due
to a reduction in crude oil prices that resulted in a decline in
raw material cost. Ind-Ra expects Agarwal Life's credit metrics to
remain strong in the near term as it does not have any plans for
debt-led CAPEX.
Liquidity Indicator - Adequate: Agarwal Life's average fund-based
working capital limit utilization was 39% for the 12-months ended
in December 2019. The networking capital cycle days improved to 34
days in FY19 (FY18: 46 days) mainly on improvement of 11 days
(FY19: 27 days) in the inventory holding period. Ind-Ra expects the
company's networking capital cycle to be between 30-35 days in
FY20. Ind-Ra expects the company's liquidity to be stretched in
1QFY21 as the outbreak of COVID-19 and the ensuing lockdown in the
country will result in elongated receivable days. However, this
risk is mitigated by the company's low utilization of working
capital limits. Agarwal Life's cash flow from operations turned
positive to INR16 million in FY19 (FY18: negative INR2 million) on
account of the improved working capital cycle.
The ratings are also supported by Agarwal Life's diversified
customer base with the top 10 customers contributing approximately
25% of the revenues. The supplier profile is also diversified with
the top 10 suppliers accounting for approximately 35% of the total
purchases. The company's reliance on a single customer is between
1% and 10% of the total purchases.
The ratings are also supported by the promoter's experience of more
than 20 years in the API industry.
RATING SENSITIVITIES
Negative: Any decline in the revenue or profitability, leading to
deterioration in the interest coverage below 2.5x, could be
negative for the ratings.
Positive: A substantial improvement in the revenue with stable
EBITDA margin, while maintaining the credit metrics, all on a
sustained basis, will be positive for the ratings.
COMPANY PROFILE
Incorporated in 2010, Agarwal Life has engaged in the manufacturing
and trading of APIs, mainly ferrous fumarate. Manufacturing
contributes approximately 75% to the revenues and trading
contributes to the balance. Ranju Pilani is the managing director
of the company. The company has a manufacturing facility in Boiser,
Maharashtra.
ANTARIKSH INFRABUILD: CRISIL Moves B Debt Rating to Not Cooperating
-------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Antariksh
Infrabuild LLP (AIL) to 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 2 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Term Loan 6.5 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with AIL for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of AIL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on AIL is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of AIL to 'CRISIL B/Stable Issuer not cooperating'.
Incorporated in 2013, by Mr Laxmichand V. Rathi and Mrs Rashmi
Agarwal, AIL is setting up a fabric manufacturing unit in Bhiwandi,
Maharashtra. Commercial operations are expected to start from
January, 2019.
ATHULITHA LABORATORIES: Ind-Ra Moves BB- Rating to Non-Cooperating
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Athulitha
Laboratories Private Limited's (ALPL) 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 BB- (ISSUER NOT COOPERATING)' on the agency's
website.
The instrument-wise rating actions are:
-- INR45 mil. Fund-based working capital limits migrated to non-
cooperating category with IND BB- (ISSUER NOT COOPERATING)
rating;
-- INR30.2 mil. Term loan due on December 2022 migrated to non-
cooperating category with IND BB- (ISSUER NOT COOPERATING)
rating;
-- INR30 mil. Non-fund-based working capital limits migrated to
non-cooperating category with IND A4+ (ISSUER NOT
COOPERATING) rating;
-- INR115 mil. Proposed fund-based working capital limits
migrated to non-cooperating category with Provisional IND BB-
(ISSUER NOT COOPERATING) rating; and
-- INR30 mil. Proposed non-fund-based working capital limits
migrated to non-cooperating category with Provisional IND A4+
(ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
April 5, 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 October 2011 in Hyderabad, ALPL manufactures drug
intermediates.
BALA VENKATA: CRISIL Moves B+ on INR5.5cr Loan in Not Cooperating
-----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Bala Venkata
Narasimha Cold Storage Private Limited (BVNCSPL) to 'CRISIL
B+/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 5.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with BVNCSPL for
obtaining information through letters and emails dated December 31,
2019 and January 13, 2020 among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of BVNCSPL, which restricts
CRISIL's ability to take a forward looking view on the entity's
credit quality. CRISIL believes information available on BVNCSPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of BVNCSPL to 'CRISIL B+/Stable Issuer not
cooperating'.
Incorporated in September 2016, BVNCSPL, promoted and managed by
Mr. K Srinivas, N Sreelatha, T Vanitha and P Narashimhulu, is
currently setting up a cold storage unit at Hyderabad, Telangana.
BHARAT ENTERPRISES: CRISIL Moves B+ Debt Rating to Not Cooperating
------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Bharat
Enterprises - Karnal (BEK) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Fund- 6 CRISIL B+/Stable (ISSUER NOT
Based Bank Limits COOPERATING; Rating Migrated)
CRISIL has been consistently following up with BEK for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of BEK, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on BEK is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of BEK to 'CRISIL B+/Stable Issuer not cooperating'.
Set up in 2011 as a proprietorship firm by Mr Parveen Gill, BEK
manufactures agricultural equipments and spares such as disc blade,
cultivator, harrow, and ploughs. The firm's three manufacturing
units in Karnal, Haryana, have total capacity of 10,000 tonne per
annum.
BLUE STAR: CRISIL Lowers Rating on INR12.5cr Cash Loan to 'D'
-------------------------------------------------------------
CRISIL has revised the rating on bank facilities of Blue Star
Building Materials Private Limited (BSBMPL; a part of the Blue Star
group) to 'CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 12.5 CRISIL D (ISSUER NOT COOPERATING;
Downgraded from 'CRISIL B/Stable
ISSUER NOT CO-OPERATING)
CRISIL has been consistently following up with BSBMPL for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of BSBMPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on BSBMPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of BSBMPL to 'CRISIL D Issuer not cooperating'.
For arriving at the ratings, CRISIL has combined the business and
financial risk profiles of BSBMPL and its group entity, Blue Star
Construction Co (BSCC). This is because the two entities, together
referred to as the Blue Star group, have strong financial and
operational linkages and a common management.
The Blue Star group is promoted by Navi Mumbai-based Mr. Pandurang
Thakur and family. BSCC, set up as a partnership firm in 1978,
constructs and maintains roads. BSBMPL, incorporated in 1996,
manufactures and lays paver blocks.
CHAPHEKAR AND COMPANY: CRISIL Moves D Ratings to Not Cooperating
----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Chaphekar and
Company (CAC) to 'CRISIL D/CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 4 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
Cash Credit 11 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
Proposed Bank 1 CRISIL D (ISSUER NOT COOPERATING;
Guarantee Rating Migrated)
Proposed Cash 1 CRISIL D (ISSUER NOT COOPERATING;
Credit Limit Rating Migrated)
CRISIL has been consistently following up with CAC for obtaining
information through letters and emails dated December 31, 2019 and
February 19, 2020 among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of CAC, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on CAC is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of CAC to 'CRISIL D/CRISIL D Issuer not cooperating'.
Established in 1973 as a partnership firm by Mr M R Chaphekar, CAC
undertakes civil construction works related to roads and bridges.
Currently, the daily operations are being managed by Mr Ashish
Chaphekar.
DELHI INT'L AIRPORT: Moody's Cuts Corp. Family Rating to Ba3
------------------------------------------------------------
Moody's Investors Service has downgraded Delhi International
Airport Limited's corporate family rating and senior secured
ratings to Ba3 from Ba2.
At the same time, Moody's has downgraded DIAL's Baseline Credit
Assessment to ba3 from ba2.
The ratings have also been placed on review for further downgrade.
The outlook has been changed to rating under review from stable.
The rating action reflects the worsening coronavirus outbreak and
the increasingly stringent travel restrictions imposed both in
India and globally, including ongoing measures introduced by the
Government of India (Baa2 negative).
RATINGS RATIONALE
"The downgrade to Ba3 reflects its expectation of a sharp decline
in passenger and aircraft traffic at Delhi Airport in the coming
months and the uncertainty over the timing and extent of a
recovery, which coincides with increased debt issuance as the
airport enters the peak stage of its INR98 billion expansion
project," says Spencer Ng, a Moody's Vice President and Senior
Analyst.
The confluence of these factors will severely weaken Delhi
Airport's credit metrics, under Moody's base case scenario of DIAL
continuing to levy the minimum tariff permitted under the Base
Airport Charge regime over the control period through to March
2024, with no ability to recoup lost revenue through tariff
adjustments.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The airport sector
has been one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment.
More specifically, the weaknesses in DIAL's credit profile,
including its exposure to falling passenger traffic have left it
vulnerable to shifts in market sentiment in these unprecedented
operating conditions, and DIAL remains vulnerable to the outbreak
continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The action reflects the impact on DIAL of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
All of DIAL's aeronautical revenues and a large portion of its
non-aeronautical revenues are closely linked to the airport's
passenger traffic volumes and aircraft movements. As such, the
expected traffic decline will lead to a sharp reduction in the
airport's revenue and cash flow over the course of fiscal 2021
(ending March 31).
Whilst the current environment is unpredictable, Moody's expects a
recovery in airport traffic to commence in the second half of the
year. Nevertheless, Moody's expects that the airport's traffic
levels for the next two to three years will be lower as a result of
the coronavirus outbreak, which will reduce DIAL's available
cashflow for its INR98 billion expansion project and increase its
reliance on debt funding.
"Given DIAL's financial profile was already weakly positioned prior
to the outbreak, the reduced cashflow and increased debt over the
next two to three years will keep its longer-term credit metrics at
a level that is more consistent with a Ba3 rating," adds Ng.
The vast majority of DIAL's expansion works are being carried out
under a single contract with a fixed construction term and prices
with Larsen & Toubro, one of the largest contractors in India.
Whilst such a structure reduces the risk of costs overrunning or
potential delays, it also limits the airport's ability to defer or
scale down the project to preserve liquidity and could expose the
airport to counterparty risk should the contractor's credit quality
materially deteriorate.
That said, Delhi Airport does have sufficient liquidity on hand,
which mainly comprises cash and investment in short term
securities, to continue funding its expansion through to the end of
calendar 2020. Delhi Airport's liquidity position would strengthen
further upon finalization of its land monetization transaction with
Bharti Reality, which management expects to conclude in the coming
months upon receiving approval from the Airports Authority of
India.
The ratings review will consider (1) the airport's financial
profile over the next two to three years as the coronavirus
situation evolves, (2) the airport's liquidity position over the
next 12 to 18 months, (3) any increase in DIAL's exposure to
counterparty risk from key airlines as a result of the outbreak,
(4) any potential improvements in the airport's financial profile
due to a better-than-expected tariff determination for the current
control period and (5) DIAL's countermeasures should the
construction contractor experience distress.
DIAL's Ba3 ratings continue to reflect the airport's strong market
position and the fact that it predominantly caters to domestic
travel.
Given that the ratings are placed on review for downgrade, Moody's
currently does not envision any upward rating pressure. The ratings
could be confirmed if there is clear evidence that the impact from
the outbreak is easing and the airport is able to maintain FFO to
debt in the low single digit percentage region on a sustained basis
post-outbreak.
On the other hand, Moody's could further downgrade DIAL's Ba3
ratings if the traffic decline in the coming months exceeds Moody's
base case assumptions, or if there is any evidence of liquidity
stress, which could manifest from a worsening counterparty
exposure.
Moody's could also downgrade the ratings if: (1) the expansion
project's costs increase or it experiences delays; or (2) material
delays in finalizing the existing transaction with Bharti Realty or
in securing further land monetization transactions.
Moody's has used its Joint Default Analysis approach for Government
Related Issuers in assessing DIAL's ratings, because the company is
more than 20% government-owned through the Airports Authority of
India, a government agency.
DIAL's Ba3 CFR combines: (1) the company's Baseline Credit
Assessment (BCA) of ba3; and (2) the low likelihood of support that
Moody's believes the Government of India (Baa2 negative) will
provide to DIAL in the event that extraordinary financial support
is required. This assumption of support results in the absence of
uplift to the company's BCA.
The methodologies used in these ratings were Privately Managed
Airports and Related Issuers published in September 2017, and
Government-Related Issuers Methodology published in February 2020.
Delhi International Airport Limited (DIAL) is the concessionaire
for the Indira Gandhi International Airport, which is located in
the political capital of India, and operates under an Operations,
Management and Development Agreement, concluded in 2006 with the
Airports Authority of India, a government agency. The concession is
for a 30-year period, and DIAL has the option to extend it for
another 30 years, subject to the company meeting defined
performance criteria.
DEVKI NANDAN: CRISIL Moves D on INR7cr Debt to Not Cooperating
--------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Devki Nandan
Minerals Private Limited (DNMPL) to 'CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 2.9 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
Long Term Loan 7 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
CRISIL has been consistently following up with DNMPL for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of DNMPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on DNMPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of DNMPL to 'CRISIL D Issuer not cooperating'.
DNMPL was set up in 2016, by promoters, Mr Paresh Nathabhai Gopani,
Mr Kailash Laxman Jakasania, and Mr Dinesh Kachrabhai Ghodasara.
The company manufactures non-metallic minerals at its plant in
Morbi. Operations commenced in August 2017 only.
EMPIRE MULTIPACK: CRISIL Moves B+ on INR5cr Debt to Not Cooperating
-------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Empire
Multipack Private Limited (EMPL) to 'CRISIL B+/Stable/CRISIL A4
Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Letter of Credit 3.0 CRISIL A4 (ISSUER NOT
COOPERATING; Rating Migrated)
Rupee Term Loan 1.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with EMPL for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of EMPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on EMPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of EMPL to 'CRISIL B+/Stable/CRISIL A4 Issuer not
cooperating'.
Incorporated in 1993 in Chandigargh and promoted by Rahul Agarwal
and his family, EMPL manufactures corrugated boxes.
FINOLITE CERAMIC: CRISIL Migrates D Debt Ratings to Not Cooperating
-------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Finolite
Ceramic (FC) to 'CRISIL D/CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 3.5 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
Cash Credit 5 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
Proposed Long 0.5 CRISIL D (ISSUER NOT COOPERATING;
Term Bank Loan Rating Migrated)
Facility
Term Loan 15 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
CRISIL has been consistently following up with FC for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of FC, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on FC is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of FC to 'CRISIL D/CRISIL D Issuer not cooperating'.
Established in 2015, FC is a partnership firm of Mr Digesh
Durlabhjibhai Aghara, Mr Nileshkumar Anantrai Mendapara, Mr
Ramnikbhai Anantrai Mendpara, Mr Kishorbhai Premjibhai Varasada, Mr
Dineshbhai Kanjibhai Kothiya, and Mr Ashishbhai Hansrajbhai
Kalariya. The company manufactures ceramic and vitrified tiles at
its facility in Morbi, Gujarat with installed capacity of 90000
MTPA.
FRISCO GLOBAL: CRISIL Moves B on INR50cr Loans to Not Cooperating
-----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Frisco Global
Private Limited (FGPL) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Cash 25 CRISIL B/Stable (ISSUER NOT
Credit Limit COOPERATING; Rating Migrated)
Proposed Term Loan 25 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with FGPL for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of FGPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on FGPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of FGPL to 'CRISIL B/Stable Issuer not cooperating'.
Incorporated in 1980, FGPL was acquired in 2010 by Delhi-based Mr
Tarun Jain and his brother, Mr Ayush Jain, who manage daily
operations. In 2017, the company sold its manufacturing facility in
Haridwar, Uttarakhand, to the Patanjali group, and continue to
trade in biscuits, wheat, and rice. FGPL is going to set up a new
plant in Indore, Madhya Pradesh, to manufacture and export a
variety of biscuits to Africa, the Middle Eastern, and South Asia.
GAJANANA TRADERS: CRISIL Lowers Rating on INR8.77cr Loan to D
-------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Gajanana
Traders (GT) to 'CRISIL D Issuer Not Cooperating' from 'CRISIL
B/Stable Issuer Not Cooperating'. The downgrade reflects delay in
debt servicing.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 8.77 CRISIL D (ISSUER NOT COOPERATING;
Downgraded from 'CRISIL B/Stable
ISSUER NOT CO-OPERATING)
CRISIL has been consistently following up with GT for obtaining
information through letters and emails dated August 31, 2019,
February 6, 2020 and February 17, 2020 among others, apart from
telephonic communication. However, the issuer has remained non
cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of GT, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on GT is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of GT is downgraded to 'CRISIL D Issuer Not Cooperating'
from 'CRISIL B/Stable Issuer Not Cooperating'.
The downgrade reflects delay in debt servicing.
Set up in 2012, GT is engaged in milling and processing of paddy
into rice, rice bran, broken rice and husk. Its rice mill is
located in East Godavari, Andhra Pradesh. The day to day operations
are managed by Mr. Srinivas Maroju.
GARUDA VENKATA: CRISIL Moves B+ on INR5.5cr Loan to Not Cooperating
-------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Garuda Venkata
Sai Cold Storage Private Limited (GVSCSPL) to 'CRISIL B+/Stable
Issuer not cooperating'
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 5.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with GVSCSPL for
obtaining information through letters and emails dated December 31,
2019 and January 13, 2020 among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of GVSCSPL, which restricts
CRISIL's ability to take a forward looking view on the entity's
credit quality. CRISIL believes information available on GVSCSPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of GVSCSPL to 'CRISIL B+/Stable Issuer not cooperating'
GVSCSPL, incorporated in September 2016, is promoted and managed by
Mrs K Radha, Mr B Ramalakshmana, Mr P Parimala, and Ms Savitri
Menon. The company is currently setting up a cold storage unit at
Hyderabad.
GEOMAX MINES: CRISIL Moves B on INR15cr Credit to Not Cooperating
-----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Geomax Mines &
Minerals Private Limited (GMMPL) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 15 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with GMMPL for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of GMMPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on GMMPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of GMMPL to 'CRISIL B/Stable Issuer not cooperating'.
GMMPL incorporated in 2009 is trades bauxite ores. The operations
are managed by Mr Chava Venu Gopal who has more than two decades of
experience in the mining industry.
GREEN LEAF: Ind-Ra Migrates BB- Issuer Rating to Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Green Leaf Plasto
Private Limited'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:
-- INR3.29 mil. Term loans due on May 2020 migrated to non-
cooperating category with IND BB- (ISSUER NOT COOPERATING)
rating; and
-- INR120 mil. Fund-based facilities migrated to non-cooperating
category with IND BB- (ISSUER NOT COOPERATING) / IND A4+
(ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
April 8, 2019. Ind-Ra is unable to provide an update, as the agency
does not have adequate information to review the ratings.
COMPANY PROFILE
Established in 2011, Green Leaf Plasto processes raw wheat grains
to produce whole wheat flour and refined flour. Its manufacturing
facility is in Aurangabad, Maharashtra.
HYDERABAD INT'L AIRPORT: Moody's Puts Ba1 CFR on Review
-------------------------------------------------------
Moody's Investors Service has placed GMR Hyderabad International
Airport Limited's (HIAL) Ba1 corporate family rating (CFR) on
review for possible downgrade.
The outlook has been changed to rating under review from negative.
The rating action reflects the worsening coronavirus outbreak and
the increasingly stringent travel restrictions imposed both in
India and globally, including ongoing measures introduced by the
Government of India (Baa2 negative).
HIAL is the concessionaire for the Rajiv Gandhi Hyderabad
International Airport (RGIA) in Hyderabad under a long-term
concession agreement with the Ministry of Civil Aviation.
RATINGS RATIONALE
"The rating action reflects its expectation of a sharp decline in
passenger and aircraft traffic at Hyderabad Airport in the coming
months and the uncertainty over the timing and extent of a
recovery, which coincides with increased debt issuance as the
airport enters the peak stage of its INR55 billion expansion
project," says Spencer Ng, a Moody's Vice President and Senior
Analyst.
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The airport sector
has been one of the sectors most significantly affected by the
shock given its sensitivity to consumer demand and sentiment.
More specifically, the weaknesses in HIAL's credit profile,
including its exposure to falling passenger traffic have left it
vulnerable to shifts in market sentiment in these unprecedented
operating conditions, and HIAL remains vulnerable to the outbreak
continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The action reflects the impact on HIAL of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
All of HIAL's aeronautical revenues and a large portion of its
non-aeronautical revenues are closely linked to the airport's
passenger traffic volumes and aircraft movements. As such, the
expected traffic decline will lead to a sharp reduction in the
airport's revenue and cash flow over the course of fiscal 2021
(ending March 31).
Whilst the current environment is unpredictable, Moody's expects a
recovery in airport traffic to commence in the second half of the
year. Nevertheless, Moody's expects that the airport's traffic
levels for the next two to three years will be lower as a result of
the coronavirus.
"Although HIAL was well-positioned financially prior to the
outbreak, its financial metrics will materially weaken under its
base case scenario after the implementation of a proposed 50%
tariff cut in the next fiscal year. Coupled with the reduced
operating cash flow as a result of the outbreak, it expects HIAL's
funds from operations (FFO) to debt to fall below the minimum
tolerance level set for its Ba1 rating over the next 12 months,"
adds Ng.
The vast majority of the expansion works are being carried out
under two key contracts with a fixed construction term and prices
with experienced and reputable contractors. Whilst such a structure
reduces the risk of costs overrunning or potential delays, it also
limits the airport's ability to scale down the project to preserve
its financial profile in response to a downturn and could expose
the airport to counterparty risk should the contractors' credit
quality materially deteriorate.
That said, HIAL does have sufficient liquidity on hand, which
mainly comprises cash and investment in short term securities, that
should allow it to continue funding its expansion through to the
end of calendar 2020. Moody's expects HIAL to incur incremental
debt to complete its INR55 billion airport expansion and other
development projects - such as the Hyderabad metro extension - over
the next two to three years.
HIAL's medium-term financial profile could benefit from a positive
tariff decision in the next control period, on the back of (1) a
material growth in its regulated asset base after the inclusion of
capital expenditure incurred for the airport expansion, and (2) a
true-up of revenue lost due to lower-than-expected traffic caused
by the coronavirus outbreak. However, tariff decisions and
implementation have frequently been delayed in the past, and which
-- if repeated -- would affect the timeliness of any tariff
increase. HIAL's next control period is scheduled to start in April
2021.
Whilst not factored into Moody's base case scenario, HIAL's
financial profile could further improve if there is a favorable
outcome from its ongoing appeal against the regulated tariffs set
in previous control periods.
The rating review will consider (1) the airport's financial profile
over the next two to three years taking into account the evolving
situation with the outbreak, (2) the outcome of the tariff appeal
process and timing of the upcoming tariff determination, (3) the
airport's liquidity position over the next 12 to 18 months, (4) any
increase in the airport's exposure to counterparty risk from key
airlines as a result of the outbreak and (5) HIAL's countermeasures
should the construction contractor experience distress.
HIAL's Ba1 CFR continues to reflect the airport's established
market position in its catchment area, its predominantly domestic
origin and destination passenger mix, which could lessen - but not
leave it immune to - the challenges introduced by the coronavirus
outbreak and support a gradual recovery of traffic once the
situation stabilizes.
Given that the rating is placed on review for downgrade, Moody's
currently does not envision any upward rating pressure. The rating
could be confirmed if there is clear evidence that the impact from
the outbreak is easing and the airport is able to maintain
appropriate financial metrics for its Ba1 rating. Such an
improvement would most likely require a favorable outcome from the
pending tariff appeal and the upcoming tariff determination
process.
On the other hand, Moody's could downgrade HIAL's Ba1 rating if the
traffic decline in the coming months exceeds Moody's base case
assumptions, or if there is any evidence of liquidity stress, which
could manifest from a worsening counterparty exposure.
Additionally, Moody's could downgrade HIAL's rating if there is
further evidence that the company's FFO/debt will fall below 8% on
a consistent basis during the expansion project.
Moody's could also downgrade the rating if there are material
missteps in the implementation of the expansion project.
The principal methodology used in this rating was Privately Managed
Airports and Related Issuers published in September 2017.
GMR Hyderabad International Airport Limited has a long-term
concession to operate the Rajiv Gandhi International Airport in
Hyderabad under a public-private partnership model. The airport is
one of the leading airports in India by passenger traffic.
The company started commercial operations on March 23, 2008.
The airport has a current design capacity of 12 million passengers
per annum. Equity in the company is held by GMR Airports (63%),
Malaysia Airports Holdings Berhad (11%, A3 negative), the
Government of India (Baa2 negative) through the Airports Authority
of India (13%), and the Government of Telangana (13%). GMR Airports
is a subsidiary of GMR Infrastructure Ltd.
J.S.R. CONSTRUCTIONS: CRISIL Moves D Debt Rating to Not Cooperating
-------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of J.S.R.
Constructions Private Limited (JSR) to 'CRISIL D/CRISIL D Issuer
not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 45 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
Overdraft 1 CRISIL D (ISSUER NOT COOPERATING;
Rating Migrated)
CRISIL has been consistently following up with JSR for obtaining
information through letters and emails dated December 31, 2019 and
January 13, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of JSR, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on JSR is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of JSR to 'CRISIL D/CRISIL D Issuer not cooperating'.
Established in 1972 as a proprietary concern by Mr. J. Srinivasulu
Reddy, it was rechristened in 1990 as JSR. Located in Bangalore,
Karnataka, JSR is engaged in construction of roads, canals and
other allied civil construction. JSR was concentrating on
irrigation works till 2001. Subsequently, JSR has been focusing
majorly focusing on road projects. The company is a registered
Special Class (Civil) contractor with Irrigation (PWD) Department
of Andhra Pradesh and Gujarat. It is also a registered Class 1
Contractors in PWD ' Karnataka and Category-1 with Karnataka
Neeravari Nigam Ltd.
KAMESWARI JEWELLERS: CRISIL Cuts Rating on INR10cr Loan to B+
-------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Kameswari
Jewellers (KJ) to 'CRISIL B+/Stable Issuer not cooperating' from
'CRISIL BB-/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 10 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with KJ for obtaining
information through letters and emails dated November 30, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KJ, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KJ is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of KJ revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
Established in 1994 as a proprietary concern of Mr Perla Samba
Murty, KJ retails jewellery. It operates two showrooms at
Visakhapatnam and Srikakulam in Andhra Pradesh. Operations are
managed by Mr Perla Koushik.
KARNA PAINTS: CRISIL Lowers Rating on INR3.5cr Loan to B+
---------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Karna Paints
Private Limited (KPPL) to 'CRISIL B+/Stable Issuer not cooperating'
from 'CRISIL BB/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 25 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 3.5 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with KPPL for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KPPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KPPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' category or
lower'.
Based on the last available information, the ratings on bank
facilities of KPPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB/Stable Issuer not cooperating'.
Incorporated in Karnal (Haryana) in 1978, KPPL is promoted by Mr.
Ajit Lakra. KPPL manufactures industrial paints, alkyd resins and
polyester resins, which are used as intermediates in manufacturing
paints. Industrial paints include liquid paints, industrial powder
coatings, and general industry paints.
KK FINECOT: CRISIL Lowers Rating on INR10cr Cash Loan to B+
-----------------------------------------------------------
CRISIL has revised the ratings on bank facilities of KK Finecot
Private Limited (KKPL) to 'CRISIL B+/Stable Issuer not cooperating'
from 'CRISIL BB-/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 10 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with KKPL for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KKPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KKPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' category or
lower'.
Based on the last available information, the ratings on bank
facilities of KKPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
For arriving at the rating, CRISIL has combined the business and
financial risk profiles of K. K. Fibers (KKF) and KKPL. This is
because both the entities, together referred to as the KK group,
are engaged in a similar business, managed by common promoters, and
have operational linkages in the form of common procurement.
The KK group, based in Khargone, Madhya Pradesh, is promoted by the
Agrawal family. KKF, a partnership firm established in 2006, gins
and presses raw cotton and sells cotton seeds. It has an in-house
oil mill for extracting oil from cotton seeds. KKFL, incorporated
in fiscal 2012, also gins and presses raw cotton.
MACROTECH DEVELOPERS: Fitch Withdraws 'CCC' Issuer Default Rating
-----------------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Foreign Currency Issuer
Default Rating on Macrotech Developers Limited at 'CCC'. Fitch has
simultaneously withdrawn the ratings for commercial reasons.
The ratings were withdrawn with the following reason For Commercial
Purposes
KEY RATING DRIVERS
The affirmation reflects Fitch's assessment that there are no
material changes to MDL's credit profile since the last rating
action on March 13, 2020.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant as the rating has been
withdrawn.
ESG CONSIDERATIONS
MDL has ESG Relevance Scores of 4 for Governance Structure and
Financial Transparency, which have a negative impact on the credit
profile and are relevant to the rating in conjunction with other
factors.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, 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.
MANAS FLOUR: CRISIL Lowers Rating on INR13cr Term Loan to B+
------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Manas Flour
Mills Limited (MFM) to 'CRISIL B+/Stable/CRISIL A4 Issuer not
cooperating' from 'CRISIL BB+/Stable/CRISIL A4+ Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 2 CRISIL A4 (ISSUER NOT
COOPERATING; Revised from
'CRISIL A4+ ISSUER NOT
COOPERATING')
Cash Credit 0.3 CRISIL B+ (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 3.2 CRISIL B+ (ISSUER NOT
Bank Loan Facility COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
Term Loan 13 CRISIL B+ (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with MFM for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of MFM, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on MFM is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of MFM revised to 'CRISIL B+/Stable/CRISIL A4 Issuer not
cooperating' from 'CRISIL BB+/Stable/CRISIL A4+ Issuer not
cooperating'.
MFM was incorporated in December 1949 as a public limited company
and is presently involved in flour milling and warehouse leasing
business and currently owns 6 warehouses spread over 15 acre of
land in Dankuni (an industrial area near Howrah, West Bengal). Mr.
Manas Swaika, the Managing Director manages the overall operations
of the company.
MANJUSHREE HARDWARES: CRISIL Keeps 'D' Rating in Not Cooperating
----------------------------------------------------------------
CRISIL said the ratings on bank facilities of Manjushree Hardwares
(MH) continues to be 'CRISIL D/CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Overdraft 5.5 CRISIL D (ISSUER NOT
COOPERATING)
Proposed Long Term .1 CRISIL D (ISSUER NOT
Bank Loan Facility COOPERATING)
CRISIL has been consistently following up with MH for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of MH, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on MH is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of MH continues to be 'CRISIL D/CRISIL D Issuer not
cooperating'.
Set up in 1990 in Bengaluru as a proprietorship firm, MH trades in
construction material such as paints, cement, and sanitary ware.
Operations are managed by Mr. R Shankar.
MARUDHAR FASHIONS: CRISIL Cuts Rating on INR13cr LT Loan to B+
--------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Marudhar
Fashions (MF) to 'CRISIL B+/Stable/CRISIL A4 Issuer not
cooperating' from 'CRISIL BB-/Stable/CRISIL A4+ Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Foreign Bill 15 CRISIL A4 (ISSUER NOT
Discounting COOPERATING; Revised from
'CRISIL A4+ ISSUER NOT
COOPERATING')
Long Term Loan 13 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with MF for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of MF, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on MF is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of MF revised to 'CRISIL B+/Stable/CRISIL A4 Issuer not
cooperating' from 'CRISIL BB-/Stable/CRISIL A4+ Issuer not
cooperating'.
Established in 1989 as a partnership firm, MF manufactures and
exports woollen and polyester carpets, woollen yarn, and towels,
and sells carpets in the domestic market. The firm also generates
electricity and has five wind turbines with combined capacity of
6.75 megawatts in Maharashtra and Rajasthan. MF's daily operations
are managed by Mr. Radhe Rathi.
METRO SPARE: CRISIL Lowers Rating on INR6cr Cash Loan to B+
-----------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Metro Spare
Part India Private Limited (MSPIPL) to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 6 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with MSPIPL for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of MSPIPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on MSPIPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' category or
lower'.
Based on the last available information, the ratings on bank
facilities of MSPIPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB/Stable Issuer not cooperating'.
MSPIPL distributes and trades in various automotive spare parts in
Odisha. The company is owned and managed by Mr. Suresh Chaudhary
and his family. It was incorporated in 2009 to take over the
business from a proprietorship firm of its current promoter; this
firm was engaged in the same line of business.
NEELSON OVERSEAS: CRISIL Cuts Rating on INR1.40cr Loan to B+
------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Neelson
Overseas (NEO) to 'CRISIL B+/Stable/CRISIL A4 Issuer not
cooperating' from 'CRISIL BB-/Stable/CRISIL A4+ Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bill Discounting 1.4 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Foreign Letter
of Credit 0.55 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Long Term Loan 3.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Packing Credit 3 CRISIL A4 (ISSUER NOT
COOPERATING; Revised from
'CRISIL A4+ ISSUER NOT
COOPERATING')
Proposed Long Term 4.05 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with NEO for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of NEO, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on NEO is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of NEO revised to 'CRISIL B+/Stable/CRISIL A4 Issuer not
cooperating' from 'CRISIL BB-/Stable/CRISIL A4+ Issuer not
cooperating'.
NEO was set up in 1993 by Mr. Vijay Nijhawan and his family. The
firm, based in Agra, manufactures and exports leather footwear for
women and children. Operations are managed by Mr. Vijay Nijhawan
and his son Mr. Sachin Nijhawan.
NOBLE EDUCATIONAL: CRISIL Lowers Rating on INR1cr Loan to B+
------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Noble
Educational Trust (NET) to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Line of Credit 1 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Overdraft 0.25 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 0.25 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Term Loan 6.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with NET for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of NET, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on NET is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of NET revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB/Stable Issuer not cooperating'.
NET was founded in 2003 by Dr. A S A Jerald Gnanarathinam. The
trust runs a K-12 school, Noble Matriculation Higher Secondary
School, in Aruppukottai, Tamil Nadu. The school is affiliated to
the Directorate of Matriculation Schools, Tamil Nadu.
NORTHPOLE INDUSTRIES: CRISIL Cuts Rating on INR5cr Loan to B+
-------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Northpole
Industries (NI) to 'CRISIL B+/Stable Issuer not cooperating' from
'CRISIL BB-/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Export Packing 5 CRISIL B+/Stable (ISSUER NOT
Credit COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 0.57 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Term Loan .43 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with NI for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of NI, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on NI is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' category or lower'.
Based on the last available information, the ratings on bank
facilities of NI revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
Incorporated in 1985 as proprietorship firm, NI is a manufacturer
and exporter of construction scaffolding and scaffold accessories
along with hand tools, garden tools and agricultural implements
such as adjustable jacks, forged and pressed steel clamps, tie bar
and shuttering clamps, industrial couplers, swivel clamps, grave
lock couplers and swivel beam clamps. The firm has its
manufacturing unit in Jalandhar, Punjab.
NURAY CHEMICALS: CRISIL Lowers Rating on INR23cr LT Loan to B+
--------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Nuray
Chemicals Private Limited (NCPL) to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 10 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 23 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with NCPL for obtaining
information through letters and emails dated August 31, 2019 and
February 6, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of NCPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on NCPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' category or
lower'.
Based on the last available information, the ratings on bank
facilities of NCPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
NCPL, set up in September 2012 in Chennai, manufactures and exports
active pharmaceutical ingredients. NCPL is promoted by Mr. J
Jayaseelan and Mr. S Shanmugam.
OPTO CIRCUITS: Insolvency Resolution Process Case Summary
---------------------------------------------------------
Debtor: M/s Opto Circuits (India) Limited
Plot no. 83, Electronics City
Bangalore South 560100
Insolvency Commencement Date: March 18, 2020
Court: National Company Law Tribunal, Bangalore Bench
Estimated date of closure of
insolvency resolution process: September 16, 2020
(180 days from commencement)
Insolvency professional: Pankaj Srivastava
Interim Resolution
Professional: Pankaj Srivastava
5, 5th Cross
Navya Nagar Jakkur
Bangalore 560064
E-mail: rpal@paisri.com
psri@live.com
Last date for
submission of claims: April 3, 2020
SAFETY CONTROLS: Ind-Ra Lowers & Moves LT Issuer Rating to 'BB+'
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Safety Controls
& Devices Private Limited's (SCDPL) Long-Term Issuer Rating to 'IND
BB+' from 'IND BBB-' and has simultaneously migrated it 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 BB+ (ISSUER NOT COOPERATING)' on the agency's
website.
The instrument-wise rating actions are:
-- INR55 mil. Fund-based limits downgraded and migrated to non-
cooperating category with IND BB+ (ISSUER NOT COOPERATING) /
IND A4+ (ISSUER NOT COOPERATING) rating; and
-- INR792.2 mil. Non-fund-based limits downgraded and migrated to
non-cooperating category with IND A4+ (ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best-available information
KEY RATING DRIVERS
The downgrade reflects SCDPL's decline in revenue, EBITDA and
stretch in working capital in FY19. The company's revenue and
absolute EBITDA declined around 24% and around 12%, respectively,
to INR1,014.20 million and INR58.59 million in FY19.
Liquidity Indicator- Stretched: The company's cash flow from
operations turned negative to INR22.44 in FY19 (FY18: INR27.05
million) mainly due to an increase in working capital requirement.
The company's working capital cycle deteriorated in FY19 due to the
decline in overall creditors. Further, the company's cash and cash
equivalents declined to INR3.02 million at FYE19 (FYE18: INR48.18
million)
The rating is further constrained by SCDPL's high
customer-concentration risk, as the company mainly caters to state
power companies, who's stretched liquidity positions may result in
further deterioration in SCDPL's working capital.
SCDPL did not participate in the rating exercise despite continuous
requests and follow-ups by the agency. The company has not provided
information such as audited financials, interim financials,
utilization reports and key details required for the surveillance
exercise.
COMPANY PROFILE
SCDPL was established in 1997 as a proprietorship concern by
Rajnish Chopra. It was reconstituted as a private limited company
and renamed Safety Controls & Devices Private Limited in June 2015.
The company is engaged in the erection of power substations and the
installation of safety equipment. It obtains contracts through the
contract bidding process.
SARAF TRADING: Ind-Ra Affirms B- LT Issuer Rating, Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Saraf Trading
Corporation Private Limited's (STCPL) Long-Term Issuer Rating at
'IND B-'. The Outlook is Stable.
The instrument-wise rating action is:
-- INR70.0 mil. Fund-based working capital limits affirmed with
IND B-/Stable/IND A4 rating;
-- INR8.1 mil. Term loan due on October 2022 assigned with IND B-
/ Stable rating; and
-- INR9.4 mil. (reduced from INR17.5 mil.) Non-fund-based working
capital limits affirmed with IND A4 rating.
KEY RATING DRIVERS
The affirmation reflects STCPL's continuous small scale of
operation with revenue declining to INR188.5 million in FY19 from
INR195.1 million in FY18 (FY17: INR197.0 million; FY16: INR214.2
million) due to the receipt of fewer orders, the loss of a major
customer and volatile tea prices. According to the provisional
results for 9MFY20, the revenue was INR162.41 million. Ind-Ra
expects STCPL's revenue to be significantly impacted during the
last quarter of FY20 due to the outbreak of COVID-19 as the company
receives a major portion of its revenue from the export markets.
Liquidity Indicator - Poor: STCPL's average use of fund-based limit
was around 94% for the 12 months ended February 2020. STCPL's
working capital cycle remained elongated at 215 days in FY19 (FY18:
206 days) mainly on the rising debtor days and inventory days. The
inventory days increased to 190 days in FY19 (184 days in FY18) due
to a long inventory holding period of up to six months to overcome
raw material price variations. STCPL had a cash balance of INR0.7
million at FYE19 (FYE18: INR0.5 million). Cash flow from operations
turned positive at INR3.3 million in FY19 (FY18: negative INR22.0
million) due to improved operating EBITDA of INR18.4 million
(INR7.9 million). The company's free cash flow turned positive at
INR1.1 million in FY19 (FY18: negative INR24.9 million) due to
improved cash flow from operations. STCPL has scheduled debt
repayment INR4.78 million in FY20 and FY21. The debt service
coverage ratio is likely to remain in the range of 1.0x-1.28x over
FY20-FY22.
The rating factor in STCPL's modest-yet-improved credit metrics.
The interest coverage (operating EBITDA/gross interest expense)
stood at 2.1x in FY19 (FY18: 0.8x) and net leverage (adjusted net
debt/operating EBITDA) at 5.8x (13.6x). The credit metrics
improved year-on-year in FY19 mainly due to an increase in the
absolute EBITDA and unsecured debt along with a fall in interest
expense. The company's average EBITDA margin improved to 9.8% in
FY19 (FY18: 3.8%) on reduced raw material procurement cost. STCPL's
return on capital employed stood at 12.9% in FY19 (FY18: 1.8%).
The ratings remain constrained by the highly competitive and
price-sensitive industry STCPL operates in. The ratings are also
constrained by the company's substantial dependence on certain
geographies and customers coupled with heavy competition from both
organized and unorganized players.
However, the ratings remain supported by STCPL's 70 years of
operating experience and the current management's three-decade-long
experience in the tea industry, leading to established
relationships with customers and suppliers.
RATING SENSITIVITIES
Positive: Substantial growth in the revenue and EBITDA margin,
along with improved liquidity position, leading to an improvement
in the credit metrics could be positive for the ratings.
Negative: Any decline in the revenue and the EBITDA margin, along
with deterioration in the overall liquidity profile or unplanned
debt-led CAPEX, leading to a stretch in the credit metrics could be
negative for the ratings.
COMPANY PROFILE
Kerala-based STCPL was founded by V.G. Saraf in 1948 and
incorporated in 1994. It is engaged in the processing, blending,
and trading of packaged tea under the brand Suntips.
SHELL LIFESCIENCES: CRISIL Assigns B Rating to INR7cr Cash Loan
---------------------------------------------------------------
CRISIL has assigned its 'CRISIL B/Stable/CRISIL A4' ratings to the
bank facilities of Shell Lifesciences Pvt Ltd (SHLLCE).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 7 CRISIL B/Stable (Assigned)
Letter of Credit 3 CRISIL A4 (Assigned)
The ratings reflect SHLLCE's modest scale of operations and
below-average financial risk profile. These weakness are partially
offset by the extensive industry experience of-and funding support
received from, the promoters.
Analytical Approach
Unsecured loans of INR2.30 crore (as on March 31, 2019) from the
promoters have been treated as debt due to withdrawals in the
past.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations: Business profile is constrained by
the modest scale of operations as reflected in turnover of INR61.29
crore in fiscal 2019 in the intensely competitive traders
industry.
* Below-average financial risk profile: Total outside liabilities
to adjusted networth ratio was high at 6.31 times as on March 31,
2019 on account of modest networth of INR4.06 crore. Debt
protection metrics were also moderate, with interest coverage and
net cash accrual to adjusted debt ratios of 1.53 times and 0.07
time, respectively, in fiscal 2019.
Strengths
* Extensive experience of the promoters: The promoters' extensive
experience, their understanding of the dynamics of the market, and
healthy relationships with suppliers and customers should support
the business.
* Funding support from the promoters: The promoters are likely to
extend support in the form of equity and unsecured loans to meet
the company's working capital requirements and repayment
obligations.
Liquidity Poor
Liquidity is poor. Cash accrual, expected at a modest INR20-50 lakh
each fiscal would be insufficient against repayment obligation of
INR1.89 crore in fiscal 2020 and INR1.17 crore in fiscal 2021. The
fund-based bank line of INR7 crore was fully utilised for the 12
months through January 2020. However, liquidity is supported by
unsecured loans from promoters, which were INR2.3 crore as on March
31, 2019.
Outlook: Stable
CRISIL believes SHLLCE will continue to benefit from its
longstanding relationships with principals and experience of the
management to mitigate the inherent risk in trading business.
Rating Sensitivity factors
Upward Factors
* Increase in cash accrual to over INR1.5 crore
* Significant improvement in capital structure and working
capital cycle
Downward Factors
* Fall in operating margin to below 3% leading to significant
lower-than-expected cash accruals
* Increase in working capital requirement, larger-than-expected
debt-funded capital expenditure or acquisition, or more-than
-expected capital withdrawals, weakening the financial risk
profile, particularly liquidity.
SHLLCE, incorporated in 2007, is engaged in trading of chemicals,
alkaline and pharmaceutical ingredients. The promoters, Mr Kiran
Thakkar and Ms Madhuben C Thakkar, manage the operations.
TATA MOTORS: Moody's Puts 'Ba3' CFR on Review for Downgrade
-----------------------------------------------------------
Moody's Investors Service placed on review for downgrade Tata
Motors Limited's Ba3 corporate family rating and Ba3 senior
unsecured debt rating. The outlook has been revised to ratings
under review from negative.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak,
deteriorating global economic outlook, falling oil prices, and
asset price declines are creating a severe and extensive credit
shock across many sectors, regions and markets. The combined credit
effects of these developments are unprecedented. The automotive
sector has been one of the sectors most significantly affected by
the shock given its sensitivity to consumer demand and sentiment.
More specifically, weaknesses in TML's credit profile, including
its exposure to final consumer demand for automobiles, have left it
vulnerable to shifts in market sentiment in these unprecedented
operating conditions, and the company remains vulnerable to the
outbreak continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety. The action reflects the impact on the companies of the
breadth and severity of the shock, and the broad deterioration in
credit quality it has triggered.
Moody's review for downgrade of TML's ratings considers that demand
for new vehicles will reduce meaningfully over the coming months,
especially in the EMEA and North American markets. This is likely
to extend through the early summer at least, with a reasonable
recovery from the low points commencing at that time. Moody's
current assumptions are that global demand will shrink by about 14%
for all of 2020, and could be down in the range of 30% for the
second quarter.
Accelerating incidence of the coronavirus across the US and EMEA
could lead to even more extended production shutdowns and a much
delayed recovery on unit sales for TML's wholly owned subsidiary,
Jaguar Land Rover Automotive Plc (JLR, B1 ratings under review for
downgrade, RUR). Production facilities in JLR's UK facilities are
mostly closed, as are factories along the broader auto supply
chain. This should enable field inventories of unsold vehicles to
be somewhat restrained, but also leads to potential for meaningful
disruption even once new vehicle production starts back up, unless
the original equipment manufacturers (OEMs) and the extended supply
chain cooperate carefully.
Even without production for a couple of months, there will be an
overhang of inventory which could lead to considerable manufacturer
incentives before the new model year shipments. For now, Moody's
assumes a reasonable pace of recovery of demand as the third
quarter develops, however the risk to the downside is considerable
and further downside scenarios around the severity and duration of
the pandemic are uncertain.
For the Chinese and Indian markets, Moody's expects auto sales to
steadily improve from the level in the first quarter. Nevertheless,
these markets also faces downside risks in terms of the pace and
magnitude of the demand recovery.
Moody's review will focus on (1) the impact of the coronavirus
outbreak on the manufacturing operations of TML, including its
supply chain; (2) the impact on demand in TML's key global markets
amid subdued consumer sentiment and governments' containment
measures; (3) any government measures to support TML and consumers
in its main markets, as well as TML's own countermeasures; and (4)
TML's liquidity profile.
Moody's expects to conclude the review within 90 days.
In addition to the disruption from the outbreak of the coronavirus,
the auto industry also faces a number of longer-term challenges
related to environmental, social and governance (ESG) factors and
megatrends.
These include (1) increasing environmental standards, stricter
emissions regulation and electrification, (2) autonomous driving
and connectivity, (3) increasing vehicle safety regulations as well
as (4) new market entrants.
Moody's expects TML, alike other automakers, will need to make
sizeable investments over the coming years to weather these
challenges, in turn constraining its ability to turn around profit
and cash flow generation.
While Moody's believe TML's roadmap to become compliant with
stricter emissions regulation is largely achievable, compliance
costs have also materially increased in some regions. In addition,
the success of the roadmap will hinge to some degree on consumer
acceptance and pricing policies of peers that are not in the
control of individual automakers.
The principal methodology used in these ratings was Automobile
Manufacturer Industry published in June 2017.
Tata Motors Limited (TML), incorporated in 1945, is the largest
manufacturer of commercial vehicles and passenger vehicles in
India. The company's products include light, medium, and heavy
vehicles, such as trucks, pick-ups and buses, utility vehicles and
passenger cars.
TML's acquisition of Jaguar Land Rover Automotive Plc (JLR, B1
ratings under review for downgrade, RUR) in 2008 diversified the
group's profile through JLR's presence international markets of the
UK, Europe, the US, China, Russia and Brazil, and the introduction
of a diversified product range that includes JLR's product suite
across luxury cars.
TML is listed on the Bombay Stock Exchange, the National Stock
Exchange and the New York Stock Exchange. As of December 2019, TML
was 42.4% owned by Tata Sons and other Tata Group companies.
Pro-forma the just announced preferential allotment of shares and
conversion of the warrants, the Tata Group shareholding in TML will
increase to 46.4%.
=================
I N D O N E S I A
=================
GEO ENERGY: Fitch Lowers LongTerm Issuer Default Rating to CC
-------------------------------------------------------------
Fitch Ratings downgraded Geo Energy Resources Limited's Long-Term
Issuer Default Rating to 'CC' from 'B-'. The agency has also
downgraded the rating on subsidiary Geo Coal International Pte.
Ltd.'s outstanding senior unsecured guaranteed notes to 'CC' from
'B-' with a Recovery Rating of 'RR4'.
The downgrade reflects its view that a default of some kind appears
probable within the next 12 months. Fitch expects Geo's liquidity
to fall significantly short of the USD190 million principal due on
its bond's put date in May 2021 if the put option is triggered in
April 2021, and believes timely refinancing is highly unlikely for
Geo. The probability of acquiring Indonesian coal mines PT Bara
Anugrah Sejahtera (BAS) and PT Banjarsari Pribumi (BP), which could
help avoid the put option by meeting reserve requirements, has
declined significantly with multiple extensions of the deadline on
a conditional sale and purchase agreement with PT Titan Infra
Energy, the owner of the mines.
Even if Geo avoids triggering the put option through an asset
acquisition, its residual liquidity on hand will not be sufficient
to repay the principal on the bond upon the final maturity date in
October 2022. An acquisition may help Geo postpone its bond
redemption pressure, but is unlikely to materially strengthen its
credit profile due to its insufficient liquidity. This will keep
refinancing risk high for Geo's bonds, although the company will
have more than 12 months to explore refinancing options. Only a
significant improvement in seaborne coal prices, coupled with
favorable credit market sentiment, could potentially make
refinancing a possibility, but this is not its base-case
assumption.
Fitch does not treat Geo's recent bond buybacks as a distressed
debt exchange but believes it is opportunistic. The company said it
bought USD16 million in bonds from the secondary market between
December 5 and December 20, 2019, while the last buyback of USD31.8
million was on mutually agreed terms with investors who approached
the company to sell their holdings. The buybacks were at
considerable discounts to the par value, but the company says it
did not seek the purchases from the investors.
KEY RATING DRIVERS
Excessive Refinancing Risk: Fitch believes Geo faces significant
risk in refinancing the US dollar unsecured notes in light of its
deteriorating liquidity and persistent negative free cash flow due
to its expectation of weak coal prices. The company's operating
profile has weakened significantly as weak coal prices and falling
reserves have reduced its headroom to continue operations. Fitch
expects the company to experience a material cash shortfall and
believe Geo's access to new funding is highly unlikely.
Deteriorating Liquidity: Fitch expects Geo's liquidity to decline
further as it will continue to drain its cash balance to offset
weak coal prices and fund its capex requirements, reflecting its
weak cost position. Its cash balance fell sharply to around USD80
million in March 2020 after its bond buybacks in the past four
months and an advance payment of USD32 million to BAS and BP for
coal off-take. Fitch thinks the diminishing cash balance has eroded
Geo's ability to arrest the decline in its operating profile by
boosting its dwindling reserves through an acquisition.
Risks to Planned Acquisition: Fitch believes the likelihood of
Geo's proposed acquisition of a 51% stake in the two South
Sumatra-based coal mines - BAS & BP - has declined significantly.
Geo has extended the long date of the agreement twice, signaling
execution uncertainty. Nevertheless, Fitch does not believe the
acquisition would result in material improvement to Geo's credit
profile as the mines would not have significant cash accretion. Geo
would continue to find refinancing challenging when its US dollar
notes mature in October 2022, even if the acquisition were to avert
the April 2021 put option. Geo is required to repay the notes early
in May 2021 if its operating reserves are below 80 million tonnes
(mt) in April 2021; its operating reserves were 65mt at end-2019.
Weak Cost Position: Geo has one of the weakest energy-adjusted cost
positions among Fitch-rated Indonesian coal miners. This, coupled
with its average-quality coal and the recent downward revision of
coal prices by Fitch, will lower unit profitability to USD2.5/tonne
from around USD3/tonne in 2019 and USD10/tonne in 2018.
Declining Reserves; Small Scale: Fitch believes Geo's small and
declining reserve base is likely to challenge the continuity of its
operations in the absence of acquisitions. Geo's operating reserves
comprised 24mt at PT Sungal Danau Jaya (SDJ) and 41mt at PT Tanah
Bumbu Resources (TBR) at end-2019. The company will exhaust its
operating reserves in nine years, based on Fitch's expected annual
production of around 7.0mt (2019: 7.2mt, 2018: 7.9mt). Geo expects
8mt annual production in 2020.
Geo has two other mines, but one is still in the exploratory phase
and the other has a weak cost position, making mining operations
unviable. In addition, the mining licenses of the SDJ and TBR mines
expire in 2022. Fitch will treat any adverse developments
pertaining to the renewal of the licences, including non-renewal,
as an event risk.
Low Off-Taker and Contractor Risk: Geo has life-of-mine contracts
for its two key operating mines on all coal produced, minimising
off-take risk. However, Geo has high exposure to China, which
contributed 50% of its 2019 sales, exposing the company to the
slowdown in coal demand from China, which is among countries that
have faced the most disruptions from COVID-19.
Geo has prepayment facilities with off-takers for both mines, which
have been fully utilised, as of end-2019, limiting its flexibility
for future working-capital management. Its contractor risk is
reduced as it has coal production and over-burden removal contracts
for the mines with one of Indonesia's largest mining contractors,
PT Bukit Makmur Mandiri Utama (BB-/Stable).
DERIVATION SUMMARY
Geo's Indonesian coal-mining peer, PT Golden Energy Mines Tbk
(GEMS; B+/Stable), has a stronger credit profile with a larger
reserve base, better cost position, and comfortable liquidity
profile, which justifies rating Geo multiple notches below GEMS.
Macrotech Developers Limited's (MDL; CCC) rating was recently
affirmed as the company is able to address its immediate
refinancing needs partly through issuing a new bond. MDL faces
refinancing risk for its next material debt maturity in 2021. MDL
expects to rely on sales of commercial assets, undrawn credit lines
and inventory financing to cover these maturities. Geo has no
reliable alternative sources to cover the significant shortfall for
its US dollar maturities. This justifies its two-notch lower rating
to that of MDL, in its view.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer:
- Coal prices in line with Fitch's mid-cycle commodity-price
assumptions, adjusted for the difference in calorific value
(average Newcastle 6,000 kcal free on board or FOB/tonne:
USD65 in 2020, USD72 in 2021, USD72 in 2022 and USD70
thereafter).
- Annual total coal production from SDJ and TBR mines of 7mt
over the medium term.
- No acquisitions, no further bond buybacks and modest capex
over the medium term.
- Strip ratio to remain at around 3.6x (2018: 3.5x) and
production cost at less than USD29/tonne (2019: USD29.3/
tonne) over 2020-2024.
Recovery Assumptions:
- Recovery analysis for Geo is on a going-concern basis in case
of bankruptcy and assumes that the company would be
reorganised and not liquidated. Fitch has assumed a 10%
discount to enterprise value to account for bankruptcy-
related administrative claims.
- The going-concern EBITDA estimate of USD15 million reflects
Fitch's view of a sustainable, post-reorganisation EBITDA
level upon which Fitch bases the enterprise valuation.
The going-concern EBITDA is 5% below the mid-cycle EBITDA
based on Fitch's long-term average thermal coal-price
expectation.
- An enterprise value multiple of 4.5x EBITDA is applied to
the going-concern EBITDA to calculate a post-reorganisation
enterprise value. The multiple is slightly higher for Geo's
existing profile compared with the enterprise value/EBITDA
multiple used in recent M&A transactions in the sector and
the multiple at which Indonesian coal companies are currently
trading in the market. The higher multiple reflects the cash
balance maintained by Geo to acquire coal assets or pay down
its US dollar notes. The acquisition of coal assets would
boost EBITDA, but it would not result in additional assets
on the balance sheet, as coal mines are essentially owned
by the government and licensed to coal miners.
- An enterprise value multiple of 4.5x used to calculate a
post-reorganisation valuation also reflects a derived EBITDA
multiple based on a distressed valuation metric of around
USD1 per tonne of Geo's proved reserves.
- The waterfall results in a recovery of 33% for the US
dollar noteholders or a Recovery Rating of 'RR4'.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- Significant reduction in refinancing risk with improved
liquidity.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- A default or the start of a default-like process.
LIQUIDITY AND DEBT STRUCTURE
Deteriorating Liquidity: Geo's weak cash balance and
free-cash-flow-deficit profile will continue to weigh on its
liquidity. This follows the reduction in cash on Geo's recent bond
buybacks. Fitch estimates its unrestricted cash balance would be
around USD80 million in March 2020 without considering any further
bond buybacks. Its bond covenants allow additional debt for working
capital of up to USD40 million, but Fitch believes Geo's access to
funding remains highly uncertain and may be unavailable in current
market conditions and hence Fitch does not think this will support
Geo's liquidity.
ESG CONSIDERATIONS
ESG issues are credit neutral or have only a minimal credit impact
on the entity(ies), either due to their nature or the way in which
they are being managed by the entity(ies).
=========
J A P A N
=========
SOFTBANK GROUP: Moody's Cuts CFR & Senior Unsec. Rating to Ba3
--------------------------------------------------------------
Moody's Japan K.K. has downgraded SoftBank Group Corp.'s corporate
family rating and senior unsecured rating to Ba3 from Ba1, and its
subordinate rating to B2 from Ba3.
At the same time, Moody's has placed the ratings under review for
further downgrade.
The rating action follows SBG's announcement on 23 March 2020 that
it will monetize up to JPY4.5 trillion (about $41 billion) of its
investment portfolio and use the proceeds to repurchase up to JPY2
trillion ($18 billion) of its own shares. It will use the remaining
JPY2.5 trillion ($23 billion) to pay back its debt at the holding
company. The company plans to execute these transactions over the
next four quarters.
SBG's latest share repurchase plan is four times the JPY0.5
trillion share repurchase it announced less than two weeks ago.
RATINGS RATIONALE
The two-notch downgrade to Ba3 reflects SBG's aggressive financial
policy, as reflected by the unexpected size and apparent urgency of
the rapid series of share repurchases, just as the drop in the
stock market has put the value and liquidity of its portfolio value
under stress.
"Asset sales will be challenging in the current financial market
downturn, with valuations falling and a flight to quality," says
Motoki Yanase, a Moody's Vice President and Senior Credit Officer.
In particular, the value and credit quality of SBG's portfolio
would deteriorate if the company reduces some of its most liquid
and highly-valued listed investments, such as its stakes in Alibaba
Group Holding Limited (A1 stable), SoftBank Corp. and Sprint
Corporation (B2, review for upgrade). It is unclear why SBG is
undertaking such a dramatic recapitalization during a time of
severe stock and market volatility. Monetizing a significant part
of its investment at this time risks a discount as well as a
deterioration in the quality and value of its remaining portfolio.
The review for further downgrade considers the volatile capital
market conditions that could weaken the valuation of SBG's investee
companies, hinder the execution of its recapitalization plan, and
weaken SBG's leverage and liquidity position.
Moody's review will focus on (1) the extent to which the fall in
financial markets erodes the value and credit quality of the
investment portfolio that covers SBG's debt; (2) the timing and the
amount of asset sales the company is able to execute under the
current market conditions, as well as the credit quality of its
remaining investment portfolio; and (3) the change in SBG's capital
structure as it repurchases stock, pays down debt and increases
secured obligations such as margin loans.
In addition, Moody's recognizes SBG's substantial JPY1.7 trillion
(about $15 billion) of cash balance that covers the next two years'
scheduled debt maturities. Downward rating pressure would build if
this liquidity cushion weakens.
Given the ratings are on review for downgrade, Moody's does not
expect upward rating pressure in the foreseeable future. An upgrade
is possible longer term if the SBG executes on its recapitalization
and demonstrates greater transparency and sustainability of its
assets and capital structure.
Moody's would consider a further downward rating action if 1) there
is a significant deterioration in the credit quality of SBG's
investee companies, including difficulty in turning around WeWork;
2) cash held at the holding company level diminishes, such that its
cash and committed credit facilities no longer cover two years of
debt maturities; and 3) there is increase in debt, including margin
loans and crystallization of legal or other contingent
obligations.
The principal methodology used in these ratings was Investment
Holding Companies and Conglomerates (Japanese) published in August
2018.
Headquartered in Tokyo, SoftBank Group Corp. is a Japanese holding
company, with subsidiaries engaged in various businesses, including
telecommunications, internet and other technology businesses.
The following ratings are affected by the rating actions:
Issuer: SoftBank Group Corp.
Corporate family rating, downgraded to Ba3 from Ba1, review for
further downgrade
Senior Unsecured (Foreign) Regular Bond/Debenture, downgraded
to Ba3 from Ba1, review for further downgrade
Subordinate (Foreign), downgraded to B2 from Ba3, review for
further downgrade
Outlook, changed to rating under review from stable
UNIVERSAL ENTERTAINMENT: Fitch Puts B+ LT IDR on Rating Watch Neg.
------------------------------------------------------------------
Fitch Ratings has placed Japan-based Universal Entertainment
Corporation's (UE) 'B+' Long-Term Issuer Default Rating and senior
secured rating of 'B+' with a Recovery Rating of 'RR4' on Rating
Watch Negative.
The RWN reflects increased uncertainty over UE's cash flow
generation following the closure of the Okada Manila, its
integrated casino resort (IR) in the Philippines, due to the
coronavirus pandemic. The gaming sector is highly exposed to the
outbreak and UE's exposure is exacerbated by its single location
focus and its lack of a track record in casino operations as the IR
is still in the ramp-up phase.
A prolonged closure of the IR could exacerbate existing weakness in
the domestic amusement-equipment business, which had only begun to
recover from a prolonged slump prior to the outbreak, and result in
leverage exceeding its negative guidance. Fitch will resolve the
Rating Watch after Fitch evaluates the impact of the pandemic on
UE's business and financial profile and examine the likelihood of
operational performance stabilising and credit metrics returning to
levels commensurate with the 'B+' rating ahead of the maturity of
its US dollar notes in December 2021.
KEY RATING DRIVERS
Uncertainty over Casino Expansion: The RWN is driven by increased
uncertainty over the completion of the ramp-up and further
expansion of the Okada Manila, which is in the capital's
Entertainment City, where all casinos suspended operations on March
15 for one month under an order by the local regulator. The IR
business has until now expanded dynamically and contributed more
than half of consolidated revenue and EBITDA in 2019. In view of
this, the closure is likely to weaken UE's cash flow materially at
least over the near term. Fitch considers the risk of an extended
suspension high in light of the severity of the outbreak. Economic
uncertainty and lack of consumer confidence could lead to a
prolonged earnings decline even if operations were to resume
swiftly.
Delay Risk in Domestic Recovery: UE's other main segment, the
amusement-entertainment business, which focusses on production and
sales of pachinko and pachislot machines for Japanese pachinko
halls, has been in a structural decline with volatile earnings.
Fitch was expecting a recovery, driven by replacement demand for
new machines compliant with more stringent new regulations around
2H20, but a delay in the recovery is now possible or it may be more
muted than Fitch previously anticipated if operators face declining
player numbers or suspension orders in response to the coronavirus
outbreak.
Improved Capital Structure, Sufficient Liquidity: UE has improved
its capital structure from prior years by cutting interest-bearing
debt from JPY252 billion at end-2017 to JPY84 billion by end-2019
and reducing its reliance on short-term financing. UE's short-term
debt of JPY8 billion at end-2019 was comfortably covered by a cash
balance of JPY38 billion. Refinancing risk is manageable as its
USD600 million notes only mature in December 2021. However, Fitch
notes that a prolonged IR closure could lead to declining liquidity
as well as negatively affect UE's access to funding. Fitch will
therefore continue to evaluate the impact of the closure on UE's
liquidity, cash flow generation and refinancing options closely.
Year-to-Date, 2019 Performance on Track: UE's 2019 revenue and
EBITDA growth were broadly in line with its expectations and
underline its view that the IR has a strong market position thanks
to its leading scale and high-end status. Fitch understands that
the previously delayed works on Hotel Tower B had been progressing
as scheduled before the outbreak and additional rooms had come
online, which had helped boost visitor numbers in the first two
months of 2020, driving further revenue and EBITDA growth. Fitch
therefore believes UE would be well placed to benefit from any
potential recovery. Fitch regards a quick return to normal
operations as unlikely, however, and would thus expect any recovery
to be muted due to the discretionary nature of UE's services and
products.
DERIVATION SUMMARY
UE operates the largest casino in Manila's Entertainment City, but
on a standalone basis, the scale of the IR is modest compared with
that of most peers such as Crown Resorts Limited (BBB/Stable) and
Las Vegas Sands Corp (BBB-/Stable). UE's profitability is roughly
in line with that of the two peers but Fitch thinks its casino
business is more vulnerable because it is dependent on a single
location while Crown's resorts are spread across Australia and
Sands has multiple attractive locations. Crown and Sands also
operate in more stable regulatory regimes than UE.
The Japanese company's execution and operational risks are also
notably higher than that of Crown and other peers as UE has not yet
established a track record in the junket and high-roller segments.
Heightened volatility in the previously stable domestic
amusement-equipment segment in 2018 and early 2019 in the wake of
regulatory changes adds to the uncertainty amid the lack of
visibility over the timing and extent of a recovery. This offsets
UE's moderate leverage and robust coverage metrics to a large
extent.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Revenue to drop by 18.9% in 2020 on IR closure and weaker
amusement-equipment sales, but increase by 7.7% in 2021
as IR expansion and recovery in domestic business resume
- EBITDA margin of 7.3% in 2020 (2019: 14.6%) and 13% in 2021
- Annual capex of JPY6 billion in 2020 and JPY5 billion in 2021
- No dividends or share buybacks in 2020-2021
Recovery Rating Assumptions:
Its distressed scenario is based on going-concern value as Fitch
believes it would maximise recovery for creditors. Fitch has
assumed a 16% discount to a projected EBITDA of JPY20 billion,
broadly in line with its base-case projection for group EBITDA
after the completion of the casino expansion, a distressed
enterprise value/EBITDA multiple of 4.5x and 10% administrative
claims.
A country cap applies under Fitch's criteria, despite the notes
being secured obligations of subsidiary guarantors, because of the
lack of a track record of enforceability in the Philippines, the
location of the IR and the source of much of the group's earnings
and cash flows in Fitch's projections. This limits the instrument
rating to 'B+'/'RR4'/50%.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- The RWN will be resolved if UE manages to overcome earnings
pressure from the IR closure and further weakness in the
domestic business through cost savings and continues to
maintain sufficient liquidity in the event of a prolonged IR
closure.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Deteriorating liquidity
- Material deterioration in cash flow generation and leverage
metrics or industry outlook
- Significant deterioration in order book and new orders in the
amusement-equipment business
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity, Manageable Maturities: UE's 2019 readily
available cash of JPY38 billion comfortably covered short-term debt
of JPY8 billion. The company projects a similar amount of
short-term debt and a cash balance of about JPY30 billion by
end-1Q20, which Fitch regards as sufficient for the time being.
Fitch also believes refinancing risk is manageable at this stage,
considering UE's USD600 million notes mature in December 2021.
However, Fitch notes that liquidity could decline and refinancing
risk may rise in the event of an extended closure of the IR and
heightened market volatility, depending on the length and evolution
of the coronavirus outbreak.
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.
UE has an ESG Relevance Score of '4' for Governance Structure due
to a dispute with its founder and former chairman Kazuo Okada,
which presents risks to the company's reputation and operations.
This has a negative impact on the credit profile, and is relevant
to the rating in conjunction with other factors.
=================
S I N G A P O R E
=================
HOOQ DIGITAL: Starts Creditors' Voluntary Liquidation
-----------------------------------------------------
The Business Times reports that HOOQ Digital, a joint-venture
company in which Singtel has an indirect 76.5 per cent effective
interest, has commenced a creditors' voluntary liquidation.
A shareholder meeting as well as a creditor meeting will take place
on April 13, the video-on-demand streaming service provider said in
a media statement on March 27, the report discloses.
Hooq has appointed Messrs Lim Siew Soo and Brendon Yeo Sau Jin as
its joint and several provisional liquidators to oversee ongoing
operations in the interim period, according to BT.
Since the company was founded five years ago, "significant
structural changes" have occurred in the over-the-top (OTT) video
market and its competitive landscape, Hooq said in its statement.
OTT film and television content is provided via a high-speed
Internet connection rather than a cable or satellite provider.
"Global and local content providers are increasingly going direct,
the cost of content remains high, and emerging-market consumers'
willingness to pay has increased only gradually amid an increasing
array of choices," Hooq, as cited by BT, said.
As a result of these changes, a viable business model for an
independent OTT distribution platform has become increasingly
challenged, it added.
Hooq has thus been unable to grow sufficiently to provide
sustainable returns nor cover escalating content costs and the
continuous operating costs of the platform, according to the
statement cited by BT.
Janice Chong, Fitch Ratings' director of Asia-Pacific corporate
ratings, told The Business Times (BT) that the premium OTT video
business is challenging amid "intense competition" in
video-streaming services, the significant content investment
required and the lack of ability to monetise content for telcos.
Singtel disclosed in a brief regulatory filing on March 28 that the
Hooq liquidation is not expected to have a material impact on the
telco's net tangible assets or earnings per share, BT adds.
===============
T H A I L A N D
===============
[*] Thai Airlines to Seek THB16 Billion Government Bailout
----------------------------------------------------------
The Bangkok Post reports that seven Thai airlines are likely to
seek a THB16 billion bailout from the Finance Ministry so they can
keep employees while their services are suspended.
The carriers are Thai AirAsia, Thai Lion Air, Nok Air, Bangkok
Airways, THAI Smile, Thai VietjetAir and Thai AirAsia X, the report
says.
Tassapon Bijleveld, executive chairman of Asia Aviation (AAV), the
largest shareholder of Thai AirAsia, told the Bangkok Post that the
seven airlines had reached an agreement to request the financial
aid in the wake of the novel coronavirus outbreak which dampened
passenger demands and forced global lockdowns.
The aviation industry in the country has been suspending most of
their international and domestic services since last week, the Post
notes.
In a discussion with the Finance Ministry expected today March 30,
the airlines hope to secure the financial package, such as
long-term loans, to increase liquidity, and get subsidies on
payroll, the Post relays.
"All airlines are tightening belts in the tough time. Thai AirAsia
still keeps hiring employees but with pay cuts of up to 30%. But
even though we're doing our best, for ThaiAirAsia, the survival
period will last only three months without injection," the report
quotes Mr. Tassapon as saying.
*********
S U B S C R I P T I O N I N F O R M A T I O N
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Editors.
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