/raid1/www/Hosts/bankrupt/TCRAP_Public/200403.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
Friday, April 3, 2020, Vol. 23, No. 68
Headlines
A U S T R A L I A
184-186 BAY ST DEVELOPMENT: 2nd Creditors' Meeting Set for April 8
ADANI ABBOT: Fitch Lowers Rating on Sr. Secured Debt to BB+
AMPHORA FINANCE: Fitch Alters Outlook on B Term Loan Rating to Neg.
CMC MANAGEMENT: Second Creditors' Meeting Set for April 8
HALLMARK (PERTH): First Creditors' Meeting Set for April 9
HORTH INVESTMENTS: Second Creditors' Meeting Set for April 9
MEZETHES SALAMANCA: First Creditors' Meeting Set for April 15
PLAYSPORT HOLDINGS: Second Creditors' Meeting Set for April 9
PROSPA TRUST 2018-1: Moody's Reviews 3 Tranches for Downgrade
SHIELD MERCANTILE: Second Creditors' Meeting Set for April 7
STELLER 168: Second Creditors' Meeting Set for April 7
TRIMANTIUM INVESTMENT: Second Creditors' Meeting Set for April 8
VICTORIA WIDE: First Creditors' Meeting Set for April 14
C H I N A
21VIANET GROUP: Fitch Alters Outlook on B+ LT IDR to Negative
ALAM SUTERA: Moody's Lowers CFR to Caa1, Outlook Negative
CHINA GRAND: Fitch Lowers LongTerm IDR to B+, Outlook Negative
CHINA LOGISTICS: Moody's Cuts CFR & Sr. Unsec. Rating to Caa1
GREENTOWN CHINA: Moody's Alters Outlook on Ba3 CFR to Stable
OCEANWIDE HOLDINGS: Fitch Withdraws CCC+ Issuer Default Rating
YIDA CHINA: S&P Raises ICR to 'CCC-' on Exchange Offer Completion
ZHENRO PROPERTIES: S&P Affirms 'B' LongTerm ICR, Outlook Positive
I N D I A
B.V.S. DISTILLERIES: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
BVL INFRASTRUCTURE: CRISIL Cuts Rating on INR13.5cr Loan to D
DELHI INT'L AIRPORT: Fitch Alters Outlook on BB+ LT IDR to Negative
HYDERABAD AIRPORT: Fitch Affirms BB+ LT IDR, Outlook Negative
IDBI BANK: Fitch Alters Outlook on BB+ LT IDR to Negative
KAY EM COPPER: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
P D ENTERPRISES: CRISIL Moves B+ on INR10cr Loan to Not Cooperating
PATTELA PROJECTS: CRISIL Keeps B+ Debt Rating in Not Cooperating
POPULAR MOTOR: CRISIL Moves B+ on INR15.5cr Loans to NonCooperating
PRIME RETAIL: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
R.A. MOTORS: CRISIL Moves B+ Debt Ratings to Not Cooperating
R.S. DREAMLAND: CRISIL Moves B on INR12cr Loan to Not Cooperating
RAJARAMSEVAK MULTIPURPOSE: Ind-Ra Lowers LT Issuer Rating to 'D'
RIYA IMPEX: Ind-Ra Lowers LT Issuer Rating to 'B', Outlook Stable
S. T. DYEING: CRISIL Withdraws 'B+' Rating on INR9cr Loans
S.V. MOTORS: CRISIL Keeps B+ on INR6.5cr Loans in Not Cooperating
SAI GANESH: CRISIL Migrates 'B' Debt Ratings to Not Cooperating
SAMBASHIVA COTTON: CRISIL Migrates B+ Ratings to Not Cooperating
SEVEN SEAS: CRISIL Keeps D on INR222cr Loans in Not Cooperating
SIVARATHISH SPINNING: CRISIL Cuts Rating on INR4.75cr Loan to B+
SMT. VISHNU: CRISIL Keeps D on INR8cr Loan in Not Cooperating
SUPER CONSTRUCTION: CRISIL Keeps D Debt Ratings in Not Cooperating
SUPREME SOLVEX: CRISIL Lowers Rating on INR6cr Cash Loan to B+
SWASTIKA PRINTING: CRISIL Keeps B+ on INR6cr Debt in NonCooperating
T. C. MOTORS: CRISIL Lowers Rating on INR4cr Cash Loan to B+
T.J.S. ENGINEERING: CRISIL Keeps D on INR9cr Debt in NonCooperating
TAXUS INFRASTRUCTURE: CRISIL Keeps 'C' Rating in Not Cooperating
UNIQUE FOODS: CRISIL Lowers Ratings on INR15cr Loans to B+
UNISONN INFRASTRUCTURES: CRISIL Keeps D Ratings in Not Cooperating
UTTAMENERGY LIMITED: Ind-Ra Lowers LT Issuer Rating to 'BB+'
V.N.M.S. AYYACHAMY: CRISIL Keeps B+ Debt Rating in Not Cooperating
V.S. BUILDCON: CRISIL Keeps D on INR10cr Loan in Not Cooperating
VEERPRABHU EXPORT: CRISIL Keeps B on INR16cr Debt in NonCooperating
VEGGIECRAFT FOOD: CRISIL Moves D Ratings to Not Cooperating
VIJAYA DURGA: CRISIL Keeps B on INR8cr Loans in Not Cooperating
VIKRAM TEA: CRISIL Cuts Rating on INR30cr Cash Loan to B+
VIOLA RESORTS: CRISIL Keeps B- on INR15cr Loans in Not Cooperating
YASH CONSTRUCTION: CRISIL Moves B Debt Ratings to Not Cooperating
I N D O N E S I A
AGUNG PODOMORO: Moody's Lowers CFR to B3, Outlook Negative
GAJAH TUNGGAL: Moody's Cuts CFR & Senior Secured Rating to Caa1
INDIKA ENERGY: Fitch Alters Outlook on BB- LT IDR to Negative
INDONESIA: Braces for Recession, Activates Crisis Protocol
LIPPO KARAWACI: Fitch Alters Outlook on B- LT IDRs to Negative
LIPPO MALLS: Moody's Alters Outlook on Ba3 CFR to Negative
J A P A N
NIPPON YUSEN: Moody's Alters Outlook on Ba1 CFR to Negative
O.S.K. LINES: Moody's Alters Outlook on Ba2 CFR to Negative
N E W Z E A L A N D
FE INVESTMENTS: Goes Into Receivership
KIKKI.K NZ: Placed Into Liquidation
P H I L I P P I N E S
[*] PHILIPPINES: Airlines Seek Government Help to Survive Virus
- - - - -
=================
A U S T R A L I A
=================
184-186 BAY ST DEVELOPMENT: 2nd Creditors' Meeting Set for April 8
------------------------------------------------------------------
A second meeting of creditors in the proceedings of 184-186 Bay St
Development Pty Ltd has been set for April 8, 2020, at 2:00 p.m.
via teleconference.
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 7, 2020, at 5:00 p.m.
Matthew James Jess of Worrells Solvency & Forensic Accountants was
appointed as administrator of 184-186 Bay on March 3, 2020.
ADANI ABBOT: Fitch Lowers Rating on Sr. Secured Debt to BB+
-----------------------------------------------------------
Fitch Ratings has downgraded the ratings of the senior secured debt
of Adani Abbot Point Terminal Pty Limited to 'BB+' from 'BBB-', and
placed the ratings on Rating Watch Negative.
RATING RATIONALE
The downgrade follows the cancellation of the AAPT's planned
US144/Regulation S debt issuance, which was scheduled to be
finalised in March. The proceeds of the issuance were to be used to
refinance upcoming debt maturities, including a AUD100 million note
maturing in May 2020, a AUD170 million bank facility maturing in
November 2020, and, if sufficient, the USD140 million private
placement maturing in September 2021. AAPT had completed draft
documentation and carried out investor presentations in the first
two weeks of March, but then terminated the financing due to
weakness in the financial markets as a result of the coronavirus
pandemic.
The company now plans to refinance the May 2020 maturity using
Adani Group funds, which are planned to be provided to AAPT on
April 3 as subordinated shareholder loans and used for the
repayment on April 17. AAPT has given the necessary 30-day
prepayment notice to the noteholders. AAPT has also indicated that
similar funding would be used, if necessary, to repay the debt
maturing in November 2020.
Nonetheless, Fitch sees a material risk to completion of the
refinancing since AAPT does not currently have the funds to repay
the May or November 2020 maturities. Fitch's rating action
commentary "Fitch Affirms Adani Abbot Point Terminal at 'BBB-';
Outlook Stable", published on November 5, 2019, noted that failure
to start addressing refinancing of debt issues at least 12 months
in advance of maturity can lead to a rating downgrade. In that
commentary, Fitch also noted that AAPT's financing options are
limited by lenders' increasing concerns over coal assets,
compounding the refinancing risk of its bullet debt maturities.
The pandemic increases the risk of a downturn in the coal sector.
Fitch conducted a rating case and a sensitivity case to the above
credits to assess coverage and liquidity. In the rating case
scenario, volume declines approximately 10% in 2020 relative to
2019 actual levels based on the following assumptions of quarterly
traffic activity: modest impact in 1Q20; severe downturn in 2Q20;
stabilising in 3Q20; and partial recovery from 4Q20. For 2021,
Fitch assumes a recovery relative to 2019 levels. This downturn is
assumed to contribute to a reduction in contracted capacity for
AAPT in the near term. A more severe sensitivity case assumes
traffic declines continue at the same peak traffic loss of 2Q20 for
an additional quarterly period followed by a recovery at similar
levels to the rating case.
The pandemic and related government containment measures worldwide
create an uncertain global environment for the coal sector in the
near term. AAPT's performance data, through the most recently
available issuer data, may not have indicated impairment, but
material changes in revenue and cost profile are occurring across
the Asia-Pacific region and will worsen in coming weeks and months
as economic activity suffers and government restrictions are
maintained or expanded. Fitch's ratings are forward-looking and
Fitch will monitor pandemic-related developments in the sector for
severity and duration, and incorporate revised base- and
rating-case qualitative and quantitative inputs based on its
expectations for performance and assessment of key risks.
Fitch will resolve the RWN once Fitch has clarity on the
refinancing of the May 2020 maturity and the funding for repayment
of the November 2020 and September 2021 maturities, which could
take more than six months.
KEY RATING DRIVERS
Mainly Low-Cost Users: Volume Risk - Midrange
Fitch regards AAPT a secondary port as it solely handles coal. The
port's users provide some diversity of product and sources but AAPT
is highly concentrated, with approximately 60% in metallurgical
coal and 40% thermal coal. The production cash costs of the
metallurgical mines are mainly in the lower half of the curve and
are well below Fitch's long-term price forecast of USD110/tonne.
The thermal coal mines are grouped at the high end of the cost
curve, but they also benefit from producing profitable
metallurgical coal. Contracted capacity is less than the nominal
capacity of 50 million tonnes per annum (mtpa). Adani Mining has
signed a contract for 9.3mtpa beginning 2023 to service its
Carmichael Mine that is under development in the Galilee Basin.
AAPT has strong rail transportation links with its customers,
particularly those in the northern Bowen Basin that are relatively
close to the port. For the mines further south, AAPT faces greater
exposure to competition from the lower-cost Dalrymple Bay Coal
Terminal (DBCT) about 200km to the southeast. DBCT is now
effectively fully contracted, limiting the competitive impact in
the near term. Mines under development in the Galilee Basin, in
central Queensland, plan rail lines to link to Abbot Point. Fitch
expects any new port facilities to be substantially more expensive
than AAPT because of higher construction costs.
Medium-Term Ship-or-Pay Contracts: Price Risk - Midrange
AAPT benefits from a weighted-average contract life of more than
six years of ship-or-pay contracts. AAPT is not regulated, although
users pay a terminal infrastructure charge (TIC) that allows AAPT
to earn a market return on its depreciated asset value. Fixed and
variable operations and maintenance costs are passed through to the
users. Payment is on a ship-or-pay basis, and no force majeure
waiver exists.
AAPT resets the TIC every five years based on an updated return
calculation and forecast of capex to be incurred during the next
five years. The users can refer the calculation to arbitration to
contest the price. If any user does not renew or defaults, the TIC
for the remaining users is increased at the next price reset to
maintain AAPT's return. Fitch believes that in practice, the TIC is
a mainly a negotiated outcome between AAPT and its users. Four of
the users requested arbitration to set the fees, which have now
been finalised, following the 2017 price reset.
Well-Funded Maintenance: Infrastructure Development and Renewal -
Midrange
The port's capacity expansion to 50mtpa was completed in 2012 and
it is fully operational. AAPT incurred around AUD120 million of
capex over the past five years, including the upgrade and
replacement of a ship loader and a stacker-reclaimer, which were
added to the depreciated asset value used in the TIC calculation,
in accordance with the technical advisor's recommendations in 2012.
Fitch forecasts annual maintenance capex at around AUD6 million,
covered by cash flow from operations.
Debt Structure - Midrange
The bullet debt structure creates refinancing risk, which is
compounded by the exposure to the coal market. Lenders benefit from
a good security package, including step-in rights under a
tripartite agreement with the government lessor, as well as a
six-month debt-service reserve account and interest and currency
hedging requirements. The cash-flow coverage ratio covenants
include distribution lock-up at 1.40x and default at 1.10x, which
are weaker because no principal is being amortised. A
volume-weighted average mine life of AAPT's users below 16 years
triggers a 75% cash sweep to a senior debt redemption account and a
debt amortisation programme would be incorporated in the next
refinance structure. The cash sweep increases up to 100% if AAPT
deems it necessary.
PEER GROUP
AAPT's closest peer is Queensland-based DBCT Finance Pty Limited
(senior secured rating BBB-/Stable), the financing vehicle for the
operator of DBCT, which, like AAPT, is a single-purpose coal export
terminal but with a higher capacity of 85mtpa. DBCT users also have
ship-or-pay contracts but with a lower remaining weighted-average
term of around five years, compared with more than six years at
AAPT. Both terminals have a similar mix of users without parent
company guarantees, with some user concentration. DBCT's position
is more competitive than AAPT's on location and pricing, resulting
in some AAPT throughput moving to DBCT when one of AAPT's user
mines was sold to a new owner that had unused contracted capacity
at DBCT.
Newcastle Coal Infrastructure Group Pty Ltd (NCIG, senior secured
rating BBB-/Stable), a New South Wales-based coal export terminal,
is also a close peer. NCIG has a stronger contractual structure
with rolling 10-year terms, although both terminals have
ship-or-pay contracts, and termination by an NCIG user essentially
requires a payout of the user's pro rata share of the capital cost
of the terminal. Both issuers use bullet-maturity debt instruments,
but NCIG incorporates partial amortisation and plans to fully repay
its senior debt by 2038. AAPT has no amortisation planned, but
benefits from a long concession that extends to 2110. AAPT's
throughput consists mainly of metallurgical coal, which Fitch sees
as less risky in terms of long-term demand than thermal coal, which
makes up the majority of NCIG's throughput.
Port of Melbourne (issuing entity Lonsdale Finance Pty Ltd,
BBB/Stable), the primary port of call serving the Victorian and
broader south-east Australian market, has stronger key rating
driver assessments, including volume, price, and infrastructure
development and renewal. The port has much more diverse throughput
with minimal commodity exposure, unlike AAPT, which is exposed to
more volatile commodities as it is used solely for coal exports.
RATING SENSITIVITIES
Developments that may, individually or collectively, lead to
negative rating action:
- A decline in AAPT's contracted capacity due to customer default
or non-renewal of contract
- A projected five-year average net debt/EBITDA above 10.0x in
Fitch's rating case
- Failure to address refinancing of debt issues at least 12
months in advance of maturity
Developments that may, individually or collectively, lead to
positive rating action:
- To resolve the RWN and stabilise the rating
Fitch will resolve the RWN once Fitch has clarity on the
refinancing of the May 2020 maturity and the funding for repayment
of the November 2020 and September 2021 maturities, which could
take more than six months.
AMPHORA FINANCE: Fitch Alters Outlook on B Term Loan Rating to Neg.
-------------------------------------------------------------------
Fitch Ratings has revised the Outlook on Amphora Finance Limited's
Long-Term Foreign-Currency Issuer Default Rating to Negative from
Stable and has affirmed the rating at 'B'. Fitch has also affirmed
the rating on Amphora's senior secured GBP301 million Term Loan B,
due in 2025, at 'BB-' with a Recovery Rating of 'RR2'.
Amphora is a holding company that wholly owns Accolade Wines, the
fifth-largest wine company globally by volume and a leading
competitor in the UK and Australia.
The Negative Outlook reflects the risks to Amphora's deleveraging
such that its leverage - measured as funds from operations/net debt
(FFO net leverage) - remains above 5.0x longer than its previous
expectations. This is due to the company experiencing delays in
achieving its cost savings, together with its premiumisation
strategy - a key driver for improving profitability that involves
appealing to consumers by emphasising exclusivity and better
quality - to be hindered by the coronavirus restrictions globally.
In particular, Fitch believes social distancing measures
implemented by the Australian and UK governments will see lower
demand for premium wines that is likely to continue even after the
restrictions are lifted, as unemployment surges and household
finances come under increasing strain. As a result, Fitch expects
FFO net leverage to remain above the negative sensitivity of 5.0x
until the financial year ending June 2022 (FY22) and for Accolade's
EBITDA margin to stay below 10% until at least FY23. This compares
with its prior forecast, which saw Accolade deleverage to below its
previous negative sensitivities in FY21.
Accolade's volume is likely to be less affected, as consumers
substitute on-premise for off-premise drinking in its two main
markets, Australia and the UK - although this is unlikely to be a
one-for-one trade. Furthermore, Accolade is under-represented in
off-premises trade in Australia and in both markets has a portfolio
that remains skewed to lower-value wines. This should also support
its volume.
The affirmation reflects its assessment that Accolade will still
achieve significant cost savings and improve its profitability as
it implements its strategy over the long term. This may take around
a year longer than previously anticipated owing to delays in
achieving cost savings because of commissioning issues, which have
since been mostly resolved, and a redesign of part of the bottling
system, which has been partially resolved and will be completed
following the installation of the second line at Berri in FY21, and
compounded by COVID-19. However, Fitch believes the changes will
provide a strong foundation for profitability, better cash flow and
deleveraging to a level in line with its rating, once implemented.
Fitch has amended Accolade's rating sensitivities to reflect the
impact of its new methodology on the treatment of leases following
the implementation of accounting standards dealing with the
treatment of leases. Under its methodology, Fitch no longer
capitalises leases as debt for alcoholic beverage companies, and
instead treat leases as operating expenses.
KEY RATING DRIVERS
High Leverage, Reduction Delayed: Fitch believes that Accolade's
ability to reduce its leverage, which has remained elevated since
its acquisition by Carlyle Group, has been hampered in the
short-term by delays in it achieving planned cost savings at its
Berri facility and the coronavirus-related social distancing
measures that affect its main markets of Australia and the UK.
These markets made up around 85% of sales in FY19. Fitch now
expects Accolade to commence deleveraging in FY21 and for its new
metric, FFO net leverage, to fall to 5.0x in FY22 - the first
full-year of realisation of the expected cost savings and normal
operations following easing of the coronavirus restrictions. This
is a year later than its previous expectations and is reflected in
its Negative Outlook.
Premiumisation Strategy Affected by COVID-19: Fitch expects
Accolade's ability to achieve premiumisation of its portfolio, and
improve its margin, to be subdued in the short-term because of
social distancing and the surge in unemployment as governments deal
with the coronavirus pandemic. Fitch now expects that consumers in
Australia and the UK will prefer to purchase lower-priced wine
during 4QFY20 and 1QFY21 as household finances remain strained.
Fitch believes that this trend will begin to reverse towards the
end of 2020, but is one of the main factors slowing its
expectations of Accolade's EBITDA improvement.
Fitch expects the impact on Accolade's Asian operations to be
mainly felt in FY20, as coronavirus restrictions were implemented
earlier in the region. Fitch believes that there will continue to
be some delays to successfully pursuing premiumisation in FY21, but
that this will be less pronounced than in Australia and the UK as
restrictions begin to ease. Fitch now expects Accolade's EBITDA
margin to improve to 9% by FY23, compared with reaching over 10% by
FY21 previously. However, Fitch continues to believe that the trend
towards premiumisation is a key growth driver in the wine industry
over the long term, particularly in Accolade's key markets of
Australia and the UK.
Growth from China Delayed: Accolade's ability to increase its
limited footprint in China has been hampered since the outbreak of
COVID-19 in early 2020, with restrictions placed on socialising
weakening demand for alcohol in the country. Nevertheless, Fitch
expects the easing of restrictions, probably over the coming
months, as well as the company's small footprint in the country and
building of an experienced team to focus on its Chinese operations,
to provide a base for growth in China, the world's fifth-largest
wine market in 2018, according to the International Organisation of
Vine and Wine. Fitch has included some benefits of the company's
expansion into China from FY21.
Sustainable Supply: Accolade is reliant on external suppliers, in
particular The Riverland Grape Producers Co-operative (CCW), which
supplies nearly half of Accolade's grapes under an evergreen supply
contract. Fitch understands that Accolade has committed to
purchasing its committed quantities during the 2020 harvest,
despite any potential declines in demand as a result of coronavirus
or due to the presence of smoke taint following the recent
Australian bushfires, which affected some Accolade-sourced grapes
in the Barossa Valley. As a result, Fitch expects Accolade's
inventory levels to be elevated at FYE20 and FYE21, while there is
likely to be modest increases in production costs associated with
sales over the next few years to mitigate the risk of smoke taint
in the product.
Leading Global Wine Producer: Accolade is the leading wine company
in the UK by volume and value, with 8% market share; this is twice
the market of the second-largest UK competitor. In Australia, it is
the leading competitor by volume and number two by value. The UK
and Australia rank sixth and tenth, respectively, in total wine
consumption globally and consumption has been resilient even during
economic downturns. Accolade's portfolio of around 50 brands
supports its market position, and includes Hardys - the
best-selling wine brand in the UK and one of the top-10 brands
globally.
Term Loan B Notched for Security: The rating on Amphora's senior
secured GBP301 million Term Loan B, due 2025, reflects the
guarantee and security provided under its terms. The loan is
guaranteed by entities within the wholly owned group, which cover
at least 80% of group EBITDA, including all companies contributing
5% or more of group EBITDA on a standalone basis. The loan also
benefits from security over group assets, with a floating charge
over the shares and all assets in the UK and Australia. Its bespoke
analysis indicates a recovery given default of 90%, as reflected in
the 'RR2' Recovery Rating assigned to the loan.
DERIVATION SUMMARY
Amphora's rating reflects its high leverage, which constrains the
company's IDR to 'B'. Amphora's financial profile is weaker than
that of global peer, Russian spirits producer PJSC BELUGA GROUP
(B+/Stable). This reflects Fitch's expectation that Amphora's FFO
net leverage will remain above 4.0x until at least FYE23, compared
with Beluga's of around 1.0x lower over the same period. Beluga
also has a leading market position in Russia and strong brand
portfolio in the Russian spirits market. These factors account for
the one-notch differential between the two companies' IDRs.
Beluga's rating also reflects the higher-than-average systemic
risks associated with the Russian business and jurisdictional
environment.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Group sales volume of between 24 million and 27 million
nine-litre cases a year. This is around 10% lower than its previous
forecast to reflect the impact of coronavirus, excluding the effect
of the exit of the US business. Fitch now expects forecast volumes
to be 3%-4% lower in Australia and around 3% lower in the UK in
FY20 and FY21 than previous forecasts.
- Price per case to increase due to premiumisation of Accolade's
portfolio. Fitch does not forecast any price increases in 4QFY20
and 1QFY21 in Australia and the UK to reflect the impact of
coronavirus restrictions and resultant strains on household
finances.
- Cost savings from Fine Wine Partners acquisition, as well as
economies of scale and increased efficiencies from the Berri
facility, with the first full-year of savings in FY22.
- Annual capex of around AUD40 million in FY20-FY21 and AUD25
million in FY22-FY23.
- No deferral of grape purchases to offset any declines in volume
as a result of coronavirus social distancing restrictions or
potential smoke taint from the Australian bushfires. Inventory
levels to rise and remain high at FYE20 and FYE21 and accounts
receivable to decline by FYE20 to reflect lower demand, with both
returning towards historical levels thereafter.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead us to
Revise the Outlook to Stable include:
- FFO net leverage improving to below 5.0x for a sustained
period.
- EBITDA margin improving to above 10.0% for a sustained period
(FYE19: 9.7%).
- Delivery of the business plan, including the Berri plant being
operational, cost savings materialising, success of brand
rationalisation and premiumisation and the implementation of the
China strategy.
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- FFO net leverage deteriorating to above 5.0x for a sustained
period.
- EBITDA margin deteriorating to below 10.0% for a sustained
period.
- Deterioration in the group's business profile; for example, if
volume declines by 20% or more for a sustained period, the sale of
one or more of its main brands without a proven replacement or loss
of a major customer in the concentrated UK or Australia liquor
markets, such as Tesco PLC (BBB-/Stable) in the UK or Woolworths
Limited and Coles Supermarkets Australia Pty Ltd in Australia.
BEST/WORST CASE RATING SCENARIO
Ratings of non-financial corporate issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of four notches over three years.
The complete span of best- and worst-case scenario credit ratings
for all rating categories ranges from 'AAA' to 'D'. Best- and
worst-case scenario credit ratings are based on historical
performance.
LIQUIDITY AND DEBT STRUCTURE
Refinancing Provided Headroom: The capital structure, following
completion of Carlyle's acquisition of Accolade, consists of a
revolving credit facility of AUD150 million and a term loan of
GBP301 million (AUD550 million equivalent), both of which are
secured by group assets with a floating charge over the shares and
all assets in the UK and Australia.
Fitch expects the revolving credit facility to remain undrawn for
the majority of the year, only to be used to fund short-term
working capital requirements. Fitch expects the term loan to remain
fully drawn and proceeds from the sale of non-core assets to help
the company deleverage and provide additional liquidity. Therefore,
Amphora has sufficient liquidity headroom over the next two to
three years to implement its strategy, with little refinancing
risk, as the debt maturities only start to come due in five years.
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).
CMC MANAGEMENT: Second Creditors' Meeting Set for April 8
---------------------------------------------------------
A second meeting of creditors in the proceedings of CMC Management
Pty Ltd has been set for April 8, 2020, at 11:00 a.m. at the
offices of Cor Cordis, Level 29, at 360 Collins Street, in
Melbourne, 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 7, 2020, at 5:00 p.m.
Barry Wight and Sam Kaso of Cor Cordis were appointed as
administrators of on Feb. 8, 2020.
HALLMARK (PERTH): First Creditors' Meeting Set for April 9
----------------------------------------------------------
A first meeting of the creditors in the proceedings of Hallmark
(Perth) Pty Ltd and Hallmark (Adelaide) 1 Pty Ltd will be held on
April 9, 2020, at 2:00 p.m. and 3:00 p.m. via teleconference.
Anne Meagher of SV Partners was appointed as administrator of
Hallmark (Perth) on March 30, 2020.
HORTH INVESTMENTS: Second Creditors' Meeting Set for April 9
------------------------------------------------------------
A second meeting of creditors in the proceedings of Horth
Investments Pty Ltd has been set for April 9, 2020, at 11:00 a.m.
via teleconference only.
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 8, 2020, at 4:00 p.m.
Brendan Copeland and Christian Sprowles of Hogan Sprowles were
appointed as administrators of Horth Investments on March 6, 2020.
MEZETHES SALAMANCA: First Creditors' Meeting Set for April 15
-------------------------------------------------------------
A first meeting of the creditors in the proceedings of Mezethes
Salamanca Pty Ltd, trading as Mezethes Greek Taverna, will be held
on April 15, 2020, at 11:00 via electronic means.
Shelley-Maree Brooks of Rodgers Reidy was appointed as
administrator of Mezethes Salamanca on
April 1, 2020.
PLAYSPORT HOLDINGS: Second Creditors' Meeting Set for April 9
-------------------------------------------------------------
A second meeting of creditors in the proceedings of Playsport
Holdings Pty Ltd and Playsport Group Australia Pty Ltd has been set
for April 9, 2020, at 11:30 a.m. at the offices of Jones Partners,
Level 13, at 189 Kent 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 8, 2020, at 4:00 p.m.
Michael Gregory Jones of Jones Partners was appointed as
administrator of Playsport Holdings on March 5, 2020.
PROSPA TRUST 2018-1: Moody's Reviews 3 Tranches for Downgrade
-------------------------------------------------------------
Moody's Investors Service has placed on review for downgrade the
ratings for three classes of notes issued by Prospa Trust Series
2018-1.
The affected ratings are as follows:
Issuer: Prospa Trust Series 2018-1
Class A Notes, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 13, 2018 Assigned A3 (sf)
Class B Notes, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 13, 2018 Assigned Ba2 (sf)
Class C Notes, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 13, 2018 Assigned B3 (sf)
RATINGS RATIONALE
The rating action reflects Moody's expectation that the operating
environment for Australian small businesses will strongly
deteriorate following severe disruptions to economic activity in
several sectors linked to the coronavirus outbreak, including the
indefinite closure of various non-essential businesses and social
distancing guidelines.
The portfolio consists of short-term, high-yielding, largely
unsecured loans made to Australian small businesses, originated by
Prospa Advance Pty Ltd (Prospa). As of February 2020, about 30% of
the loans in the pool were to borrowers in the food and beverage
and retail industries, which are severely affected by the current
business closures.
Given the transaction's significant exposure to Australian small
business highly impacted by the ongoing economic disruptions and
the unsecured nature of the loans, Moody's expects delinquency and
default rates for the portfolio to rise to significantly higher
levels than its closing assumptions.
Moody's analysis considered various default and recovery rate
assumptions for the collateral pool to evaluate the resiliency of
the note ratings amid the uncertainty surrounding the pool's future
performance. Among others, Moody's considered a scenario with a
portfolio default rate of 7.1% and mean recovery rate of 5%
(equivalent to a B3 default rating proxy and a Caa1 expected loss
rating proxy, over a portfolio weighted average life of 0.7 years).
A 7.1% default rate represents a 20% increase from the initial
default rate assumption. At closing, Moody's base default rate
assumption was 5.95% (equivalent to a B2/B3 default rating proxy,
over a portfolio weighted average life of 0.7 years) with base mean
recovery rate of 5%, for the underlying small business loans.
The Class A Notes rating is relatively more resilient compared to
the Class B Notes and Class C Notes ratings given Class A Notes'
seniority and higher note subordination. However, given the
uncertainty regarding future small business loan performance, in
its view even a very high default scenario cannot be ruled out.
During the ratings review period, Moody's will evaluate the effects
of ongoing and projected macroeconomic conditions, the impact of
economic disruptions and government relief measures on Australian
small businesses, as well as the evolution of the business
conditions for Prospa as the originator and servicer. Based on
these factors, Moody's will assess the performance of underlying
pool to update its cumulative default projection for the pool and
any final rating action on the notes.
Government measures affecting Australian small business to date
include, among others, (1) the indefinite closure of various
non-essential businesses; (2) cash flow support for small
businesses, including wage subsidies and quick and efficient access
to cheaper unsecured credit; and (3) a 6-month rental eviction
moratorium.
While the government relief measures will mitigate some of the
impact of the coronavirus outbreak on Australian businesses,
smaller and more highly indebted businesses, especially in tourism
and hospitality, may not have the financial resources to weather
the current disruptions.
Its analysis has considered the increased uncertainty relating to
the effect of the coronavirus outbreak on the Australian economy as
well as the effects that the announced government measures put in
place to contain the virus, will have on the performance of small
businesses. Moody's regards the coronavirus outbreak as a social
risk under its ESG framework, given the substantial implications
for public health and safety. It is a global health shock, which
makes it extremely difficult to provide an economic assessment. The
degree of uncertainty around its forecasts is unusually high.
The transaction has a substitution period to April 2021, during
which, available principal collections will be used to purchase
additional receivables subject to certain performance triggers,
portfolio parameters and eligibility criteria.
During the substitution period, the Class A, Class B and Class C
Notes will benefit from minimum note subordination of 28.0%, 11.7%,
and 7.5%, respectively. Following the end of the substitution
period, the notes will be repaid on a sequential basis.
The transaction is supported by a liquidity reserve in the amount
of 2.00% of the note balance, which can cover approximately four
months of interest payments if no collections come in at all.
The principal methodology used in these ratings was "Moody's Global
Approach to Rating SME Balance Sheet Securitizations" published in
July 2019.
Factors that would lead to an upgrade or downgrade of the ratings:
Factors that could lead to an upgrade of the ratings include (1)
performance of the underlying collateral that is better than
Moody's expectations, and (2) an increase in credit enhancement
available for the notes.
Factors that could lead to a downgrade of the ratings include (1)
performance of the underlying collateral that is worse than Moody's
expectations, (2) a decrease in the notes' available credit
enhancement, and (3) a deterioration in the credit quality of the
transaction counterparties.
SHIELD MERCANTILE: Second Creditors' Meeting Set for April 7
------------------------------------------------------------
A second meeting of creditors in the proceedings of Shield
Mercantile Pty Ltd has been set for April 7, 2020, at 11:00 a.m.
via telephone only.
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 6, 2020, at 5:00 p.m.
Graeme Beattie & Simon Cathro of Worrells Solvency & Forensic
Accountants were appointed as administrators of Shield Mercantile
on March 3, 2020.
STELLER 168: Second Creditors' Meeting Set for April 7
------------------------------------------------------
A second meeting of creditors in the proceedings of Steller 168 Pty
Ltd has been set for April 7, 2020, at 10:00 a.m. and will be held
virtually using telephone conference facilities.
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 6, 2020, at 5:00 p.m.
Timothy James Brace, Michael Carrafa and Peter Gountzos of SV
Partners were appointed as administrators of Steller 168 on Sept.
20, 2019.
TRIMANTIUM INVESTMENT: Second Creditors' Meeting Set for April 8
----------------------------------------------------------------
A second meeting of creditors in the proceedings of Trimantium
Investment Management Pty Limited and Trimantium Capital Funds
Management Pty Limited has been set for April 8, 2020, at
1:15 p.m. via Virtual Meeting by telephone conference facilities
due to the threat of COVID-19 in accordance with government policy
on gatherings.
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 7, 2020, at 4:00 p.m.
Andrew McCabe and Joseph Hayes of Wexted Advisors were appointed as
administrators of Trimantium Investment on March 8, 2020.
VICTORIA WIDE: First Creditors' Meeting Set for April 14
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Victoria
Wide Demolitions & Bin Hire Pty Ltd will be held on April 14, 2020,
at 2:30 p.m. via teleconference.
Malcolm Kimbal Howell of Jirsch Sutherland was appointed as
administrator of Victoria Wide Demolitions on March 31, 2020.
=========
C H I N A
=========
21VIANET GROUP: Fitch Alters Outlook on B+ LT IDR to Negative
-------------------------------------------------------------
Fitch Ratings has revised the rating Outlook on China-based
carrier-neutral data centre provider 21Vianet Group, Inc. to
Negative from Stable and has affirmed the Long-Term Foreign- and
Local-Currency Issuer Default Ratings (IDRs) at 'B+'. Fitch has
also affirmed the rating on 21Vianet's USD300 million 7.875% senior
unsecured notes due 2021 at 'B+' with a Recovery Rating of 'RR4'.
The Negative Outlook reflects Fitch's expectation that 21Vianet's
2020 FFO adjusted net leverage will worsen to above 4.0x (2019
estimate: 3.2x), the threshold above which Fitch may take negative
rating action. Leverage will likely worsen due to lower revenue
growth as customers delay data-centre leases due to uncertainty
relating to the outbreak of COVID-19 and the likely FCF deficit due
to the company's large capex plans.
KEY RATING DRIVERS
Demand Slowdown Amid COVID-19: Fitch expects 21Vianet's revenue
growth to be to 11%-12% in 2020 (2019: 11%), relative to the
management guidance of 20%-26%, on lower demand due to subdued
economic activity and reduced online advertising spending, at least
in 1H20. Fitch expects Chinese internet companies, which contribute
about 70% of 21Vianet's revenue, to defer leases for data centres
due to weak consumer sentiment. However, higher revenue from
customers in the online education, online games and entertainment
industries is likely to partially offset the lower demand from
other customers.
Should demand recover in 2H20, revenue growth could rebound to a
double-digit percentage rate in 2020 given 21Vianet's longstanding
relationships with a diversified set of customers. Customer
concentration is manageable, with the top-20 customers accounting
for only 27% of revenue in 4Q19. The company will also benefit in
the medium to long term from a demand for data centres driven by
rising internet adoption, smartphone usage, IT outsourcing and
increasing outsourcing of data-centre services to carrier-neutral
providers.
Leverage to Worsen: Fitch expects FFO adjusted net leverage to
deteriorate to 4.4x-4.6x in 2020-2021 (2019 estimate: 3.2x), as
Fitch expects the company to increase 2020 capex to CNY2.4
billion-2.8 billion (2019: CNY1.3 billion) to expand its
data-centre and cabinet capacities. However, FFO adjusted net
leverage should improve in the medium term on demand recovery and
improvement in cash generation.
Fitch's exposure draft on its Lease Rating Criteria for
non-financial corporates, published on January 30, 2020, proposes
to treat lease costs as operating expenses for the majority of
corporate sectors instead of capitalising them as debt. Should the
proposals be adopted as criteria, 21Vianet may gain some rating
headroom as the difference between lease-adjusted and unadjusted
FFO net leverage is about 0.5x-0.6x. The criteria change follows
the introduction of the IFRS 16 and ASC 842 accounting standards
under IFRS and US GAAP, respectively.
Ongoing Wholesale Expansion: Fitch expects wholesale contribution
to revenue to increase to mid-single-digit in 2020-2021 (2019:
zero), led by higher cabinet orders from Alibaba and expansion in
the wholesale business segment. Fitch believe expansion in this
segment will improve 21Vianet's business-risk profile, as wholesale
contracts are usually for five to eight years, which provides
higher cash flow visibility, although they have thinner margins
than retail contracts. However, Fitch does not expect meaningful
revenue contribution from wholesale customers before 2022 as
utilisation will take time to ramp up.
IDR Based on Standalone Credit Profile: Fitch rates 21Vianet based
on its standalone credit profile, as its cash flow is largely
ring-fenced within the group by the restrictive dividend covenants
in the unsecured bond documents. This limits its ability to pay
significant cash to its parent, Tus-Holdings Co., Ltd. (THCL).
Fitch assesses the relationship between THCL and 21Vianet as one of
'Weak Parent, Strong Subsidiary' and legal and operational linkage
as 'Weak', in line with Fitch's Parent and Subsidiary Rating
Linkage criteria.
THCL owns 21% of equity stake in 21Vianet but has 51% of the voting
rights. Related-party transactions worth more than CNY15 million
require board review and approval. However, Fitch may downgrade the
ratings upon evidence of a stronger parental influence over
21Vianet that leads us assessing 'Moderate' or 'Strong'
parent-subsidiary linkage.
Variable Interest Equity Structure: The ratings reflect its
expectation that 21Vianet's relationship with the Chinese
government and regulatory authorities continue to be healthy.
However, any change could affect its credit strength as the company
does not have equity control over its onshore operating companies.
These include Beijing Yiyun Network Technology Co., Ltd., Beijing
iJoy Information Technology Co., Ltd., WiFire Network Technology
(Beijing) Co., Ltd. and other consolidated affiliated Chinese
entities with which 21Vianet has only contractual relationships due
to government restrictions on foreign ownership in China's
value-added telecom businesses.
DERIVATION SUMMARY
21Vianet has a significantly weaker business risk profile relative
to leading global data centre operator, Equinix, Inc. (Equinix,
BBB-/Stable). Equinix has a strong competitive position through its
global network of colocation data centres while 21Vianet is
China-centric. Equinix's credit strength is further supported by
its globally diversified portfolio of about 200 data centres
serving a granular tenant base across multiple industries.
21Vianet's Fitch-forecasted 2020 FFO adjusted net leverage of 4.4x
is moderately higher than Equinix's 4.1x.
21Vianet warrants a similar business risk profile with TierPoint,
LLC (TierPoint, B-/Negative), given the comparable revenue scale
and market position in their home markets. TierPoint is more
diversified as it serves SMEs in 20 markets, but this is
counterbalanced by the significantly higher contribution from
managed services, which have shorter contract terms and weaker cash
flow visibility. 21Vianet has a stronger financial risk profile
with Fitch-forecasted 2020 FFO adjusted net leverage of 4.4x
compared with TierPoint's 7.2x. TierPoint's Negative Outlook
reflects Fitch's expectation of challenging competitive landscape
for smaller data centre operators and increasingly pressured
liquidity.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Moderate pricing decline in hosting and colocation services
in China in 2020 due to impact from the COVID-19 outbreak
- Annual net addition of self-built cabinets of 12,000-15,000
each in 2020 and 2021 (2019: 6,336)
- Average monthly cabinet utilisation ratio to decline to
60%-63% in 2020-2021 driven by addition of a large number
of cabinets (2019: 66%-67%)
- Adjusted EBITDA margin at 26%-27% in 2020-2021 (2019: 28%)
- Capex expenditure at CNY2.4 billion-2.8 billion each in
2020 and 2021 (2019: CNY1.3 billion)
- No cash dividends over 2020-2021
Recovery Rating Assumptions
- The recovery analysis assumes that 21Vianet would be
considered a going-concern in a bankruptcy and that the
company would be reorganised rather than liquidated. Fitch
has assumed a 10% administrative claim.
- Fitch assumes 21Vianet's going-concern EBITDA to be around
CNY743 million. It reflects Fitch's view of a sustainable,
post-reorganisation EBITDA level, upon which Fitch based
the valuation of the company.
- An enterprise value/EBITDA multiple of 4x is used to
calculate the post-reorganisation valuation. Its multiple
assumption represents a 30% discount to the average
multiple of 5.7x for telecoms infrastructure peers
in the recovery analyses in APAC.
- Fitch treats all debt - excluding capital leases -
domiciled at 21Vianet's variable-interest entities at
end-2019 as prior-ranking.
- The recovery waterfall results in a recovery rate estimate
corresponding to a 'RR2' Recovery Rating for the USD300
million senior unsecured notes. Nevertheless, Fitch has
rated the senior notes at 'B+' with a Recovery Rating of
'RR4' because, under Fitch's Country-Specific Treatment of
Recovery Ratings criteria, China falls into 'Group D' of
creditor friendliness. Instrument ratings of issuers with
assets in this group are subject to a soft cap at the
issuer's IDR.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Revision of the Outlook to Stable
- FFO adjusted net leverage below 4.0x for a sustained period
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Evidence of parental influence from THCL that would lead to
an assessment of 'Moderate' to 'Strong' parent-subsidiary
linkage between THCL and 21Vianet
- Deterioration in liquidity should THCL reduce its stake and
become a minority shareholder - in terms of voting rights -
which could trigger payment acceleration of the 2021 USD300
million bond under the notes' change-of-control provisions..
- M&A that affects 21Vianet's business profile
- Operating EBITDA margin below 15% for a sustained period
(2020 forecast: 26%-27%)
- FFO adjusted net leverage above 4.0x for a sustained period
(2020 forecast: 4.4x-4.5x)
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: At end-December 2019, liquidity was adequate
with readily available cash of CNY2.4 billion, sufficient to fund
the short-term debt of CNY1.6 billion. In addition, 21Vianet issued
USD200 million of private convertible notes in 1H20 to refinance
its USD130 million of senior unsecured notes falling due in August
2020. Fitch expects the company to fund 50%-60% of capex through
secured bank loans and capital leases. Fitch treats the convertible
notes as 100% debt given their five-year maturity and existence of
material affirmative covenants, per Fitch's Corporate Hybrids
Treatment and Notching criteria.
However, 21Vianet is likely to face liquidity problems should THCL
reduce its stake to the extent that it loses control over the
majority of voting rights. This will trigger the change of control
clause in the October 2021 USD300 million bond documents, which
could lead to an acceleration in payment of the notes. Both a
change of control and a rating downgrade by at least one rating
agency are required to trigger the acceleration and one rating
agency downgraded its rating on the bond recently.
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).
ALAM SUTERA: Moody's Lowers CFR to Caa1, Outlook Negative
---------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of Alam Sutera Realty Tbk to Caa1 from B3.
At the same time, Moody's has downgraded the backed senior
unsecured rating of the 2021 notes and 2022 notes issued by Alam
Synergy Pte. Ltd., a wholly owned subsidiary of Alam Sutera, to
Caa1 from B3. The notes are guaranteed by Alam Sutera and most of
its subsidiaries.
The outlook on the ratings remains negative.
RATINGS RATIONALE
"The downgrade reflects the heightened refinancing risk on Alam
Sutera's 2021 notes because we expect the company to be reliant on
external funding and do not believe it has sufficient committed
funds to address the risk," says Jacintha Poh, a Moody's Vice
President and Senior Credit Officer.
"The depreciation of the Indonesian rupiah against the US dollar in
the last week has exacerbated Alam Sutera's refinancing risk," adds
Poh.
In March 2020, Alam Sutera announced a $60 million call redemption
on its 2021 notes [1]. Moody's estimates that the company will fund
the redemption with proceeds of (1) IDR700 billion ($44 million)
raised from two secured bank loans -- Bank Permata Tbk (P.T.) (Baa3
under review for upgrade) and Bank Central Asia Tbk (P.T.) (Baa2
stable); and (2) around $20 million from the expiry of financial
hedges.
Despite the partial redemption, Moody's expects Alam Sutera's
internal cash sources to be insufficient to fully cover the 2021
bond maturity.
Alam Sutera held cash and cash equivalents of IDR1.1 trillion ($69
million) as of September 30, 2019. While Moody's expects the
company to generate around IDR600 billion in operating cash flows
over the next 12-18 months, this amount could be lower if marketing
sales are hurt by the coronavirus outbreak. Consequently, the
company is reliant on external funding to address its notes
maturity.
In terms of environmental, social and governance (ESG) factors,
Moody's has considered the governance risk stemming from Alam
Sutera's (1) weak financial management, as its debt maturity wall
has resulted in significant refinancing risk; and (2) concentrated
ownership by its promoter and a five-member board of commissioners,
of which only two members are independent. Nonetheless, the company
is run by experienced professionals and has a track record of
reducing land acquisitions to preserve liquidity.
The negative outlook reflects Alam Sutera's maturity wall, with all
of its US-dollar notes maturing in 2021 and 2022.
The principal methodology used in these ratings was Homebuilding
and Property Development Industry published in January 2018.
Factors that would lead to an upgrade or downgrade of the ratings:
Given the negative outlook, a ratings upgrade is unlikely over the
next 12-18 months. Nevertheless, the outlook could return to stable
if Alam Sutera (1) improves its liquidity by addressing the
refinancing risk of its 2021 and 2022 notes; and (2) continues to
execute its core marketing sales, such that adjusted homebuilding
EBIT/interest expense rises above 1.0x.
Moody's could further downgrade the ratings if there is an
increasing likelihood that Alam Sutera is unable to redeem its 2021
bonds in full on maturity.
Established in November 1993 and listed on the Indonesian Stock
Exchange in December 2007, Alam Sutera Realty Tbk (P.T.) is an
integrated property developer in Indonesia that focuses on the sale
of land lots in accordance with township planning requirements, as
well as property development in residential and commercial segments
in Indonesia. As of December 31, 2019, the family of The Ning King
owned around 47% of the company.
CHINA GRAND: Fitch Lowers LongTerm IDR to B+, Outlook Negative
--------------------------------------------------------------
Fitch Ratings has downgraded China Grand Automotive Services Group
Co., Ltd.'s Long-Term Foreign-Currency Issuer Default Rating (IDR)
to 'B+' from 'BB-'. The Outlook is Negative.
The downgrade reflects the deterioration in CGA's liquidity. The
Negative Outlook factors in the ongoing uncertainty over the
automotive retailer's ability to follow through with its
deleveraging plan amid the disruptions caused by the coronavirus
outbreak.
Fitch has also assigned subsidiary China Grand Automotive Services
Limited's USD83 million 8.885% senior notes due 2021 a final rating
of 'B+' with a Recovery Rating of 'RR4'. The expected rating of
'BB-(EXP)' was initially assigned on October 8, 2019 and affirmed
on November 10, 2019. The difference between the expected and the
final rating is due to the rating downgrade. The notes are
unconditionally and irrevocably guaranteed by CGA.
KEY RATING DRIVERS
Rising Short-Term Financing: CGA redeemed USD328 million in senior
perpetual notes in December 2019 and another USD218 million in
senior notes due February 2020. The redemption, without replacement
with other long-term borrowings, has negatively affected CGA's
financial structure by increasing its reliance on short-term
financing. Fitch believes ample onshore credit facilities remain
available due to CGA's strong market position and solid banking
relationships although near-term and material improvement in its
debt maturity profile is unlikely.
Coronavirus Adds Uncertainty: The abrupt disruption caused by the
coronavirus outbreak in China, which led the country's
passenger-vehicle sales to plunge by about 80% yoy in February, has
intensified pressure on CGA's business, potentially hampering its
deleveraging plan. However, CGA said sales have recovered rapidly
in March and the company expects business activities to normalise
by 2Q20. Fitch will continue to monitor the outbreak and the
direction of nationwide auto sales. Fitch also expects a recovery
in car demand should the coronavirus outbreak subside, driven by
Chinese consumers' rising desire for private vehicles and potential
consumption stimulus policies.
New Deleveraging Measures: Management said new initiatives are in
place to stabilise revenue, profit and cash flow. The company is
partnering automakers and insurance companies to roll out new
high-margin vehicle-maintenance products and expects margin
improvement in its after-sales service business segment. CGA also
proposed further cost-reduction and capex-control measures. The
company also plans to complete a CNY3.4 billion convertible bond
issuance in 2020 and will fund any future M&A activities with only
non-debt financing.
DERIVATION SUMMARY
CGA's ratings are supported by its leading market position and
large operating scale, but are constrained by high leverage. Peers
include AutoNation, Inc. (BBB-/Stable), the largest automotive
retailer in the US, with over 360 new-vehicle franchises across 16
states. CGA has a similar operational scale and margin as
AutoNation, but weaker financial metrics and lower free cash flow
(FCF) generation.
eHi Car Services Limited (B/Stable), China's second-largest
car-rental company, has a similar leverage ratio, but CGA has a
much larger operating scale, lower capex requirements and a more
stable competitive environment. CGA has a better market position
than Golden Eagle Retail Group Limited (BB/Stable), a Chinese
department-store operator, but a weaker leverage ratio, lower
margins and smaller FCF generation.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Deconsolidation of CGA's finance-service (leasing) entity is
contingent on the assumption that there will be no
significant deterioration in the quality of the company's
lease assets against historical reported figures.
- Low-single-digit revenue CAGR in 2020-2022 (2019 estimate: 0%)
- Average EBITDA margin of 4.8% in 2020-2022 (2019 estimates:
5.5%)
- Capex, inclusive of acquisitions, declining to CNY1.2 billion
in 2020 and rising to CNY3.0 billion by 2022 (2019 estimate:
CNY2.4 billion)
Recovery Rating Assumptions:
Its recovery analysis is based on going-concern value, as it is
higher than the liquidation value. The going-concern value is
derived from CGA's 2018 reported EBITDA of CNY9.9 billion with 40%
discount, enterprise value-to-EBITDA multiple of 5.0x, and 10%
administrative claim.
The Recovery Rating assigned to its senior unsecured debt is 'RR4'
because under Fitch's Country-Specific Treatment of Recovery
Ratings Rating Criteria, China falls into the Group D of countries
in terms of creditor friendliness. Recovery Ratings of issuers with
assets in this group are capped at 'RR4'.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
CGA's rating Outlook could be revised to Stable if the company is
able to access capital markets to extend its debt maturity, execute
its deleveraging plan, and stay within negative leverage and
coverage guidelines over the next 12 months.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
CGA's rating could be downgraded should business recovery be slower
than its expectations, which would lead to prolonged deterioration
in revenue, margins and/or cash flow generation such that leverage
and coverage are higher than the negative guidelines for a
sustained period. The negative guidelines include:
- FFO adjusted net leverage (excluding leasing) above 6.0x for a
sustained period (2019 estimate: 5.0x)
- FFO fixed-charge cover (excluding leasing) below 1.5x for a
sustained period (2019 estimate: 2.1x)
- Failure to improve its debt maturity profile within the next 12
months
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity: The company had unrestricted cash of CNY7.2
billion and available and undrawn credit facilities of CNY39
billion at end-February 2020 against CNY39 billion in short-term
borrowings. The company has received strong support from domestic
banks and financial institutions due to its strong market position
and solid banking relationships.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch has deconsolidated Huitong Xincheng, a fully owned subsidiary
of CGA that is engaged in the leasing business.
CHINA LOGISTICS: Moody's Cuts CFR & Sr. Unsec. Rating to Caa1
-------------------------------------------------------------
Moody's Investors Service has downgraded to Caa1 from B3 the
corporate family and senior unsecured debt ratings of China
Logistics Property Holdings Co., Ltd.
The outlook on the ratings is negative.
RATINGS RATIONALE
"The downgrade reflects its concerns that the current weakening
economic and capital markets conditions will add uncertainty to
CNLP's debt refinancing," says Stephanie Lau, a Moody's Vice
President and Senior Analyst.
Per its full-year 2019 results announcement on 30 March 2020, the
company had USD139.2 million of senior notes maturing on 8 August
2020, USD104 million of private bonds maturing in November 2020,
and USD162 million of senior unsecured notes maturing in September
2021.
Given the large size of its debt maturities, the company's
liquidity ratio, as measured by cash/12-months mature debt, was
weak at 0.54x at December 31, 2019.
Although CNLP announced that it would sell its various equity
stakes for RMB660 million on March 26, 2020 to two funds under
LaSalle Investment Management, it still needs to raise further
funding to meet its upcoming debt obligations.
Moody's expects CNLP will continue to endeavor to meet debt
payments by recycling properties and/or projects into funds
majority-owned by its investors, and by increasing mortgage
financing on its wholly-owned properties.
The company's Caa1 corporate family rating (CFR) reflects the
higher risk that it faces in raising adequate new funding to pay
for its maturing debt over the next 12 months, especially given the
turbulent state of the financial markets.
Moreover, the company's interest servicing capacity is weak, as
reflected by its adjusted EBITDA/interest of 0.8x at December 31,
2019. Moody's projects that its EBITDA/interest will remain below
1.0x in 2020. This weak interest coverage is one of the drivers
behind the downgrade of its CFR to Caa1 from B3.
In terms of environmental, social and governance considerations,
Moody's has taken into account the company's (1) expansion policy,
which has resulted in elevated debt leverage and weak interest
coverage; (2) operational track record in the development and
management of grade-A logistics facilities in China; (3) disclosure
of material related-party transactions under the Corporate
Governance Code for companies listed on the Hong Kong Exchange; and
(4) board of directors, in which only five out of 15 members are
independent nonexecutive directors. But some degree of checks and
balances is provided by the audit, nomination and remuneration
committees, which are chaired by independent nonexecutive
directors.
There is no structural subordination risk in CNLP's senior
unsecured bond rating, because claims and secured debt at the
operating companies are less than the senior unsecured debt at the
holding company.
The outlook on the ratings is negative, reflecting Moody's
expectation that CNLP's debt-refinancing risk will remain elevated
over the next 12-18 months.
The principal methodology used in these ratings was REITs and Other
Commercial Real Estate Firms published in September 2018.
Factors that would lead to an upgrade or downgrade of the ratings:
Upward rating pressure is unlikely, given the negative outlook.
However, the outlook could return to stable if CNLP demonstrates an
ability to refinance its maturing debt, maintains adequate
liquidity, and improves its EBITDA/interest towards 1x.
On the other hand, downgrade rating pressure could arise if the
company fails to meet its debt payments.
CNLP is a leading operator of Grade-A logistics facilities in
China. As of December 31, 2019, the company had 176 completed
facilities totaling 3.4 million square meters (sqm), operating in
37 stabilized and pre-stabilized logistics parks across 18
provinces or centrally administered municipalities. The company's
portfolio of investment properties had a total value of RMB19.4
billion as of December 31, 2019. The company was listed on the Hong
Kong Stock Exchange on 15 July 2016 and had a market capitalization
of around HKD9.3billion as of 30 March 2020.
GREENTOWN CHINA: Moody's Alters Outlook on Ba3 CFR to Stable
------------------------------------------------------------
Moody's has affirmed Greentown China Holdings Limited's Ba3
corporate family rating, as well as the following ratings:
1. The Ba3 backed senior unsecured rating on the USD senior notes
issued by Greentown; and
2. The Ba3 backed senior unsecured rating on the senior perpetual
capital securities issued by Champion Sincerity Holdings Limited
and guaranteed by Greentown China Holdings Limited; and
3. The Ba3 backed senior unsecured rating on the senior perpetual
capital securities issued by Twinkle Lights Holdings Limited and
guaranteed by Greentown China Holdings Limited; and
4. The Ba3 backed senior unsecured rating on the senior perpetual
capital securities issued by Wisdom Glory Group Limited and
guaranteed by Greentown China Holdings Limited
At the same time, Moody's has changed the outlook on all ratings to
stable from positive.
RATINGS RATIONALE
"The change in outlooks to stable from positive reflects our
expectation that Greentown's credit metrics will stabilize over the
next 12-18 months, as debt growth to support its land investments
will largely offset revenue growth," says Celine Yang, a Moody's
Assistant Vice President and Analyst.
Greentown spent around RMB 52.3 billion on an attributable basis to
acquire new land in 2019, accounting for around 75%-80% of cash
collected from its attributable property sales, which is a high
level when compared with many of its industry peers. As a result,
its reported net debt increased by 31.4% to RMB43.7 billion at the
end of 2019 from RMB33.2 billion at the end of 2018, while revenue
only increased by 2% to RMB61.6 billion in 2019 from 2018.
While Moody's expects Greentown will scale back its land
acquisitions moderately in the coming 12-18 months from the high
levels in 2019, its leverage -- as measured by revenue/adjusted
debt -- will likely improve only moderately improve to 44%-45% from
39% over the same period, and its interest coverage -- as measured
by EBIT/interest -- to 2.4x-2.5x from 2.3x.
Moody's estimates that Greentown's attributable land bank of around
22 million square meters by gross floor area at the end of 2019
will be enough to support its property development needs for about
four years.
Greentown's property sales fell by 28.3% year-on-year to RMB6.6
billion in the first two months in 2020 compared to the same period
in 2019, driven mainly by the coronavirus outbreak. Moody's expects
the company's sales to stay weak in 1Q 2020 before recovering
gradually through the remainder of 2020.
Greentown's Ba3 corporate family rating continues to reflect its
standalone credit strength and a two-notch uplift based on Moody's
expectation that the company will receive extraordinary financial
support from China Communications Construction Group (Limited)
(CCCG), its largest shareholder, in times of financial distress.
Greentown's standalone credit strength reflects its (1)
well-established market position in property development in
Hangzhou city and Zhejiang Province, (2) long operating track
record, good brand name, quality products and large nationwide land
bank, and (3) improved financial management and funding costs as
part of CCCG.
The two-notch uplift incorporates Moody's assessment that CCCG will
extend strong support to Greentown in case of need, given that (1)
it has significant influence on the company as its largest
shareholder; (2) CCCG occupies four out of the six executive
director seats on the company's board of directors; and (3) CCCG
has demonstrated its willingness to provide financial support
through a keepwell deed and a deed of equity purchase, investment
and liquidity support undertaking in respect of Greentown's senior
and perpetual bonds.
This view also factors in CCCG's strong ability to provide support,
underpinned by its large scale, strong business and financial
profiles, and good access to funding.
The stable outlook on Greentown's ratings reflects Moody's
expectation that the company will maintain its sales execution,
stable financial profile and adequate liquidity over the next 12-18
months. In addition, the outlook reflects Moody's expectation that
the support the company will likely receive from CCCG, in times of
need, will remain unchanged.
In terms of environmental, social and governance (ESG)
considerations, Moody's has considered (1) the company's financial
policy to pursue expansion, which has resulted in elevated
leverage; (2) its good track record in operations and execution;
(3) the presence of strong shareholders; (4) its disclosure of
material related-party transactions as required under the Corporate
Governance Code for companies listed on the Hong Kong Exchange; and
(5) the presence of a diversified board of directors and three
special committees (including Audit Committee, Remuneration
Committee, and Nomination Committee) to supervise the company's
operations.
Greentown's board has 11 directors in total and four of them are
independent non-executive directors (INEDs). All three special
committees are chaired by INEDs.
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. China's property
sector has been one of the sectors affected by the shock given its
sensitivity to consumer demand and sentiment. Moody's regards the
coronavirus outbreak as a social risk under its ESG framework,
given the substantial implications for public health and safety.
Factors that would lead to an upgrade or downgrade of the ratings:
Greentown's rating could be upgraded if it strengthens its
financial and liquidity positions.
Specifically, Moody's could upgrade the rating if (1)
revenue/adjusted debt exceeds 55%-60%; and (2) EBIT interest
coverage rises above 2.5x.
A material reduction in contingent liabilities associated with
joint ventures or lower risks of providing funding support to joint
ventures could also be positive to the ratings. This could be a
result of reduced usage of joint ventures or material improvement
in the financial strengths of its joint venture projects.
Moody's could downgrade the rating if (1) contracted sales growth
slows; (2) credit metrics weaken, with EBIT/interest coverage
falling below 1.5x, or revenue/adjusted debt falling below 40% on a
sustained basis; or (3) liquidity deteriorates, as reflected by
cash/short-term debt falling below 1.0x.
Moody's could also downgrade the rating if the company's contingent
liabilities associated with joint ventures or the risks of
providing funding support to joint ventures increase materially.
This could be a result of a material deterioration in the financial
strengths and liquidity of its joint venture projects or a
substantial increase in investment in new joint venture projects.
Principal Methodology
The principal methodology used in these ratings was Homebuilding
and Property Development Industry published in January 2018.
Greentown China Holdings Limited is a major property developer in
China, with a primary focus in Hangzhou City and Zhejiang Province.
At the end of 2019, the company had 142 projects with a total gross
floor area (GFA) of 38.7 million square meters (sqm), with 22.4
million sqm attributable to the company.
OCEANWIDE HOLDINGS: Fitch Withdraws CCC+ Issuer Default Rating
--------------------------------------------------------------
Fitch Ratings has affirmed and withdrawn China-based Oceanwide
Holdings Co. Ltd.'s Long-Term Foreign-Currency Issuer Default
Rating (IDR) of 'CCC+'. Fitch has also affirmed and withdrawn the
company's senior unsecured rating of 'CCC+' with a recovery rating
of 'RR4'.
Fitch Ratings has chosen to withdraw the ratings of Oceanwide for
commercial reasons.
KEY RATING DRIVERS
The affirmation reflects Fitch's assessment that there are no
material changes to Oceanwide's credit profile since the last
rating action on March 19, 2020.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant given the withdrawal.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
ESG CONSIDERATIONS
Oceanwide has an ESG relevance score of 4 for Governance -
Management Strategy, reflecting its transition into a financial
conglomerate, resulting in the company's high debt level that was
partly due to its large investment in financial institutions.
Oceanwide's aggressive expansion into the financial business over
2014-2017 has a negative impact on the credit profile, and is
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. This means ESG issues are
credit-neutral or have only a minimal credit impact on the
entity(ies), either due to their nature or to the way in which they
are being managed by the entity(ies).
YIDA CHINA: S&P Raises ICR to 'CCC-' on Exchange Offer Completion
-----------------------------------------------------------------
S&P Global Ratings, on April 1, 2020, raised its long-term issuer
credit rating on Yida China Holdings Ltd. to 'CCC-' from 'SD'. At
the same time, S&P raised its long-term issue rating on the
company's senior unsecured notes to 'CC' from 'D'.
S&P raised the ratings on Yida after it reassessed the company's
credit profile, following the completion of the exchange offer on
its notes due April 2020.
S&P's ratings reflect its view that Yida will continue to have
exceptionally weak liquidity and face repayment risk over the next
six to 12 months, amid an overhang of debt repayable on demand. In
particular, its Chinese renminbi (RMB) 800 million domestic
corporate bond will come due in September 2020 and another RMB625
million is due in March 2021.
As of the end of 2019, Yida has RMB13.9 billion of current
borrowings, including RMB8.2 billion of loans that are repayable on
demand due to the financial difficulties of China Minsheng
Investment Group Corp. Ltd. (CMIG), Yida's largest shareholder.
S&P estimates that Yida will have only RMB600 million cash balance
after repaying the remaining US$53 million original notes due in
April 2020, US$22 million as cash consideration for the exchange
offer, and US$7.5 million of accrued interest. This is insufficient
to cover its next two domestic corporate bond maturities.
Yida will need to rely on cash collections from contracted sales,
asset disposals, new borrowings, or other means to repay its
upcoming maturities. This remains uncertain, especially given the
global COVID-19 outbreak. Yida's contracted sales were down 29% in
the first two months of the year.
The negative outlook at the time of withdrawal reflects the
possibility of further ratings downside if Yida encounters another
liquidity crunch.
Yida is a business park developer in China. It also develops
residential properties in integrated community projects. Yida
listed on the Hong Kong stock exchange in 2014. CMIG became its
controlling shareholder in late 2016.
Yida holds a total land bank of 9.8 million square meters gross
floor area as of end-June 2019, 70% of which is located in Dalian.
Yida owns six business parks and manages 24 parks on behalf of
other owners in China.
ZHENRO PROPERTIES: S&P Affirms 'B' LongTerm ICR, Outlook Positive
-----------------------------------------------------------------
S&P Global Ratings, on April 1, 2020, affirmed its 'B' long-term
issuer credit rating on Zhenro Properties Group Ltd. and its 'B-'
long-term issue rating on the company's senior unsecured notes.
The positive outlook on Zhenro reflects S&P's expectation that the
company will significantly deleverage this year, after making a
notable improvement in its debt capital structure. The company's
more evenly distributed debt maturity and improved liquidity
profile have strengthened its ability to meet volatilities in the
financial market, compared with a year ago. Zhenro has done this
through active debt management by using its improved capital market
access.
In 2019 and the first three months of 2020, Zhenro has issued
US$2.4 billion and Chinese renminbi (RMB) 700 million in offshore
notes, US$200 million of offshore perpetual securities, and RMB3.45
billion in domestic bonds, most of which have a maturity of two to
five years. The company therefore significantly reduced its
costlier trust loans exposure to 20% by the end of 2019, from 36%
in 2018. At the same time, its proportion of short-term debt has
declined to 34% of total debt, from 51% in 2018. As such, Zhenro's
weighted average maturity lengthened to 2.3 years at the end of
2019, from 1.9 years in 2018. The company also has a sizable cash
balance that covers 1.8x of short-term debt.
S&P said, "In our view, Zhenro's diversified funding channels have
become more comparable to higher-rated peers. Within its relatively
short listing history on the Hong Kong stock exchange since January
2018, the company has established offshore financing channels using
senior notes and syndicated loans. With some of its higher-cost
senior notes maturing in June 2020 and January 2021, we expect the
company's funding costs to further improve toward 7% over the next
12-24 months, from 7.5% as of end-2019.
"Our rating affirmation on Zhenro reflects the company's
deleveraging, which has been slower than our expectation, mainly
due to a margin decline. Price restrictions in the higher-tier
cities and the competitive land market have suppressed margin,
given Zhenro's reliance on public bidding to secure land resources.
However, we believe its low gross margin at about 20% will not have
significant further downside in 2020, because the company will
likely dispose the remainder of its low-margin or loss-making
projects acquired in 2016 and 2017. Price restrictions have
severely dampened the profitability of these projects.
"We expect an acceleration in revenue recognition to drive Zhenro's
deleveraging over the next 12 months in both consolidated and
proportionate terms. As of the end of 2019, the company has
unbooked revenue of RMB150 billion-RMB160 billion (in gross terms),
supporting its future earnings growth. We estimate Zhenro's
consolidated revenue will grow by 10%-15% to RMB36 billion-RMB37
billion, and joint-controlled entities' revenue (attributable
portion) will grow to about RMB10 billion in 2020, from a low base
of RMB4.7 billion in 2019. We believe about 90% of Zhenro's revenue
has been pre-sold and locked in. In addition, Zhenro's contracted
sales recovery is on track as the COVID-19 outbreak in China
stabilizes, and its contracted sales growth target of 7% should be
achievable; that target has been lowered in light of the fallout
from COVID-19.
"Zhenro's debt growth is likely to be controlled at 0%-5% in 2020,
because the company intends to focus more on earnings quality
rather than on expanding its scale. In our view, Zhenro's debt
growth is under control because the company is using its ample cash
balance to reduce its onshore financing year to date. Zhenro
targets to increase sales by 7% to RMB140 billion for 2020, against
20% in 2019.
"By our estimates, Zhenro will purchase RMB25 billion-RMB27 billion
of land in 2020, or 45%-50% of its cash proceeds, from sales. We
believe its current land reserves of 26 million square meters are
sufficient to support more than two years of sales, even without
replenishment.
"In our view, Zhenro's project portfolio is more defensive than
some of its peers in a weak market. This is because 75% of the
company's projects are in higher-tier cities with a strong economic
base, high income, and population inflow. Higher-tier cities have
in the past recovered faster from a down-cycle.
"The positive outlook reflects our view that Zhenro will improve
its leverage over the next 12 months through revenue growth in its
consolidated and joint-controlled entities' projects. We also
expect the company to slow down its land acquisitions, given it has
sufficient saleable resources to meet a mild sales growth target.
At the same time, we anticipate Zhenro's profitability to have
bottomed out and will at least remain stable.
"We may raise the rating if Zhenro improves its leverage over the
next 12 months. This may be by accelerating its proportionate
revenue recognition to 25%-30% and limiting its proportionate debt
growth to less than 5%. Indications of such improvement would be
the proportionately consolidated debt-to-EBITDA ratio staying
sustainably below 6x, with Zhenro's consolidated debt-to-EBITDA
ratio improving to about 6.5x.
"We may revise the outlook to stable if Zhenro's debt-funded
expansion continues to be more aggressive than we expect or the
company's margins continue to be compressed. Indications of these
would be its proportionately consolidated debt-to-EBITDA ratio not
improving to below 6x, or its consolidated debt-to-EBITDA ratio not
improving to about 6.5x."
=========
I N D I A
=========
B.V.S. DISTILLERIES: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded B.V.S.
Distilleries Private Limited's Long-Term Issuer Rating to 'IND D
(ISSUER NOT COOPERATING)' from 'IND B- (ISSUER NOT COOPERATING)'.
The issuer did not participate in the rating exercise despite
continuous requests and follow-ups by the agency. Thus, the ratings
are on the best-available information. Therefore, investors and
other users are advised to take appropriate caution while using
these ratings.
The instrument-wise rating action is:
-- INR290.0 mil. Long-term loans downgraded with IND D (ISSUER
NOT COOPERATING) rating.
KEY RATING DRIVERS
The downgrade reflects irregularities in the loan accounts of the
issuer resulting in it being recorded as a non-performing assets as
per the information available in the public domain.
COMPANY PROFILE
Incorporated in 2011, BVSDPL manufactures Indian-made foreign
liquors.
BVL INFRASTRUCTURE: CRISIL Cuts Rating on INR13.5cr Loan to D
-------------------------------------------------------------
CRISIL has downgraded its ratings on the bank loan facilities of
BVL Infrastructure Private Limited (BIPL) to 'CRISIL D/CRISIL D'
from 'CRISIL B/Stable/CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 1.16 CRISIL D (Downgraded from
'CRISIL A4')
Cash Credit 10 CRISIL D (Downgraded from
'CRISIL B/Stable')
Foreign Currency 13.5 CRISIL D (Downgraded from
Term Loan 'CRISIL B/Stable')
Foreign Exchange
Forward .2 CRISIL D (Downgraded from
'CRISIL A4')
Line of Credit 2 CRISIL D (Downgraded from
'CRISIL B/Stable')
Long Term Loan 9.5 CRISIL D (Downgraded from
'CRISIL B/Stable')
Proposed Long Term 0.64 CRISIL D (Downgraded from
Bank Loan Facility 'CRISIL B/Stable')
The downgrade is driven by delays in debt servicing by the company
because of poor liquidity.
The ratings reflect large working capital requirements and
susceptibility of its operating margins to volatility in raw
material prices and foreign exchange rates. These weaknesses are
partially offset by promoter's extensive industry experience in the
building products industry.
Key Rating Drivers & Detailed Description
Weaknesses:
* Delay in servicing of debt: There has been delays in servicing
of term debt along with over dues in cash credit facility for more
than 30 days because of poor liquidity.
* Working capital-intensive operations: The company's large
working capital requirement is reflected in its gross current
assets of 420 days as on March 31, 2019, driven by sizeable
inventory and receivables of 307 and 128 days, respectively.
* Exposure to intense competition: Intense competition constrains
the company's bargaining power.
Strength:
* Extensive industry experience of the promoter: The promoter, Mr.
Bellam Ravi Chandra, has experience of more than a decade in the
building products industry, which has helped establish
relationships with suppliers and customers.
Liquidity Poor
Liquidity is constrained by fully utilized bank limits along with
stretched receivables has resulted in delay of debt servicing.
Rating Sensitivity factors
Upward factors:
* Track record of timely debt servicing for at least over 90 days
* Improvement in working capital cycle
BIPL was incorporated in 2007, but started operations in 2017. It
is based in Tanguturu, Andhra Pradesh. It processes granite.
BIPL is a part of the BVL group of companies, based in Ongole,
Andhra Pradesh. The group has presence in tobacco processing and
export, construction, real estate, and granite quarrying,
processing, and export.
DELHI INT'L AIRPORT: Fitch Alters Outlook on BB+ LT IDR to Negative
-------------------------------------------------------------------
Fitch Ratings has revised the Outlook on Delhi International
Airport Limited's (DIAL) Long-Term Issuer Default Rating (IDR) and
bond issue ratings to Negative from Stable, and affirmed the
ratings at 'BB+'.
RATING RATIONALE
The recent outbreak of coronavirus and related government
containment measures worldwide creates an uncertain global
environment for air travel in the near term. Fitch's ratings are
forward-looking in nature and Fitch will monitor developments in
the sector as a result of the virus outbreak as it relates to
severity and duration, and incorporate revised base and rating case
qualitative and quantitative inputs based on expectations for
future performance and assessment of key risks.
Its Negative Outlook reflects the coronavirus-related impact on the
airport's passenger traffic and revenue and the execution risk of
the debt-funded airport expansion plan.
DIAL's most recent performance data may not have indicated
impairment due to the virus outbreak, but Fitch expects travel
restrictions to affect severely DIAL's passenger traffic and
revenue. The Indian government has imposed a 21-day nationwide
lockdown until April 14, 2020. A prolonged outbreak and further
deterioration in the economy could hurt business and leisure travel
and passengers' spending in the airport, leading to reduced
aeronautical and non-aeronautical revenue. More than 70% of DIAL's
traffic is domestic passengers, who Fitch sees as more resilient
than international traffic. However, any nationwide lockdown as
currently imposed would also affect domestic traffic.
DIAL's expansion plan will increase its capacity to 100 million
passengers per annum (MPPA) from 66 MPPA. Contractors are carrying
out the work under fixed-rate contracts. Management expects the
expansion to be completed by end of the financial year ended March
2023 (FY23). Management has no intention to delay the capex plan,
but there is some timing flexibility in making payments for the
committed capex. Under its forecast, DIAL will incur INR99 billion
capex in FY20-FY24, of which INR25 billion will be spent in FY21
and INR36 billion in FY22. The capex will be included in the
regulated asset base for determination of the third control period
(CP3) tariffs.
Inevitably, reduced passenger traffic will hamper aeronautical and
non-aeronautical revenue. Commercial property development (CPD)
revenue, however, is likely to experience less of an impact. Under
its forecast, DIAL's CPD revenue including contracted fixed-rental
income is about INR5 billion in FY20.
Weak investor sentiment and tight liquidity in the credit markets
may present challenges to companies' refinancing plans, but DIAL
has no debt maturing in the near term. In fact, DIAL has completed
its USD150 million additional tap issuance in February. Its debt
comprises mainly three US dollar bonds, which mature in 2022, 2026
and 2029. Management expects to fund its expansion capex by
internal accruals, existing borrowings and advance payment from
CPD. DIAL has INR21 billion in cash and bank balances as at
December 2019, compared with about INR12 billion in operating
expenses (excluding depreciation and amortisation) and INR6 billion
in finance costs in FY19. A significant portion of DIAL's operating
expenses are variable, including maintenance and utilities, and
could decline in light of reduced passenger traffic. The concession
fee to the Airport Authority of India (AAI) was about INR16 billion
in FY19. The fee is also variable and depends on the revenue
generated. Management is in discussions with the government and the
AAI for relief packages, including waiver of the concession fee and
deferment of statutory dues.
The regulated asset base (RAB) framework ensures a guaranteed
return to the invested capital. Under RAB, any revenue shortfall
for DIAL against its expectation would result in a true-up in the
next control period. Therefore, a drop in FY21 passenger traffic
and revenue could lead to higher yield per passenger in the CP3 in
FY20-FY25. DIAL continues to charge the base airport charges+10%
(BAC+10%) tariffs while awaiting the tariff determination by
Airports Economic Regulatory Authority. Fitch believes the BAC+10%
serve as a floor to the tariffs. Under its forecast, Fitch assumes
BAC+10% over the forecast period.
KEY RATING DRIVERS
PEER GROUP
GMR Hyderabad International Airport Limited (GHIAL, BB+/Negative)
is the closest peer of DIAL. Both airports benefit from the
fast-growing air passenger market in India. DIAL has a stronger
catchment area than GHIAL, which serves Hyderabad, a vibrant but
smaller city than Delhi. DIAL and GHIAL both operate under the same
economic regulatory framework - a hybrid till model with 30% of
non-aeronautical revenue being used for cross-subsidisation of
aeronautical charges. GHIAL has some pending disputes with
regulators regarding tariff determination, while DIAL has
implemented BAC+10%, which effectively removes downside risk to
aeronautical tariffs. Both airports are undertaking intensive
debt-funded expansion plan. The higher leverage of DIAL is
compensated by its stronger catchment area and its volume risk
assessment.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead to
Positive Rating Action:
- A positive rating action is not expected in the near term
- A return to a Stable Outlook could be possible, and the
rating affirmed, if Fitch sees sustained recovery in traffic
and revenue due to the easing of the pandemic resulting in
normal air traffic patterns or the adaption of strategies
that convincingly stabilises the finances
Future Developments That May, Individually or Collectively, Lead to
Negative Rating Action:
- Traffic or revenue underperformance, or cost overruns in
the capex execution, leading to the forecast rating case net
debt/EBITDA remaining above 8.0x for a sustained period
- Further credit erosion of the major air carriers or payment
delinquencies to the finance of the airport
- Deterioration in airport liquidity level for a sustained
period
- Renegotiation of expansion contracts and higher contract
prices as a result of bankruptcy of the contractors
BEST/WORST CASE RATING SCENARIO
Ratings of public finance issuers have a best-case rating upgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a positive direction) of three notches over a
three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of three notches over three
years. The complete span of best- and worst-case scenario credit
ratings for all rating categories ranges from 'AAA' to 'D'. Best-
and worst-case scenario credit ratings are based on historical
performance.
FINANCIAL ANALYSIS
Under the Fitch base case (FBC), Fitch forecast traffic to decline
by 2% in FY20 and 5% in FY21 and then increase in line with GDP.
Fitch forecast passenger traffic's CAGR at 2.3% in FY19-FY24, while
aeronautical revenue per passenger will remain largely flat in the
five-year forecast period due to the implementation of BAC+10%.
Fitch also applied a haircut to management's forecast for
non-aeronautical revenue yield per passenger. For CPD revenue,
Fitch excludes the revenue and upfront payment from Bharti Realty
related to the Phase II development of the 450,000 sq m of land at
Aerocity as it remains an option for Bharti Realty. Its capex
forecast reflects some delays to the original capex budget. Under
its forecast, DIAL will incur INR99 billion capex in FY20-FY24, of
which INR25 billion will be spent in FY21 and INR36 billion in
FY22.
The Fitch rating case (FRC) is largely the same as the FBC.
However, Fitch assumes passenger traffic will decline by 2% in FY20
and 10% decline in FY21, based on the following assumptions of the
quarterly traffic trend: a significant decline in international
traffic and, to a lesser extent, in domestic traffic in 1QFY21, a
moderate decline the traffic in 2QFY21, and gradual recovery in
3QFY21-4QFY21. Fitch assumes traffic in FY22 to recover to the FY20
level. Fitch expects traffic to increase in line with GDP
afterwards. Fitch forecast passenger traffic's CAGR at 1.9% in
FY19-FY24.
Its FBC generates an average net debt /EBITDA of 7.6x with a
maximum of 9.3x in FY23. Its FRC forecasts leverage to increase to
a peak of 9.7x in FY23 and then decline to 9.3x in FY24 as traffic
and revenue recovers. Its FRC generates an average net debt/EBITDA
of 8.0x. Fitch also runs a COVID-19 stress case where Fitch assumes
traffic to recover to the FY20 levels only in FY23. The COVID-19
stress case generates an average net debt/EBITDA of 8.7x with a
maximum of 10.7x.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
HYDERABAD AIRPORT: Fitch Affirms BB+ LT IDR, Outlook Negative
-------------------------------------------------------------
Fitch Ratings has affirmed GMR Hyderabad International Airport
Limited's (GHIAL) Long-Term Issuer Default Rating (IDR) and its
bond issue ratings at 'BB+' with a Negative Outlook.
RATING RATIONALE
The coronavirus pandemic and related government containment
measures worldwide create an uncertain global environment for air
travel in the near term. Fitch's ratings are forward-looking , and
Fitch will monitor pandemic-related developments in the sector for
severity and duration, and incorporate revised base- and
rating-case qualitative and quantitative inputs based on its
expectations for performance and assessment of key risks. Its
Negative Outlook reflects the pandemic-related impact on the
airport's passenger traffic and revenue, execution risk of the
debt-funded airport expansion plan and price uncertainty for future
five-year control periods.
GHIAL's most recent performance data may not have indicated
outbreak-related impacts, but Fitch expects travel restrictions to
affect severely GHIAL's passenger traffic and revenue. The Indian
government has imposed a 21-day nationwide lockdown until April 14,
2020. A prolonged outbreak and further deterioration in the economy
will hurt business and leisure travel and passengers' spending in
the airport, leading to reduced aeronautical and non-aeronautical
revenue. Still, GHIAL's traffic is 80% domestic passengers, who
Fitch sees as more resilient than international traffic. However,
any nationwide lockdown as currently imposed would also affect
domestic traffic.
GHIAL's expansion plan will increase its capacity to 34 million
passengers per annum (mppa) from 12mppa. This expansion plan is
more cost efficient than the previous plan, which is more modular
and divided into several phases, and is being carried out under a
fixed-price fixed-term contract. Management expects the expansion
work to be completed by the end of the financial year to March 2022
(FY22). Construction is on track and about 40% of the work was
completed by FY20. Under management's revised forecast, GHIAL will
incur about INR75 billion capex in FY20-FY24, of which INR20
billion will be spent in FY20, INR24 billion in FY21 and INR20
billion in FY22. The expansion is more aggressive than the previous
plan and leads to near-term high leverage, although this is
supported by GHIAL's robust long-term traffic growth and the cost
efficiency.
Weak investor sentiment and tight liquidity in the credit markets
may present challenges to companies' refinancing plans, but GHIAL
has no debt maturing in the near term. Its debt comprises mainly
two US dollars bonds that mature in 2024 and 2027. Management
expects to use rupee bank loans because of the current market
situation to fund its expansion capex. GHIAL has INR22.5 billion in
cash and bank balances, compared with about INR10 billion in
operating and interest expenses in FY19. A significant portion of
GHIAL's operating expenses are also variable, including concession
fees, cost of goods sold, maintenance and utilities. These could be
lowered in light of reduced passenger traffic.
The regulatory asset base (RAB) framework ensures a guaranteed
return to the invested capital. Under RAB, any revenue shortfall
for GHIAL against its revenue eligibility would result in a true-up
in the next control period. Therefore, a drop in FY21 passenger
traffic and revenue could lead to higher yield per passenger in the
third control period (CP3). The CP2 tariff order was issued by the
regulator on 27 March 2020 with implementation from April 1, 2020.
Management expects the CP3 tariff will be applied on time from
FY22. The regulator will take into account the expansion capex when
determining the CP3 tariff. However, delays in regulatory decisions
on tariffs have occurred in the past. Management believes the
settlement of the cargo, ground handling and fuel (CGF) revenue in
CP3 and the pre-control period entitlement will have a favourable
outcome for GHIAL. However, Fitch assumes under its base- and
rating-case that CGF will be considered as aeronautical revenue, in
line with the regulator's view.
KEY RATING DRIVERS
Strong Passenger Growth - Volume Risk: Midrange
GHIAL's FY19 passenger traffic was 21.4 million, most of which were
origin and destination passengers. Fitch believes the long-term
structural growth story remains intact because India is an emerging
economy with an increasing propensity to fly. Traffic recovered
within two years following the 2013 bankruptcy of Kingfisher
Airlines, the country's main airline at the time with around a 35%
market share. This demonstrates GHIAL's resilience against shocks.
The airport faces limited regional competition from Bangalore and
Chennai airports or from alternative modes of transport. The
largest carrier, Indigo, accounted for 34% of aeronautical revenue
in 9MFY20, which is not significantly more concentrated than
peers.
Blended Till, Some Remaining Uncertainty - Price Risk: Midrange
GHIAL's blended till regulatory framework is now being implemented.
However, there is still some uncertainty about the price increases
for FY17-21 due to outstanding legal and regulatory issues with the
recent pricing decisions, including recovery of past entitlements,
classification of revenues and other issues. FY17-FY20 had ad-hoc
tariffs approved by the regulator due to delays in finalising the
tariff regime for CP2. The CP2 tariff order was issued by the
regulator on 27 March 2020 with implementation from April 1, 2020.
Management expects the CP3 tariff will be applied on time from
FY22.The regulator will take into account the expansion capex when
determining the CP3 tariff under the RAB framework.
Significant Capex but Experienced Management - Infrastructure
Development and Renewal: Midrange
The airport is operating above designed capacity, with a
utilisation ratio above 170%. Management plans to increase capacity
to 34mppa, from 12mppa within three years, and will be funded
through a combination of internal accruals and borrowings. This
plan is more aggressive than the previous plan. However, Fitch
believes that the plan to bring the capex forward is justified by
the strong traffic growth and will be more efficient in terms of
costs and execution. Management has a well-developed expansion plan
in place, including entering into fixed-price fixed-term contracts
with developers. Management also has significant experience with
the Hyderabad and Delhi airports for timely and on-budget
delivery.
Limited Creditor Protections - Debt Structure: Weaker
GHIAL's senior debt is secured but is exposed to refinance risk.
The debt has limited credit protection, except for the fixed-charge
cover ratio test for additional indebtedness. The long concession
tenor to 2038 mitigates refinancing risk. In addition, GHIAL has
notified the grantor for an extension of the concession agreement
by another 30 years, to 2068.
PEER GROUP
Delhi International Airport Limited (DIAL) is the closest peer of
GHIAL. Both airports benefit from the fast-growing air passenger
market in India. Located in Delhi, DIAL has a stronger catchment
area than GHIAL, which serves Hyderabad, a vibrant but smaller city
than Delhi. DIAL and GHIAL both operate under the same economic
regulatory framework - a hybrid till model with 30% of
non-aeronautical revenue being used for cross-subsidisation of
aeronautical charges. GHIAL has some pending disputes with
regulators regarding tariff determination, while DIAL has
implemented the base airport charges, which effectively remove
downside risk to aeronautical tariffs. Both airports are
undertaking intensive debt-funded expansion plans. The higher
leverage of DIAL is compensated by its stronger catchment area and
its volume risk assessment.
RATING SENSITIVITIES
Future Developments That May, Individually or Collectively, Lead to
Positive Rating Action:
- A positive rating action is not expected in the near term
- A return to a Stable Outlook could be possible, and the
rating affirmed, if Fitch sees sustained recovery in traffic
and revenues due to the easing of the pandemic resulting in
normal air traffic patterns or the adaption of strategies
that convincingly stabilises the finances
Future Developments That May, Individually or Collectively, Lead to
Negative Rating Action:
- Traffic or revenue underperformance, adverse pricing
decisions, or cost overruns in the capex execution leading to
forecast rating case net debt/EBITDA remaining above 5.0x for
a sustained period of time
- Further credit erosion of the major air carriers or payment
delinquencies to the finance of the airport
- Deterioration in airport liquidity level for a sustained
period
- Renegotiation of expansion contracts and higher contract
prices as a result of bankruptcy of the contractors
BEST/WORST CASE RATING SCENARIO
Ratings of public finance issuers have a best-case rating upgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a positive direction) of three notches over a
three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of three notches over three
years. The complete span of best- and worst-case scenario credit
ratings for all rating categories ranges from 'AAA' to 'D'. Best-
and worst-case scenario credit ratings are based on historical
performance.
CREDIT UPDATE
Total passenger traffic at the airport in 9MFY20 was 16.8 million,
up 5.8% yoy, led by domestic traffic (+6.4%), while international
traffic increased by 3.3%. Most of the slots that were previously
used by Jet Airways have been filled. For FY20, management expects
total traffic to increase by only 1.9% due to coronavirus-related
impacts.
FINANCIAL ANALYSIS
The Fitch base case (FBC) assumes a decline in passenger traffic in
FY21 in line with management forecast and 1.4x GDP growth
afterwards, which is the average GDP multiplier of all Indian
airports since FY08. Fitch forecast passenger traffic's CAGR at
5.1% in FY19-FY24. Fitch assumes the CP2 tariff to be implemented
in FY21 and the CP3 tariff to be applied on time in FY22. In
addition, Fitch assumes CGF revenue to be included in aeronautical
revenue for the tariff determination in CP3, in line with Airports
Economic Regulatory Authority's (AERA) ruling. Fitch also applies a
20% haircut to the CP3 tariff increase, and a 20% haircut to
management forecast for retail, food and beverage and duty free
revenue per passenger growth. Its forecast includes only contracted
rental income from real estate development. Its FBC also assumes
25% of the FY21 capex budget to be delayed into FY22.
The Fitch rating case (FRC) is largely the same as the FBC.
However, Fitch assumes a 10% decline in passenger traffic in FY21,
based on the following assumptions of the quarterly traffic trend:
a significant decline in international traffic and, to a lesser
extent, in domestic traffic in 1QFY21, a moderate decline the
traffic in 2QFY21, and gradual recovery in 3QFY21 and 4QFY21. Fitch
assumes traffic in FY22 to recover to the FY20 level. Fitch expects
traffic to grow at 1.4x GDP in FY23 and in line with GDP
afterwards. Fitch forecast passenger traffic's CAGR at 3.3% in
FY19-FY24.
Its FBC generates an average net debt/EBITDA of 4.9x with a maximum
of 6.2x in FY21. Its FRC forecasts leverage to increase to the peak
of 6.7x in FY21 and decline to 4.9x in FY24 as traffic and revenue
recovers. Its FRC generates an average net debt/EBITDA of 5.3x.
Fitch also runs a COVID-19 stress case where Fitch assumes traffic
to recover to the FY20 levels only in FY23. The COVID-19 stress
case generates an average net debt/EBITDA of 5.8x with a maximum of
7.1x.
ESG CONSIDERATIONS
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
IDBI BANK: Fitch Alters Outlook on BB+ LT IDR to Negative
---------------------------------------------------------
Fitch Ratings has revised the Outlook on India-based IDBI Bank
Limited's Long-Term Issuer Default Rating to Negative from Stable,
while affirming the IDR at 'BB+'. The agency has simultaneously
affirmed the bank's Viability Rating (VR) at 'ccc'.
The Negative Outlook reflects its expectation that the state's
propensity to provide extraordinary support to IDBI Bank may
diminish following the government's proposal to sell its stake in
the bank and partial stake in IDBI Bank's majority shareholder,
state-owned Life Insurance Corporation of India (LIC).
IDBI Bank's Support Rating Floor and IDR are unchanged, as support
prospects have not materially altered since its last review.
However, these could shift over time in line with the government's
proposed stake sale.
The VR affirmation factors in the bank's more stable core
capitalisation and slightly improved asset quality. The bank
received nearly USD5 billion in fresh capital from both the state
and LIC in the financial year ended March 2018 (FY18) and FY19,
which contributed to a higher common equity Tier 1 (CET1) ratio of
10% by end-December 2019, from 5.6% at end-March 2017. However,
IDBI Bank's financial profile remains weak and its performance is
not immune to the worsening operating environment. That said, Fitch
believes the risk of the bank failing has not increased.
KEY RATING DRIVERS
IDR, SUPPORT RATING AND SUPPORT RATING FLOOR
IDBI Bank's Long-Term IDR is driven by its Support Rating and
Support Rating Floor, which is many notches higher than its VR.
They reflect Fitch's expectation of a moderate probability of
extraordinary state support due to the bank's market position,
systemic importance and linkages to the state. Fitch believes the
bank's moderate size and its significant deposit base remain
important considerations in assessing systemic importance, and
ultimately the prospect of extraordinary support for the bank.
The Negative Outlook reflects its expectation that the state's
propensity to provide extraordinary support to IDBI Bank will
diminish as its shareholding in the bank drops, especially below
51%. The state directly owns 47% of IDBI Bank and holds another 51%
indirectly through LIC, India's largest life insurer. The state
announced its intention to sell its 47% stake in IDBI Bank and
dilute part of its 100% shareholding in LIC through a market
listing in its budget in February 2020. The Reserve Bank of India
also expects LIC to gradually reduce its shareholding in IDBI Bank,
although over a 12-year period.
However, Fitch does not think the sale is an imminent risk due to
the sharp correction in the equity index and IDBI Bank's share
price. The government's immediate priority is to address the
consequences of the coronavirus on the broader economy, which
raises execution risk on the proposed share sale. This implies that
a Negative Outlook is appropriate instead of a Rating Watch.
VR
IDBI's VR continues to reflect high fundamental credit risk. The
bank's capital position has improved, thanks to substantial equity
injections from the state and LIC in recent years, while absolute
impaired loans have been declining and loan-loss cover has been
rising (9M20: 86%; FY19: 70%; FY18: 48%). However, Fitch believes
asset-quality pressures remain a risk for the banking sector,
including for IDBI Bank, in light of the weakening operating
environment. This is because retail loan growth has been high at
IDBI Bank - similarly to most other banks - which, together with
SME loans, can erode the bank's already weak income buffers as the
environment deteriorates.
Fitch therefore believes IDBI Bank's CET1 ratio of 10% at 9MFYE20
is less commensurate with its balance sheet risks, as its capital
buffers can be vulnerable to even moderate shocks. Fitch also
expects the bank's earning potential to remain weak, even though
loan-impairment charges (8% of loans) will probably decline in
FY21. Pre-provision profits at 2% of loans are inadequate if bad
loan recoveries in FY21 (2% of loans) fall short of management
expectations, which looks increasingly likely in the weaker
macroeconomic environment. Fitch expects the bank to preserve
capital and calibrate its risk appetite and loan growth accordingly
if the overall risk environment is unconducive, although there is
still a risk of the government pressing the bank to lend once
regulatory restrictions are lifted.
The bank's impaired-loan ratio of 28.7% has remained elevated due
to a contraction in loans, the growth of which should remain
subdued in the near term. The ratio is well above the industry
average, although Fitch thinks the lower concentration risk may
limit the prospect of further large negative asset-quality
surprises relative to earlier years. However, a moderate downturn
is still likely to pressure special-mention loans (30 and 60 days
overdue), currently at around 3% of total loans, and hamper efforts
to improve net non-performing loans (NPL)/equity (9MFYE20: 20%).
Fitch expects funding to remain stable, which may provide support
for the bank. Fitch believes funding will be underpinned by
depositor perception of implicit government support, although this
will be tested once the government lowers its majority holding in
the bank. The bank reported further improvement in its low-cost
deposit ratio, which stood at 48% at 9MFYE20, while its reliance on
volatile bulk deposits fell further to 17% of total deposits.
SENIOR DEBT
IDBI Bank's senior debt rating is at the same level as its IDR, as
the debt represents its unsecured and unsubordinated obligations.
ESG - Governance: IDBI Bank has an ESG Relevance Score of '4' for
Governance Structure. It reflects its assessment that key
governance aspects, such as board independence and effectiveness,
ownership concentration, protection of creditor or stakeholder
rights and related-party transactions, affect support prospects
that drive the long-term ratings due to the state's high
influence.
ESG - Financial Transparency: IDBI Bank has an ESG Relevance Score
of '4' for Financial Transparency. It reflects its assessment that
the quality and frequency of financial reporting and the auditing
process have an effect on the VR. These factors have become more
prominent in the past few years because of the sharp financial
deterioration at state banks as well as the wide reported
divergences in NPL recognition between the banks and the
regulator.
RATING SENSITIVITIES
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND SENIOR DEBT
The Support Rating and Support Rating Floor are most sensitive to
the agency's assessment of the government's propensity and ability
to support the bank, based on its size, systemic importance and
linkage to the state.
Should Fitch perceive any reduction in the government's propensity
to extend timely support, the agency will reassess the Support
Rating and Support Rating Floor, and in turn, the bank's IDRs and
senior debt ratings. The Support Rating Floor and IDR could be
downgraded if the government's stake in IDBI Bank is diluted or if
the bank ultimately becomes privatised. Weakening of the
government's ability to provide extraordinary support - reflected
by a downgrade in India's sovereign ratings or Outlook
(BBB-/Stable) - would be likely to also lead to further negative
action on IDBI Bank's IDR.
That said, Fitch sees IDBI Bank as systemically important, though
less so than the larger state banks and large private banks,
meaning support will continue to be a factor in the ratings. Fitch
believes its Support Rating Floor is likely to remain in the 'BB'
category, assuming no change in the government's ability to provide
support.
An upgrade of the sovereign rating appears less likely in the near
term, although the sovereign's stronger ability to offer support
may lead to positive action on IDBI Bank's ratings.
VR
The VR is most sensitive to changes in IDBI Bank's asset quality
and profitability, both of which will affect capitalisation. A VR
upgrade is less probable in the near term, but a move to the 'b'
category will be predicated on sustained improvement in the
impaired-loan ratio to below 20% through meaningful progress in NPL
resolution and more stable earnings, such as a positive return on
assets for a few quarters, as that would support the bank's core
capitalisation and reduce capital vulnerability.
The VR could be downgraded if poor earnings and weak asset quality
compromise the bank's progress in improving its core capital
position and increases the need for extraordinary support on a
last-resort basis. However, Fitch sees less risk of that occurring
in the near term, despite the negative outlook for the operating
environment. The VR could also be affected if there are funding
difficulties after the change of ownership, although this is not
its base case.
BEST/WORST CASE RATING SCENARIO
Ratings of financial institutions issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of four notches over three years.
The complete span of best- and worst-case scenario credit ratings
for all rating categories ranges from 'AAA' to 'D'. Best- and
worst-case scenario credit ratings are based on historical
performance.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
IDBI Bank has an ESG Relevance Score of 4 for Governance Structure.
It reflects its assessment that key governance aspects, such as
board independence and effectiveness, ownership concentration,
protection of creditor or stakeholder rights and related-party
transactions, affect support prospects that drive the long-term
ratings due to the state's high influence.
IDBI Bank also has an ESG Relevance Score of 4 for Financial
Transparency. It reflects its assessment that the quality and
frequency of financial reporting and the auditing process have an
effect on the VR. These factors have become more prominent in the
past few years because of the sharp financial deterioration at
state banks as well as the wide reported divergences in NPL
recognition between the banks and the regulator.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3. This means ESG issues are
credit-neutral or have only a minimal credit impact on the
entity(ies), either due to their nature or to the way in which they
are being managed by the entity(ies).
KAY EM COPPER: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
----------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Kay Em Copper
Private Limited's Long-Term Issuer Rating to 'IND D (ISSUER NOT
COOPERATING)' from 'IND BB- (ISSUER NOT COOPERATING)'. The issuer
did not participate in the rating exercise despite continuous
requests and follow-ups by the agency. Thus, the rating is based on
the best available information. Therefore, investors and other
users are advised to take appropriate caution while using these
ratings.
The instrument-wise rating actions are:
-- INR40 mil. Fund-based cash credit facility(Long-term/Short-
term downgraded with IND D (ISSUER NOT COOPERATING) rating;
-- INR10 mil. Non-fund-based bank guarantee (Short-term)
downgraded with IND D (ISSUER NOT COOPERATING) rating;
-- INR90 mil. Non-fund-based letter of credit(Short-term)
downgraded with IND D (ISSUER NOT COOPERATING) rating; and
-- INR2 mil. Non-fund-based forward contract(Short-term)
downgraded with IND D (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best available information
KEY RATING DRIVERS
The downgrade reflects irregularities in Kay Em Copper's loan
accounts, which has led to the company being classified as a non
–performing asset by State Bank of India, as per information
available in the public domain.
RATING SENSITIVITIES
Positive: Timely debt servicing for at least three consecutive
months would be positive for the ratings.
COMPANY PROFILE
Kay Em Copper is involved in the trading of non-ferrous metals,
majorly copper wire rods and ingots.
P D ENTERPRISES: CRISIL Moves B+ on INR10cr Loan to Not Cooperating
-------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of P D
Enterprises -Vijayawada (PDE) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 10 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with PDE 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 PDE, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on PDE 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 PDE to 'CRISIL B+/Stable Issuer not cooperating'.
Established in 2017 in Vijayawada, Andhra Pradesh, PDE is a
partnership concern of Mr Kadiyala Umamaheswara Rao and his wife
Mrs Manyam Swapna. It trades in coal and coke, and also undertakes
sorting, screening, and grading of these materials.
PATTELA PROJECTS: CRISIL Keeps B+ Debt Rating in Not Cooperating
----------------------------------------------------------------
CRISIL said the ratings on bank facilities of Pattela Projects
Private Limited (SVWTPL) continues to be 'CRISIL B+/Stable Issuer
not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 7.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING)
Proposed Long Term 1.0 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING)
CRISIL has been consistently following up with SVWTPL 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 SVWTPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SVWTPL 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 SVWTPL continues to be 'CRISIL B+/Stable Issuer not
cooperating'.
SVWTPL was established in 2014 by Mr. PV Narasimha Rao. The company
undertakes installation of water treatment plants for government
departments, mainly for households in Andhra Pradesh and it is also
exclusive distributorship of water purifiers in 13 district in
Andhra Pradesh for Shresht Industries Private Limited.
POPULAR MOTOR: CRISIL Moves B+ on INR15.5cr Loans to NonCooperating
-------------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Popular Motor
World Private Limited (PMWPL) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit .5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Inventory Funding 15.0 CRISIL B+/Stable (ISSUER NOT
Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with PMWPL 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 PMWPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on PMWPL 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 PMWPL to 'CRISIL B+/Stable Issuer not cooperating'.
PMWPL, incorporated in 2004, is a dealer of Hyundai's cars and
spares, and provides vehicle servicing services in south and
central Kerala. The company has 52 showrooms and service centers.
PRIME RETAIL: Ind-Ra Lowers LongTerm Issuer Rating to 'D'
---------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Prime Retail
(India) Ltd's Long-Term Issuer Rating to 'IND D (ISSUER NOT
COOPERATING)' from 'IND BB+ (ISSUER NOT COOPERATING)'. The issuer
did not participate in the rating exercise despite continuous
requests and follow-ups by the agency. Thus, the rating is based on
the best available information. Therefore, investors and other
users are advised to take appropriate caution while using these
ratings. The rating will now appear as 'IND D (ISSUER NOT
COOPERATING)' on the agency's website.
The instrument-wise rating actions are:
-- INR310 mil. Fund-based limits (Long-term) downgraded with
IND D (ISSUER NOT COOPERATING) rating;
-- INR80 mil. Proposed fund-based limits (Long-term) downgraded
with Provisional IND D (ISSUER NOT COOPERATING) rating;
-- INR7.5 mil. Non-fund based limits (Short term) downgraded with
IND D (ISSUER NOT COOPERATING) rating; and
-- INR12.5 mil. Proposed non-fund-based limits (Short term)
downgraded with Provisional IND D (ISSUER NOT COOPERATING)
rating.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best-available information.
KEY RATING DRIVERS
The downgrade reflects delays in debt servicing by Prime Retail
India Limited, based on information available in the public
domain.
COMPANY PROFILE
Incorporated in 1989, Prime Retail (India) is engaged in the retail
sale of luxury watches, mobiles, pens, and other lifestyle items.
The company has showrooms in Kolkata, Jaipur, Raipur, and Mumbai.
R.A. MOTORS: CRISIL Moves B+ Debt Ratings to Not Cooperating
------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of R.A. Motors
Private Limited (RAMPL) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 7.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Channel Financing 9.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Corporate Loan 3 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Electronic Dealer 10 CRISIL B+/Stable (ISSUER NOT
Financing Scheme COOPERATING; Rating Migrated)
(e-DFS)
CRISIL has been consistently following up with RAMPL 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 RAMPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on RAMPL 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 RAMPL to 'CRISIL B+/Stable Issuer not cooperating'.
RAMPL, incorporated in 2004, is an authorised dealer for TML's CVs
with four showrooms and nine sales offices covering Etah,
Moradabad, Badaun, Kasganj, Sambhal, Amroha, and Bareilly, in Uttar
Pradesh. The Etah, U.P.-based Company deals in the entire range of
TML's commercial as well as passenger vehicles. Mr Ajay Chaturvedi
is the promoter.
R.S. DREAMLAND: CRISIL Moves B on INR12cr Loan to Not Cooperating
-----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of R.S. Dreamland
Private Limited (RSDLPL) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Rupee Term Loan 12 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with RSDLPL 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 RSDLPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on RSDLPL 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 RSDLPL to 'CRISIL B/Stable Issuer not cooperating'.
RSDLPL was established in 2006 by the Mr Kushi Ram Kundnani and is
engaged in development of residential property in Raipur,
Chhattisgarh. The company is currently engaged in development of a
residential project of about 175000 sq ft in the Raipur,
Chhatisgarh.
RAJARAMSEVAK MULTIPURPOSE: Ind-Ra Lowers LT Issuer Rating to 'D'
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Rajaramsevak
Multipurpose Cold Storage Private Limited's Long-Term Issuer Rating
to 'IND D (ISSUER NOT COOPERATING)' from 'IND B+ (ISSUER NOT
COOPERATING)'. 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 instrument-wise rating actions are:
-- INR50.5 mil. Term loan (Long-term) downgraded with IND D
(ISSUER NOT COOPERATING) rating;
-- INR87.5 mil. Fund-based limits (Long-term) downgraded with IND
D (ISSUER NOT COOPERATING) rating; and
-- INR2.0 mil. Non-fund-based limits (Short-term) downgraded with
IND D (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best available information
KEY RATING DRIVERS
The downgrade reflects Rajaramsevak Multipurpose Cold Storage's
delays in debt servicing, according to the information put out in
the public domain by another rating agency.
RATING SENSITIVITIES
Positive: Timely debt servicing for at least three consecutive
months will be positive for the ratings.
COMPANY PROFILE
Rajaramsevak Multipurpose Cold Storage provides cold storage
facility to potato farmers and traders on a rental basis. The
facility is located at Medinipur, West Bengal.
RIYA IMPEX: Ind-Ra Lowers LT Issuer Rating to 'B', Outlook Stable
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Riya Impex's
(RI) Long-Term Issuer Rating to 'IND B' from 'IND B+ (ISSUER NOT
COOPERATING)'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR 20 mil. Fund-based working capital limits downgraded with
IND B/ Stable rating; and
-- INR 180 mil. Non-fund-based working capital limits affirmed
with an IND A4 rating.
The downgrade reflects the decline in RI's profitability in FY19,
which led to the weakening of the credit metrics.
KEY RATING DRIVERS
RI's EBITDA margin fell to 0.74% in FY19 (FY18: 1.19%) because of
an increase in raw material costs and administrative expenses. The
margin remained modest due to the trading nature of the business.
The return on capital employed was 4.13% in FY19 (FY18: 7.91%).
The company reported a margin of 3.25%. in 9MFY20
Furthermore, the company's credit metrics deteriorated in FY19 due
to the decline in absolute EBITDA to INR5.89 million (FY18: INR8.32
million). The interest coverage (operating EBITDA/gross interest
expense) was 0.90x in FY19 (FY18: 1.28x) and the net leverage
(total adjusted net debt/operating EBITDAR) was 1.91x (FY18:
negative net leverage). The interest coverage was 2.46x in 9MFY20.
The ratings reflect RI's small scale of operations, as indicated by
revenue of INR794 million in FY19 (FY18: INR697 million). The
revenue increased due to an increase in orders. The company
achieved revenue of INR470 million in 11MFY20.
The ratings are constrained by RI's high customer concentration
risk, with the company deriving 100% of its turnover from one
single customer – US-based ADK India LLC.
Liquidity Indicator – Poor: The company's average use of its
non-fund based working capital facility was 88% for the 12 months
ended in January 2020. The cash flow from operation improved but
remained negative at INR 9 million in FY19 (FY18: negative INR23
million) due to an increase in working capital requirements owing
to an increase in inventory. RI's working capital cycle continued
to be stable at 34 days in FY19 (FY18: 34 days). RI had cash and
cash equivalents of INR1.58 million at end-FY19 (end-FY18: INR7.90
million) against the debt of INR12.48 million (FY18: INR4.07
million).
The ratings, however, continue to be supported by the proprietor's
experience of over two decades in the trading of cashew nuts and
spices.
RATING SENSITIVITIES
Negative: Any deterioration in the interest coverage will be
negative for the ratings.
Positive: A positive rating action could result from any
improvement in the interest coverage.
COMPANY PROFILE
Incorporated in 2010, RI is a proprietorship firm engaged in the
import and export of cashew nuts and spices.
S. T. DYEING: CRISIL Withdraws 'B+' Rating on INR9cr Loans
----------------------------------------------------------
CRISIL has withdrawn its ratings on the bank facilities of S. T.
Dyeing (ST) on the request of the company. The rating action is in
line with CRISIL's policy on withdrawal of its ratings on bank
loans.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Cash 2.0 CRISIL B+/Stable (ISSUER NOT
Credit Limit COOPERATING; Rating Withdrawn)
Proposed Fund- 0.5 CRISIL B+/Stable (ISSUER NOT
Based Bank Limits COOPERATING; Rating Withdrawn)
Proposed Term Loan 6.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Withdrawn)
CRISIL has been consistently following up with ST for obtaining
information through letters and emails dated November 26, 2019 and
December 2, 2019, 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 they are arrived at without any management
interaction and are 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 ST. This restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on ST is consistent
with Scenario 2' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BBB' rating category or
lower'. Based on the last available information, the rating on bank
facilities of ST continues to be 'CRISIL B+/Stable Issuer Not
Cooperating'.
CRISIL has withdrawn its ratings on the bank facilities of ST on
the request of the company. The rating action is in line with
CRISIL's policy on withdrawal of its ratings on bank loans.
ST was set up by Mr Vikram Takkar, Mr Ajit Kumar, and Mr Varun
Takkar in 2013 as a partnership firm. It is engaged in dyeing of
fabric on a job-work basis at its facility in Ludhiana, Punjab.
S.V. MOTORS: CRISIL Keeps B+ on INR6.5cr Loans in Not Cooperating
-----------------------------------------------------------------
CRISIL said the ratings on bank facilities of S.V. Motors (SVM)
continues to be 'CRISIL B+/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 0.2 CRISIL B+/Stable (ISSUER NOT
COOPERATING)
Open Cash Credit 6.3 CRISIL B+/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with SVM 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 SVM, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SVM 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 SVM continues to be 'CRISIL B+/Stable Issuer not
cooperating'.
Established in 2014 as a partnership firm, SVM is an exclusive
dealer of PVPL's three-wheelers and four-wheeler commercial
vehicles in Vishakhapatnam, Andhra Pradesh. The firm is promoted by
Mr.B Naveen Kumar and Mr. K Madhusudhana Rao.
SAI GANESH: CRISIL Migrates 'B' Debt Ratings to Not Cooperating
---------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Sai Ganesh
Agencies (SGA) to 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 0.6 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Overdraft 3.25 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Working 7.15 CRISIL B/Stable (ISSUER NOT
Capital Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with SGA 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 SGA, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SGA 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 SGA to 'CRISIL B/Stable Issuer not cooperating'.
Set up in 1996 in Tenali, Guntur, Andhra Pradesh, SGA is a
proprietorship firm involved in trading of pulses and edible oil.
The firm is also a distributor of BSNL recharges and BSNL SIM cards
in the region.
SAMBASHIVA COTTON: CRISIL Migrates B+ Ratings to Not Cooperating
----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Sambashiva
Cotton Industries (SCI) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 3.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Long Term Loan 2.8 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Long Term 1.7 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with SCI 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 SCI, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SCI 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 SCI to 'CRISIL B+/Stable Issuer not cooperating'.
Established in October, 2015 as a partnership firm, SCI is engaged
in the business of cotton ginning and cotton seed oil extraction.
Based in Karimnagar (Telangana), the firm is promoted and managed
by Mr. D Malla Reddy, Mr.M Srinivas and Mr. B Manohar.
SEVEN SEAS: CRISIL Keeps D on INR222cr Loans in Not Cooperating
---------------------------------------------------------------
CRISIL said the ratings on bank facilities of Seven Seas
Hospitality Private Limited (SSHPL) continues to be 'CRISIL D
Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Overdraft 4 CRISIL D (ISSUER NOT COOPERATING)
Term Loan 218 CRISIL D (ISSUER NOT COOPERATING)
CRISIL has been consistently following up with SSHPL 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 SSHPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SSHPL 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 SSHPL continues to be 'CRISIL D Issuer not
cooperating'.
Incorporated in 2006 and promoted by the Dang group, SSHPL offers
banqueting and catering services at three banquet halls at Lawrence
Road, Delhi, with combined seating capacity of 1500 people. The
company has set up a five-star
hotel-cum-restaurant-cum-banquet-hall at Rohini, Delhi.
SIVARATHISH SPINNING: CRISIL Cuts Rating on INR4.75cr Loan to B+
----------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Sivarathish
Spinning Mills Private Limited (SSMPL) to 'CRISIL B+/Stable Issuer
not cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 4.75 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Cash Term Loan 1.83 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
Proposed Long Term
Bank Loan Facility .42 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB-/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with SSMPL 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 SSMPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SSMPL 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 SSMPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
SSMPL, established in 1995, manufactures cotton yarn and grey
fabric. It is managed by Mr. K C Veerappan, who has experience of
over 30 years in the textile industry.
SMT. VISHNU: CRISIL Keeps D on INR8cr Loan in Not Cooperating
-------------------------------------------------------------
CRISIL said the ratings on bank facilities of Smt. Vishnu Devi
Educational Trust (SVDET) continues to be 'CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 8 CRISIL D (ISSUER NOT COOPERATING)
CRISIL has been consistently following up with SVDET 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 SVDET, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SVDET 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 SVDET continues to be 'CRISIL D Issuer not
cooperating'.
SVDET was formed in 2011, by Mr. Anil Kumar Agrawal and family. The
trust has been set up to run educational institutions. Presently,
the trust is running a school under the name of K N International
School near Mathura (Uttar Pradesh), which was established in
2011.
SUPER CONSTRUCTION: CRISIL Keeps D Debt Ratings in Not Cooperating
------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Super Construction
Co. - Mumbai (SCC) continues to be 'CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Long Term 5.5 CRISIL D (ISSUER NOT
Bank Loan Facility COOPERATING)
Term Loan 8.5 CRISIL D (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with SCC 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 SCC, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SCC 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 SCC continues to be 'CRISIL D Issuer not
cooperating'.
SCC, set up in 1981, undertakes real estate development in and
around Mumbai. The firm is owned and managed by Mr. Haribansh Singh
and his family. The firm's office is in Navi Mumbai. Currently, SCC
is developing a residential real estate project in Kharghar, and
two slum rehabilitation projects (one each in Bandra and Wadala in
Mumbai). In addition, the firm is also setting up a hotel in
Panvel.
SUPREME SOLVEX: CRISIL Lowers Rating on INR6cr Cash Loan to B+
--------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Supreme Solvex
Private Limited (SSPL) 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 SSPL 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 SSPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SSPL 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 SSPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB-/Stable Issuer not cooperating'.
Incorporated in 2009 and promoted by Mr Dipesh Goyal, SSPL's
business was acquired by Mr Rajendra Kumar Patel in January 2016.
The company extracts crude oil, mainly mustard, at its facility in
Sirohi, Rajasthan.
SWASTIKA PRINTING: CRISIL Keeps B+ on INR6cr Debt in NonCooperating
-------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Swastika Printing and
Packaging (SPP) continues to be 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 6.5 CRISIL B+/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with SPP 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 SPP, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SPP 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 SPP continues to be 'CRISIL B+/Stable Issuer not
cooperating'.
Set up in 2009, SPP is based in Kala Amb, Himachal Pradesh. The
firm manufactures mono cartons and corrugated boxes used in
industrial packaging. The firm is managed by its partners, Mr.
Jatinder Kumar Arora and Mr. Narinder Kumar Gupta.
T. C. MOTORS: CRISIL Lowers Rating on INR4cr Cash Loan to B+
------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of T. C. Motors
Private Limited (TCMPL) to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 4 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Drop Line 1 CRISIL B+/Stable (ISSUER NOT
Overdraft Facility COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Proposed Fund- 1.2 CRISIL B+/Stable (ISSUER NOT
Based Bank Limits COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Working Capital 15 CRISIL B+/Stable (ISSUER NOT
Facility COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Working Capital 4.37 CRISIL B+/Stable (ISSUER NOT
Loan COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with TCMPL 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 TCMPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on TCMPL 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 TCMPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB/Stable Issuer not cooperating'.
Incorporated in 2009, TCMPL is promoted by Kolkata-based Chowdhury
and family. The company is an authorised dealer of TML's passenger
vehicles in Howrah, Kolkata, Hooghly, and Nadia (all in West
Bengal).
T.J.S. ENGINEERING: CRISIL Keeps D on INR9cr Debt in NonCooperating
-------------------------------------------------------------------
CRISIL said the ratings on bank facilities of T.J.S. Engineering
College (TJSEC) continues to be 'CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Long Term
Bank Loan Facility 4.5 CRISIL D (ISSUER NOT
COOPERATING)
Rupee Term Loan 4.5 CRISIL D (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with TJSEC 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 TJSEC, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on TJSEC 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 TJSEC continues to be 'CRISIL D Issuer not
cooperating'.
Set up in 2007, TJ Sivananda Mudaliar Educational Trust (TJSMET;
currently chaired by Mr. T J Govindarajan). TJSEC began its
operations in 2009-10 (refers to Financial Year, April 1 to March
31) and offers degree course in engineering. TJSMET also operates
TJS Polytechnic College, which started operations in 2010-11 and
offers diploma in engineering. Both the institutes are affiliated
with Anna University, Chennai, and accredited by All India Council
for Technical Education.
TAXUS INFRASTRUCTURE: CRISIL Keeps 'C' Rating in Not Cooperating
----------------------------------------------------------------
CRISIL said the ratings on bank facilities of Taxus Infrastructure
And Power Projects Private Limited (TIPPPL) continues to be 'CRISIL
C/CRISIL A4 Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5 CRISIL C (ISSUER NOT
COOPERATING)
Letter Of Guarantee 15 CRISIL A4 (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with TIPPPL 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 TIPPPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on TIPPPL 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 TIPPPL continues to be 'CRISIL C/CRISIL A4 Issuer not
cooperating'.
TIPPPL, established in 2009, executes turnkey projects for
automatic power factor control panels and trades in electrical
equipment. In 2011-12 (refers to financial year, April 1 to March
31), it started setting up a 5-megawatt solar power plant in
Gujarat, which became operational in April 2013.
UNIQUE FOODS: CRISIL Lowers Ratings on INR15cr Loans to B+
----------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Unique Foods
(UF) to 'CRISIL B+/Stable Issuer not cooperating' from 'CRISIL
BB+/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 11 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
Term Loan 4 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with UF 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 UF, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on UF 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 UF revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB+/Stable Issuer not cooperating'.
For arriving at its ratings CRISIL has combined the business and
financial risk profiles of UF, Radha Krishna Impex Pvt Ltd (RKIPL),
and Shree Keshav Agro Pvt Ltd (SKAPL). This is because all these
entities, together referred to as the Unique group, are in the same
line of business, have common promoters, and share common customers
as well as a marketing team. Furthermore, the promoters treat the
companies as one single group with a common treasury.
UF is engaged in fruit pulp processing and has its unit located in
Muzaffarpur. It is the only unit under RK Agri Biz LLP (RKA), its
proprietor. RKIPL and SKAPL primarily trades in processed fruit
pulp and concentrates. The operations of the unique group is
managed by Muzaffarpur-based Mr. Raj Kumar Kedia, along with his
two sons, Mr. Ranjan Kedia and Mr. Alok Kedia. The family has been
in the food processing industry since 1994.
UNISONN INFRASTRUCTURES: CRISIL Keeps D Ratings in Not Cooperating
------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Unisonn
Infrastructures (UI) continues to be 'CRISIL D/CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan .12 CRISIL D (ISSUER NOT COOPERATING)
Overdraft 2.2 CRISIL D (ISSUER NOT COOPERATING)
Proposed Long 7.68 CRISIL D (ISSUER NOT COOPERATING)
Term Bank Loan
Facility
CRISIL has been consistently following up with UI 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 UI, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on UI 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 UI continues to be 'CRISIL D/CRISIL D Issuer not
cooperating'.
Established in 2009 as a partnership firm, Unisonn Infrastructures
(UI) is engaged in diversified industrial civil construction
activities primarily in construction & retrofitting of cooling
towers. Based in Vishakhapatnam (Andhra Pradesh), the firm is
promoted and managed by Mr.K Vaishnav and Mr.A Vaishnav.
UTTAMENERGY LIMITED: Ind-Ra Lowers LT Issuer Rating to 'BB+'
------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Uttamenergy
Limited's (Uttam) Long-Term Issuer Rating to 'IND BB+' from 'IND
BBB'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR61.7 mil. (reduced from INR88 mil.) Long-term loans due on
January 2022 - June 2033 downgraded with IND BB+/Stable
rating;
-- INR200 mil. Fund-based working capital limit downgraded with
IND BB+/Stable/IND A4+ rating; and
-- INR630 mil. Non-fund-based working capital limit downgraded
with an IND A4+ rating.
KEY RATING DRIVERS
Liquidity Indicator – Stretched: There have been some instances
of overutilization of the fund-based working capital limits by
Uttam for up to 10 days during the 12 months ended February 2020.
Uttam's average use of fund-based limits was 95.8% for the 12
months ended February 2020. Its working capital cycle remained
elongated at 122 days in FY19 (FY18: 89 days). Debtor's days
increased to 153 in FY19 (FY18: 115) due to a delay in receiving
payment for government projects. Cash flow from operations turned
positive at INR173 million in FY19 (FY18: negative INR38 million)
on the back increased absolute EBITDA to INR212 million from INR113
million. At FYE19, the company had a cash balance of INR20 million
(FYE18: INR2 million) and an outstanding term loan of INR61.7
million that will be repaid fully by end-June 2033.
The rating factor in Uttam's continued modest scale of operations
despite revenue increasing to INR1,483 million in FY19 (FY18:
INR853 million) due to the completion of higher orders. Uttam
achieved further improved revenue of INR1,714.5 million over
April-November 2019. At end-December 2019, the company had an
order book of INR2,352 million (1.4x of FY19 revenue) which is
likely to be executed by FY21.
Moreover, the company's credit metrics were comfortable in FY19
with interest coverage (operating EBITDA/gross interest expense) of
6.1x (FY18: 3.0x) and net leverage (adjusted net debt/operating
EBITDAR) of 0.8x (2.3x). The credit metrics improved year-on-year
in FY19 due to a rise in absolute EBITDA to INR212.2 million (FY18:
INR113.3 million). The company's already healthy EBITDA margin
improved to 14.6% in FY19 (FY18: 13.4%), mainly due to the higher
execution of high-margin projects. The return on capital employed
was 35% in FY19 (FY18: 19%).
The ratings continue to be supported by Uttam's founders who have
experience of more than two decades in the engineering, procurement
and construction segment.
RATING SENSITIVITIES
Negative: Any further strain on the liquidity position, or a
decline in the EBITDA margin, resulting in a sustained
deterioration in the credit metrics, could lead to negative rating
action.
Positive: An improvement in the liquidity position, while
maintaining the credit profile could lead to positive rating
action.
COMPANY PROFILE
Incorporated in 2012, Uttam manufactures industrial boilers and
provides erection, installation and commissioning for the boilers.
V.N.M.S. AYYACHAMY: CRISIL Keeps B+ Debt Rating in Not Cooperating
------------------------------------------------------------------
CRISIL said the ratings on bank facilities of V.N.M.S. Ayyachamy
Nadar and Bros (VNMS) continues to be 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 9 CRISIL B+/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with VNMS 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 VNMS, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on VNMS 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 VNMS continues to be 'CRISIL B+/Stable Issuer not
cooperating'.
Set up in 1929, VNMS imports a wide range of pulses for sale in
India. The head office is in Virudhunagar and branches in Chennai
and Madurai.
V.S. BUILDCON: CRISIL Keeps D on INR10cr Loan in Not Cooperating
----------------------------------------------------------------
CRISIL said the ratings on bank facilities of V.S. Buildcon (VS)
continues to be 'CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 10 CRISIL D (ISSUER NOT COOPERATING)
CRISIL has been consistently following up with VS 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 VS, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on VS 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 VS continues to be 'CRISIL D Issuer not
cooperating'.
Set up in 2008 in Ghaziabad as a partnership firm between Mr Varun
Chaudhary, his father, Mr Subhash Chaudhary, and his wife, Ms Reenu
Chaudhary, VS undertakes civil construction work, mainly road and
irrigation projects, for government departments.
VEERPRABHU EXPORT: CRISIL Keeps B on INR16cr Debt in NonCooperating
-------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Veerprabhu Export
House (VEH) continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Fund-Based 16 CRISIL B/Stable (ISSUER NOT
Facilities COOPERATING)
CRISIL has been consistently following up with VEH for obtaining
information through letters and emails dated October 15, 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 VEH, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on VEH 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 VEH continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Established in 1947, VEH is a partnership firm, primarily exporting
spices, other agro commodities and packaged food items. Operations
are managed by Mr Jiten Shah.
VEGGIECRAFT FOOD: CRISIL Moves D Ratings to Not Cooperating
-----------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Veggiecraft
Food Private Limited (VFPL) to 'CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 1 CRISIL D (ISSUER NOT
COOPERATING; Rating Migrated)
Long Term Loan 7.5 CRISIL D (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with VFPL 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 VFPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on VFPL 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 VFPL to 'CRISIL D Issuer not cooperating'.
VFPL, promoted by Mr Chander Prakash Chabra, Ms Karuna Rawat, Mr
Param Dhanot, and Mr Kunal Malik in 2014, harvests, processes,
stores, packs, and cans mushrooms, and has a dairy plant in
Mathura, Uttar Pradesh.
VIJAYA DURGA: CRISIL Keeps B on INR8cr Loans in Not Cooperating
---------------------------------------------------------------
CRISIL said the ratings on bank facilities of Sri Vijaya Durga Oil
Products Private Limited (SVDOPP) continues to be 'CRISIL B/Stable
Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 5.3 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Proposed Fund- 2.7 CRISIL B/Stable (ISSUER NOT
Based Bank Limits COOPERATING)
CRISIL has been consistently following up with SVDOPP 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 SVDOPP, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SVDOPP 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 SVDOPP continues to be 'CRISIL B/Stable Issuer not
cooperating'.
SVDOPP, set up in 2014, is managed by Mr. B Venu Gopala Rao and his
wife, Mrs. Sunitha Balamuri. The company extracts and refines oil
from cotton seeds and palm and sells the by-product, de-oiled cake.
Its plant is in Nuzivid, Andhra Pradesh.
VIKRAM TEA: CRISIL Cuts Rating on INR30cr Cash Loan to B+
---------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Vikram Tea
Processor Private Limited (VTPPL) to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB+/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 30 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 3.43 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
Term Loan 2.57 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
Working Capital 6 CRISIL B+/Stable (ISSUER NOT
Term Loan COOPERATING; Revised from
'CRISIL BB+/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with VTPPL for obtaining
information through letters and emails dated October 15, 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 VTPPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on VTPPL 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 VTPPL revised to 'CRISIL B+/Stable Issuer not
cooperating' from 'CRISIL BB+/Stable Issuer not cooperating'.
Vikram Tea, based in Jalna (Maharashtra), is promoted by Mr.
Rameshbhai C Patel. The company blends, packages, and markets tea
under the Vikram, Lion, and Titali brands. It procures tea largely
from auction houses and tea gardens in Assam, and has its blending
and packaging unit in Jalna.
VIOLA RESORTS: CRISIL Keeps B- on INR15cr Loans in Not Cooperating
------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Viola Resorts Private
Limited (VRPL) continues to be 'CRISIL B-/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Long Term 4.24 CRISIL B-/Stable (ISSUER
Bank Loan Facility NOT COOPERATING)
Term Loan 10.75 CRISIL B-/Stable (ISSUER
NOT COOPERATING)
CRISIL has been consistently following up with VRPL 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 VRPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on VRPL 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 VRPL continues to be 'CRISIL B-/Stable Issuer not
cooperating'.
VRPL, incorporated in 2010 and promoted by Mumbai-based Mr. Nitin
Chimbaikar and his family members, is setting up a four-star hotel,
The Fern Resort, at Lonavala. The company's head office is in
Mumbai.
YASH CONSTRUCTION: CRISIL Moves B Debt Ratings to Not Cooperating
-----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Yash
Construction Company - Latur (YCC) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 8.5 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Term Loan 1.5 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with YCC 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 YCC, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on YCC 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 YCC to 'CRISIL B/Stable Issuer not cooperating'.
YCC was formed as a partnership firm of Ms Anita Thombre and Ms
Vandana Thorat at Latur in 2007. The firm undertakes civil
construction contracts for roads, bridges, and buildings in
Maharashtra.
=================
I N D O N E S I A
=================
AGUNG PODOMORO: Moody's Lowers CFR to B3, Outlook Negative
----------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of Agung Podomoro Land Tbk (P.T.) to B3 from B2.
At the same time, Moody's has downgraded the backed senior
unsecured rating of the 2024 notes issued by APL Realty Holdings
Pte. Ltd., a wholly owned subsidiary of Agung Podomoro Land, to B3
from B2. The notes are guaranteed by Agung Podomoro Land and some
of its subsidiaries.
The outlook on all ratings remains negative.
RATINGS RATIONALE
"The downgrade reflects an increase in Agung Podomoro Land's
liquidity risk over the next 12 months because of the maturity of
its secured loan in March 2021, and its expectation of weaker
operating cash flows," says Jacintha Poh, a Moody's Vice President
and Senior Credit Officer.
In September 2019, Agung Podomoro Land signed a $127 million senior
secured term facility agreement with Credit Opportunities II Pte.
Limited (managed by SSG Capital Management) that has a tenor of 18
months[1]. Moody's expects the company will be reliant on proceeds
from the sale of an investment property to repay the loan, but the
sale had not yet been completed as of March 2020.
Moody's also expects Agung Podomoro Land's revenue generated from
its investment properties will fall by around 20% in 2020 because
travel restrictions and the fear of contagion caused by the
coronavirus outbreak will lead to drop in demand for the company's
retail spaces and hotels. Consequently, Moody's estimates recurring
cash flow coverage of interest expense will weaken to around 0.4x
in 2020, from around 0.6x in 2019.
Based on Moody's assumption that Agung Podomoro Land achieves
marketing sales of IDR1.5 trillion to IDR1.8 trillion in 2020, the
company's credit metrics will remain weak with adjusted
debt/homebuilding EBITDA at around 7.0x and homebuilding
EBIT/interest expense below 1.5x. For the 12 months ended September
30, 2019, Agung Podomoro Land recorded adjusted debt/homebuilding
EBITDA of 6.4x and homebuilding EBIT/interest expense of 1.3x.
In terms of environmental, social and governance (ESG) factors,
Moody's has considered Agung Podomoro Land's weak financial
management. The company's ownership is also concentrated in its
founder and his family, but this risk is partially mitigated by the
oversight exercised through independent board directors.
Furthermore, the founder has shown support for the company by
injecting funds in times of stress.
The negative outlook reflects Agung Podomoro Land's elevated
refinancing risk over the next 12 months.
The principal methodology used in these ratings was Homebuilding
And Property Development Industry published in January 2018.
Factors that would lead to an upgrade or downgrade of the ratings:
Given the negative ratings outlook, an upgrade is unlikely over the
next 12-18 months. Nonetheless, the outlook could return to stable
if the company (1) improves its liquidity, such that cash balances
and committed facilities are sufficient to cover operating cash
needs and debt repayments over the next 12-18 months; and (2)
successfully executes its business plans and maintains adjusted
homebuilding EBIT/interest expense above 1.0x.
Moody's could downgrade the ratings if Agung Podomoro Land is
unable to refinance its senior secured term facility agreement with
Credit Opportunities II Pte. Limited (managed by SSG Capital
Management) by June 2020.
Agung Podomoro Land Tbk (P.T.) is an integrated property developer,
and listed on the Indonesia Stock Exchange in 2010. The company and
its subsidiaries are engaged in the development, management and
operation of apartments, houses, shopping centers, office towers
and hotel properties. It is controlled by Mr. Trihatma Kusuma
Haliman and family, who held an approximate 84% stake in the
company at December 31, 2019.
GAJAH TUNGGAL: Moody's Cuts CFR & Senior Secured Rating to Caa1
---------------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of Gajah Tunggal Tbk to Caa1 from B3.
At the same time, Moody's has downgraded the rating on GJTL's $250
million senior secured notes due in August 2022 to Caa1 from B3.
The outlook is negative.
RATINGS RATIONALE
"The downgrade to Caa1 reflects its expectation that GJTL's largely
unmitigated exposure to the weakening Indonesian rupiah, if
sustained, will drive up debt and weaken EBITDA margins", says
Stephanie Cheong, a Moody's Analyst, "This in turn will dampen
profitability, reduce cash flows and further increase its reliance
on short-term funding."
GJTL's revenues are largely denominated in Indonesian rupiah, but
almost all of its raw material costs, debt and debt service
obligations are denominated in or linked to the US dollar. Moody's
expects every 10% decline in the Indonesian rupiah against the US
dollar will lower GJTL's EBITDA margins by around 2%.
Of GJTL's $397 million long-term US dollar debt, only $184 million
was hedged at September 30, 2019. Furthermore, the hedges only
protect the principal up to IDR14,811 while interest expense
remains unhedged.
"Moreover, GJTL relies heavily on short-term working capital loans,
the majority of which will come due in August 2020," says Cheong.
"The current volatile capital market conditions exacerbate the
refinancing risk for these loans."
Moody's projects the company's $30 million of cash flow from
operations over the next 12 months together with $46 in cash on its
balance sheet at the end of September 2019 will be insufficient to
cover estimated capital expenditures of $30 million and bank loan
amortization payments totaling $53 million. GJTL also has $86
million outstanding under its short-term revolving working capital
loans, the majority of which will mature in August 2020.
GJTL is required to maintain a maximum net debt/EBITDA ratio and
minimum debt service coverage ratio of 4.50x and 1.05x,
respectively, according to its $250 million senior secured
syndicated bank facilities due August 2022.
At September 30, 2019, the covenant calculations were 4.02x and
1.09x, respectively, providing little cushion to absorb shortfalls
in EBITDA or rising debt levels stemming from the depreciation of
the Indonesian rupiah. Additionally, these maintenance covenants
will tighten to 4.35x and 1.10x, respectively, for the period
ending March 2020.
In terms of environmental, social and governance (ESG) factors, the
ratings in corporate governance risk arising from the company's
concentrated ownership structure, weak financial management and
related party transactions.
The principal methodology used in these ratings was Automotive
Supplier Methodology published in January 2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Given the negative outlook, an upgrade is unlikely over the next
12-18 months. However, the outlook could return to stable if GJTL
meaningfully improves its cash flow and liquidity and maintains
sufficient cushion under its bank loan covenants. The company will
also need to successfully roll over upcoming short-term loans and
extend maturities on its working capital facilities to ensure
sufficient liquidity.
Moody's could further downgrade the ratings if (1) GJTL fails to
improve its liquidity, either due to a declining cash balance, a
loss in access to working capital lines, or if it continues to
operate with limited cushion under its maintenance covenants; (2)
GJTL's financial profile deteriorates more severely than expected,
particularly if there is a further weakening in the Indonesian
rupiah; (3) GJTL fails to refinance its $250 million bonds well
ahead of their maturities in 2022.
Gajah Tunggal Tbk (P.T.) (GJTL), headquartered in Jakarta,
Indonesia, is Southeast Asia's largest integrated tire
manufacturer, with installed capacity to produce 55,000 passenger
car radial (PCR) tires, 14,500 bias tires, 95,000 motorcycle tires,
and 2,000 truck and bus radial (TBR) tires per day. The company
also has capacity to produce 40,000 tons and 75,000 tons of tire
cord and synthetic rubber per year, respectively, for both internal
consumption and third-party sales.
GJTL's key shareholders include Denham Pte Ltd (49.5%), a
subsidiary of the Chinese tire manufacturer Giti Tire, and
Compagnie Financiere Michelin SCmA (10%, A3 stable). The remaining
shares are publicly traded on the Indonesian Stock Exchange.
INDIKA ENERGY: Fitch Alters Outlook on BB- LT IDR to Negative
-------------------------------------------------------------
Fitch Ratings has revised the Outlook on Indonesia-based PT Indika
Energy Tbk's Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDRs) to Negative from Stable and affirmed the IDRs at
'BB-'. Fitch has also affirmed the company's outstanding senior
unsecured notes at 'BB-'.
The Outlook revision is due to its expectations that the company's
credit metrics will weaken by more than Fitch had previously
forecast, limiting rating headroom, after Fitch revised coal price
and volume assumptions. Fitch lowered the selling prices of
Indika's thermal coal for 2020 following the revision of some of
its commodity price assumptions (see Fitch Ratings Updates
Mid-Cycle Metals and Mining Price Assumptions, dated 20 March
2020). Fitch also expects the company's coal sales volume to be
lower than in 2019 due to weaker demand and the possibility of
lower production quotas in 2020. Weaker volume and prices are also
likely to pressure the earnings of Indika's contract mining and
barging operations.
Indika's 'BB-' ratings continue to reflect the moderate cost
position and reserve life of its mining operations, its position as
one of Indonesia's largest coal miners, and its integrated
operations, which provide some buffer against weakening prices and
adequate liquidity. Fitch expects the mining licence of Indika's
91%-owned coal-mining subsidiary, PT Kideco Jaya Agung, to be
extended upon its expiry in 2023 without any major impact on its
credit profile, and will consider any significant negative
development in concession renewals, including non-renewal, as an
event risk.
KEY RATING DRIVERS
Weakened Rating Headroom: Fitch raised its forecast for Indika's
FFO net leverage in 2020 to 5x from its previous expectation of
2.7x, and Fitch expects the ratio to remain relatively elevated for
its ratings. Fitch expects Indika's leverage to be at or slightly
below 3.0x from 2021, the level at which Fitch may take negative
rating action. The drop from 2020 would be in line with its
improving price and volume expectations. Indika's FFO net leverage
increased to 4.1x in 2019 from 1.9x in 2018 due to relatively high
capex and increased cash taxes.
Fitch lowered its forecast for Indika's consolidated EBITDA in 2020
to USD245 million from USD430 million. This was after Fitch cuts
Indika's coal selling price and volume assumptions in 2020 to
USD39/tonne and 30 million tonnes respectively, from its previous
expectation of USD43/tonne and 35 million tonnes, respectively.
Weaker Volumes: Lower global demand for thermal coal and the
resumption of production at most Chinese state-owned coal mines
following the ending of quarantine measures early this year could
have a significant impact on the demand for seaborne coal. Its
revised volume expectations are also in line with Indika's
state-approved production quota for 2020, which it received in late
2019. Some Indonesian coal miners typically have their annual
production quotas raised after the initial estimate although Fitch
thinks 2020 production quotas are likely to remain broadly
unchanged from the initial quotas in light of the weaker demand.
Weaker Contract Mining, Barging Earnings: Fitch expects the
earnings of Indika's 70%-owned coal-mining contractor, PT Petrosea
Tbk, to decline in 2020, in line with its expectation of lower
production volumes at its two main customers, Kideco and PT Bayan
Resources Tbk (BB-/Stable), which will account for almost all of
Petrosea's overburden removal volumes in 2020. Fitch similarly
expects lower volume in 2020 at its 51%-owned coal-barging company,
PT Mitrabahtera Segara Sejati Tbk (MBSS). Fitch estimates Petrosea
and MBSS generated around USD120 million and USD27 million in
EBITDA, respectively, in 2019.
Flexibility in Capex and Costs: Indika currently does not expect to
materially alter its long-term mining plan or expansionary spending
despite weak prices and volumes. Fitch however notes that the
company does retain some flexibility in curtailing its expansionary
capex of around USD150 million, most of which would be incurred to
procure equipment for Petrosea. Indika has also demonstrated its
ability to lower its strip ratios during the previous coal price
downturn in 2015-2016.
Fitch however expects Indika's cash costs to drop in 2020 to
USD34/tonne from USD37/tonne in 2019, mainly due to lower fuel
prices and royalties, which will help offset the reduction in
EBITDA to an extent. Fitch estimates Indika incurred fuel costs of
around USD200 million in 2019, which are likely to fall
significantly following a major cut in its price estimates for 2020
(see Fitch Ratings Cuts Oil, Gas Price Assumptions on Coronavirus,
Price War, dated 19th March 2020).
DERIVATION SUMMARY
Indika's ratings are driven by Kideco's moderate-cost position,
production flexibility, reasonable reserves and large capacity,
which require little capex. The similar ratings of Bayan reflect
its comparable operational risk profile to Indika. Bayan has a
lower-cost position and larger reserves than Indika and a healthier
financial profile with considerably lower sensitivity to price and
volume assumptions than Indika. Bayan has faced operational
disruptions due to bottlenecks in its transport infrastructure,
which constrain its ratings. Indika's operations are more
integrated and have a stronger record of uninterrupted production.
The energy-adjusted cost position of Indika's mining operations is
stronger than that of Golden Energy and Resources Limited (GEAR,
B+/Stable). Indika's operations are also more integrated than that
of GEAR. Indika's higher ratings reflect its large scale of
earnings, operational track record and more integrated operations.
GEAR's ratings are constrained until it is able to generate higher
earnings.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Kideco's average coal selling prices to decline to USD39/tonne
in 2020 from USD45/tonne in 2019. Prices to recover to USD42-43 per
tonne from 2021
- Kideco's coal mining volume to decline to 30 million tonnes in
2020 from 34 million tonnes in 2019. Volume to recover to 33-34
million tonnes from 2021
- Kideco's EBITDA to decline to around USD100 million in 2020,
from its estimate of around USD260 million in 2019.
- EBITDA at Petrosea to decline to USD70 million in 2020 from
USD127 million in 2019. Petrosea EBITDA forecast to increase to
over USD130 million from 2021.
- Consolidated investment and capex of USD140 million in 2020 and
USD174 million in 2021. Majority of capex from 2020 would be
incurred for equipment purchases at Petrosea and the completion of
its fuel storage project.
RATING SENSITIVITIES
Developments That may Individually or Collectively, Lead to
Positive Rating Action:
- Fitch does not expect an upgrade as the company's Outlook is
Negative. The Outlook will be revised to Stable if Indika is able
to sustain credit metrics at levels stronger than its negative
sensitivities from 2021, which would be driven by a recovery of
coal prices and volumes.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- If Indika's FFO net leverage is sustained above 3.0x and/or its
FFO fixed-charge coverage falls below 3.5x in 2021 and beyond
- Any weakness or challenges in successfully addressing lumpy
debt maturities
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
No Near-Term Liquidity Issues: Indika does not have any major debt
maturities until its USD265 million senior unsecured notes are due
in April 2022. Indika has debt maturities of less than USD100
million per annum in 2020 and 2021. Indika's consolidated cash
balances are healthy, at over USD610 million at end-September 2019,
although a large part of this is held with its operating
subsidiaries. Fitch nevertheless expects Indika to require
refinancing to meet its 2022 obligations and debt coming due after,
with USD1.1 billion of total consolidated debt of USD1.5 billion
due between 2022 and 2024. Fitch also expects Indika to pay USD210
million in 2022 to the previous shareholders of Kideco upon the
extension of its mining licence.
INDONESIA: Braces for Recession, Activates Crisis Protocol
----------------------------------------------------------
The Jakarta Post reports that Indonesia is bracing for the
spillover effect of a global recession as policymakers roll out
crisis protocols for the worst-case scenarios concerning GDP and
the rupiah exchange rate while COVID-19 is hitting businesses and
households hard.
A government regulation in lieu of law (Perppu) issued on March 31
covers a range of crisis protocols that include allowing Bank
Indonesia (BI) to throw a lifeline to the state budget through
direct government bond purchases and to banks via liquidity
support, The Jakarta Post says.
Indonesia's economy is expected to grow by 2.3 percent this year
under the baseline scenario, which would be the lowest rate since
1999, or contract by 0.4 percent in the worst-case scenario, in the
face of higher global recession risks, The Jakarta Post discloses
citing Finance Minister Sri Muyani Indrawati. The rupiah may hover
between IDR17,500 and IDR20,000 per US dollar under the worst-case
scenario, a historic low even weaker than after the 1998 financial
crisis.
The Jakarta Post says President Joko "Jokowi" Widodo has announced
plans to spend IDR405.1 trillion on health care, social safety nets
and business recovery programs. The new regulation, Perppu No.
1/2020, allows the budget deficit to widen beyond the previous
legal limit of 3 percent of the gross domestic product (GDP).
"No actions, including decisions made based on this Perppu, may be
subject to lawsuits that could be filed at a state administrative
court," reads the Perppu on state finance and financial system
stability to contain the COVID-19 pandemic, the report relays.
According to The Jakarta Post, Sri Mulyani said the stipulation was
necessary so that authorities were legally protected to take
"extraordinary measures in protecting the economy". The Perppu was
issued as Indonesia declared a public health emergency that
involves imposing large-scale social restrictions.
"We are very aware that we must be very careful to avoid moral
hazard," the report quotes Sri Mulyani, who was among decision
makers in a controversial 2008 bailout on failed Bank Century, as
saying. "We will formulate a safeguard, so that policymakers that
are taking measures to improve public health and the economy cannot
be criminalized because of the acts of others."
According to the report, the COVID-19 crisis playbook bears eerie
resemblance to the 1998 crisis, during which the central bank
provided massive liquidity support to commercial banks to survive
the monetary crisis, but most of the money was eventually
embezzled.
The government's economic recession scenario would mean the first
GDP contraction since the 1998 crisis, which saw the domestic
economy contract by 13.1 percent.
However, three economists contacted by The Jakarta Post agreed that
Indonesia's current state was "very different" from that in 1998.
The common denominator among the economists is that existing
Indonesian companies have stronger fundamentals than those in the
aftermath of the Asian financial crisis.
According to The Jakarta Post, Center for Reform on Economics
(Core) Indonesia research director Piter Abdullah explained that
many Indonesian companies in the 1990s had relied heavily on
foreign loans to finance operations. Those loans had made such
companies inherently vulnerable to the rupiah exchange rate slump
that began in July 1997.
"The companies today have not collapsed. They have been shaken,
yes, but not collapsed," the report quotes Abdullah as saying.
Public sentiment over the 1998 crisis – a violent period in
Indonesian history – was stirred after the Indonesian rupiah hit
IDR16,000 to the US dollar on March 20, the weakest since the
crisis, as the COVID-19 pandemic prompted an Indonesian asset
sell-off.
Indonesia has responded by announcing tax breaks to support
companies, increasing healthcare spending and allowing the central
bank to buy tradable government bonds to stabilize the rupiah,
among other measures, in line with policies carried out by
authorities worldwide to protect the economy, adds The Jakarta
Post.
LIPPO KARAWACI: Fitch Alters Outlook on B- LT IDRs to Negative
--------------------------------------------------------------
Fitch Ratings has revised the Outlook on Indonesia-based
homebuilder PT Lippo Karawaci TBK's Long-Term Foreign- and
Local-Currency Issuer Default Ratings (IDR) to Negative from Stable
and affirmed the ratings at 'B-'. Fitch Ratings Indonesia has also
revised the Outlook on Lippo's 'BB+(idn)' National Long-term Rating
to Negative from Stable.
'BB' National Ratings denote an elevated default risk relative to
other issuers or obligations in the same country or monetary
union.
KEY RATING DRIVERS
Heightened Risk to Cash Flow: The Negative Outlook reflects the
heightened risk that Lippo may not be able to meaningfully improve
its operating cash flow at the holding company level, as it will
find it challenging to launch new projects in 2H20 amid the
COVID-19 pandemic; new projects formed the bulk of its previous
estimate for 2020 presales and Fitch has consequently cut its 2020
presales assumption to IDR500 billion, from IDR2 trillion. Its
rating case estimates that presales will fall by 50% yoy in 2Q20
amid unprecedented macroeconomic volatility and tight
social-distancing measures, with a more moderate 30% decline in
3Q20 and 20% in 4Q20, and a full recovery being at least 12 months
away.
Short-Term Liquidity Sufficient: Lippo's rating is underpinned by
its adequate liquidity, with no significant debt maturities until
2025. The company reports cash of around IDR3.5 trillion as of
March 2020, to be used to meet operating costs and around IDR1
trillion in annual interest expenses. The company may be able to
temporarily lower construction costs on existing projects to
conserve cash, particularly if social distancing measures delay the
pace of project completions. Fitch expects Lippo to end the year
with more than IDR1 trillion in cash, based on its forecast of
IDR500 billion cash collections from presales this year. The rating
may come under pressure in the next six- to 12 months if Lippo is
unable to maintain sufficient liquidity over a rolling 12-18 month
horizon.
Execution Risk for Asset Sales: Fitch believes Lippo's plan to sell
Puri Mall to its Singapore-listed Lippo Malls Indonesia Retail
Trust (BB/Stable) in 1H20 may face further delays due to the
volatility in capital markets, because the sale was contingent on
the trust raising equity through a rights issuance. Lippo plans to
sell other assets in the next six to 12 months, but Fitch believes
these avenues carry significant execution risk and have not
factored them into its rating case.
Challenging Macroeconomic Environment: Indonesia's economy is
suffering from the fallout caused by the coronavirus pandemic due
to its trade linkages with China and exposure to commodity exports,
as published in its March 2020 Global Economic Outlook. Global risk
aversion has led to the Indonesian rupiah falling sharply to around
IDR16,000-17,000 per US dollar. Tightening financial conditions
stemming from currency depreciation will add another challenge to
Indonesian growth in 1H20 and are likely to depress demand for home
purchases for most of the year.
ESG - Management Strategy: Lippo has an ESG Relevance Score of '4'
for management strategy. The company is yet to demonstrate its
ability to successfully execute its shift into mid-rise,
high-density projects in the affordable segment, from its previous
focus on the mid- to middle-upper segment. Fitch has captured this
strategy-change risk in the company's management strategy scores.
DERIVATION SUMMARY
Lippo's rating is comparable with that of international peers, such
as PT Agung Podomoro Land Tbk (APLN, CCC+), PT Modernland Realty
Tbk (B/Stable) and PT Alam Sutera Realty Tbk (ASRI, B/Negative).
Lippo has a better liquidity position than APLN, as it has no large
debt maturities until 2025, sufficient cash on hand to meet
operating costs over a 12-15 month period and an adequate land bank
to support its efforts to revive property presales in the medium
term. APLN sells more properties than Lippo, at around IDR1.5
trillion-2.0 trillion a year, but this is insufficient to cover the
largely committed construction costs on its high-rise projects and
interest expense. APLN's liquidity is weaker than Lippo's, as it
needs to resort to asset sales to meet its IDR1.8 trillion loan due
in June 2021. Therefore, Lippo is rated higher than APLN.
Modernland is rated one-notch higher than Lippo to reflect its
healthy operating cash flow and stronger presale execution.
Modernland generates around IDR2.0 trillion-2.5 trillion of
presales annually, around half of which stem from its mature
industrial park, where sales are highly cash accretive given the
low development costs. The balance stems from well-located
residential products. Consequently, Modernland is able to generate
neutral-to-positive operating cash flow in most years, which is
reflective of a stronger business profile than Lippo.
Alam Sutera is rated higher than Lippo due to its stronger business
risk profile reflected in higher presales and healthy operating
cash flows supported by a higher mix of landed houses, as well as
its large land bank. The Negative Outlook on ASRI's rating reflects
the refinancing risks tied to its April 2021 bond maturity.
Lippo's National Long-Term Rating is higher than that of PT
Smartfren Telecom Tbk (CCC+(idn)) due to Smartfren's weaker cash
flow generation and poor liquidity. Fitch expects Smartfren to keep
relying on external liquidity sources, as cash flow generation will
be insufficient to cover working capital, capex and debt servicing.
The rating also reflects the company's limited financial
flexibility due to its high credit risk, although the company has
sufficient coverage to pay its interest for the next 18 months.
KEY ASSUMPTIONS
-- Annual presales at the holding company of IDR500 billion
from existing projects in 2020 and 2021
-- Annual presales from new projects of IDR2 trillion in 2021
-- Annual cash interest cost and rental support payments to its
former affiliate, First Real Estate Investment Trust, of
around IDR1 trillion each
-- Construction costs of IDR2 trillion in 2020, mainly for
existing projects, and around IDR600 billion in 2021 on new
project launches
-- Year-end cash on hand of over IDR1 trillion in 2020 and
around IDR700 billion in 2021
Key Recovery Rating Assumptions:
Fitch assumes Lippo will be liquidated in a bankruptcy rather than
continue as a going concern, because it is an asset-trading
company
To estimate Lippo's liquidation value, Fitch assumes a 75% advance
rate against accounts receivable at the standalone level and a 50%
advance rate against the carrying value of adjusted inventory and
fixed assets
Proceeds from the disposal of Lippo's 51% share of subsidiary, PT
Siloam International Hospitals Tbk, will be available during a
liquidation at market value
Based on the calculation of the adjusted liquidation value after
administrative claims, Fitch estimates the Recovery Rating of the
senior unsecured bonds at 100%, which corresponds to a Recovery
Rating of 'RR1'. However, Fitch has rated the senior unsecured
bonds 'B-'/'RR4' because Indonesia falls into Group D of
creditor-friendliness under its Country-Specific Treatment of
Recovery Ratings Criteria and the instrument ratings of issuers
with assets in this group are subject to a soft cap at the
company's IDR.
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- The Outlook could be revised to Stable if Lippo improves its
negative free cash flow/gross debt to less than -20% on a sustained
basis (2020F: -29%; 2021F: -9%)
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Inability to meaningfully improve property presales, such that
negative free cash flow/gross debt at the holding company remains
weaker than -20% for a sustained period
- Inability to ensure sufficient cash on hand to cover
obligations over a rolling 12-18 month horizon
BEST/WORST CASE RATING SCENARIO
Ratings of non-financial corporate issuers have a best-case rating
upgrade scenario (defined as the 99th percentile of rating
transitions, measured in a positive direction) of three notches
over a three-year rating horizon; and a worst-case rating downgrade
scenario (defined as the 99th percentile of rating transitions,
measured in a negative direction) of four notches over three years.
The complete span of best- and worst-case scenario credit ratings
for all rating categories ranges from 'AAA' to 'D'. Best- and
worst-case scenario credit ratings are based on historical
performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate 12-Month Liquidity: Lippo says it has cash on hand of
around IDR3.5 trillion at the holding company as of March 2020, and
Fitch expects the company will end 2020 with cash of more than IDR1
trillion after meeting all operating expenses and interest costs.
Its forecast includes around IDR2 trillion in construction costs
for 2020, similarly to last year, but actual construction costs
could be lower if the coronavirus-related slowdown persists for
more than a few months, which will help the company conserve cash.
Lippo issued USD420 million in unsecured notes in 1Q20, due 2025,
which it used to repay its 2022 notes. The new notes are now
Lippo's earliest significant debt maturity. Lippo also has IDR270
billion of working capital loans that are typically rolled over
annually, as well as committed undrawn revolving credit facilities
of IDR700 billion, which Fitch expects it may have to draw down in
2021 to support liquidity.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch deconsolidated the financials of Lippo's listed subsidiaries,
PT Siloam International Hospitals Tbk and PT Lippo Cikarang Tbk,
from Lippo's consolidated financial profile, because Fitch does not
expect these subsidiaries to upstream significant cash flow to
Lippo in the medium term.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Lippo has an ESG relevance score of 4 for Management Strategy given
the company's ability to execute its shift to affordable housing is
a key rating driver.
Lippo has an ESG relevance score of 4 for Governance Structure to
reflect its concentrated shareholding and limited board
independence.
Lippo has an ESG relevance score of 4 for Financial Transparency to
reflect its record of delayed financial reporting on a number of
occasions.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or to the way in which they are being
managed by the entity.
LIPPO MALLS: Moody's Alters Outlook on Ba3 CFR to Negative
----------------------------------------------------------
Moody's Investors Service has affirmed the Ba3 corporate family
rating of Lippo Malls Indonesia Retail Trust.
At the same time, Moody's has affirmed the Ba3 backed senior
unsecured rating on the bond issued by LMIRT Capital Pte. Ltd., a
wholly-owned subsidiary of LMIRT. The bond is guaranteed by the
trustee of LMIRT.
The outlook is changed to negative from stable.
RATINGS RATIONALE
"The change in outlook to negative reflects its expectation that
LMIRT's credit metrics will weaken in 2020 because of the softer
operating conditions caused by the coronavirus outbreak, and due to
the depreciation of the Indonesian rupiah against the Singapore
dollar," says Jacintha Poh, a Moody's Vice President and Senior
Credit Officer.
On March 31, 2020, LMIRT announced the temporary closure of all
malls except for essential services from April 1 for a minimum of
two weeks[1].
Based on Moody's assumption of a 15% decline in 2020 revenue caused
by mall closures, weaker demand for retail space and Indonesian
rupiah depreciation against the Singapore dollar, Moody's expects
LMIRT's net debt/EBITDA will weaken to around 6.5x in 2020 from
5.2x in 2019, and EBITDA/interest expense to around 2.0x from 3.0x
over the same period.
Nonetheless, Moody's expects LMIRT's liquidity will remain adequate
over the next 12 months, assuming the trust will obtain the
required funding before proceeding with its proposed acquisition of
Lippo Mall Puri. As of December 31, 2019, LMIRT had SGD110 million
of cash on hand, compared with SGD75 million of bonds maturing in
June 2020.
However, refinancing risk will escalate in 2021 because LMIRT has
SGD175 million of syndicated term loans maturing in August 2021 and
SGD140 million of perpetual securities callable in September 2021.
LMIRT's Ba3 rating continues to reflect the trust's established
presence in Indonesia (Baa2 stable), with its portfolio of retail
malls and retail spaces spread across the ten Indonesian cities and
targeting the country's growing middle to upper-middle income
consumers.
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 retail
property sector has been one of the sectors affected by the shock
given its sensitivity to consumer demand and sentiment.
More specifically, the expected weakening in LMIRT's credit
profile, including its exposure to Indonesia, 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. Its action reflects the impact on LMIRT of the breadth
and severity of the shock, and the broad deterioration in credit
quality it has triggered.
Moody's has also taken into consideration the governance risk
stemming from related-party transactions between LMIRT and the
Lippo group of companies. This risk is partially mitigated by the
regulatory oversight provided by the Monetary Authority of
Singapore and exercised through the board, which mostly consists of
independent directors. Furthermore, there is an alignment of
interest between LMIRT and its sponsor, Lippo Karawaci, because the
latter has a 32% stake in the trust.
The principal methodology used in these ratings was REITs and Other
Commercial Real Estate Firms published in September 2018.
Factors that would lead to an upgrade or downgrade of the ratings:
Given the negative ratings outlook, an upgrade is unlikely over the
next 12-18 months. Nonetheless, the outlook could return to stable
if the company (1) improves its liquidity, such that cash balances
and committed facilities are sufficient to cover operating cash
needs and debt repayments over the next 12-18 months; and (2)
executes its business plans and maintains adjusted net debt/EBITDA
below 6.5x and adjusted EBITDA/interest expense above 2.5x.
On the other hand, LMIRT's ratings could be downgraded if: (1) the
operating environment deteriorates, leading to higher vacancy
levels and declining operating cash flows or falling asset
valuations; (2) the trust's credit metrics weaken, with adjusted
net debt/EBITDA exceeding 6.5x or adjusted EBITDA/interest expense
falling below 2.5x; or (3) the trust fails to proactively manage
its debt maturities, such that short-term debt exceeds 15% of total
debt.
Lippo Malls Indonesia Retail Trust (LMIRT) is a real estate
investment trust and has been listed on the Singapore Stock
Exchange since November 2007. At December 31, 2019, it had a
portfolio of 23 retail malls and seven retail spaces across major
cities in Indonesia, with a total appraised value of around SGD1.8
billion.
=========
J A P A N
=========
NIPPON YUSEN: Moody's Alters Outlook on Ba1 CFR to Negative
-----------------------------------------------------------
Moody's Japan K.K. has affirmed the Ba1 corporate family rating of
Nippon Yusen Kabushiki Kaisha.
At the same time, Moody's has changed the outlook on the rating to
negative from stable.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak, the
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 shipping
sector has been one of the sectors most significantly affected by
the shock given its sensitivity to demand and sentiment. More
specifically, weaknesses in NYK's credit profile, including its
high debt load and leverage, have left it vulnerable to shifts in
market sentiment in these unprecedented operating conditions, and
NYK remains vulnerable to the outbreak continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
environmental, social and governance (ESG) framework, given the
substantial implications for public health and safety. The actions
reflect the impact on NYK of the breadth and severity of the shock,
and the broad deterioration in credit quality it has triggered.
Moody's expects the coronavirus outbreak will restrain global
economic growth and trade activity, and in turn curtail container
shipping demand. Shrinking Chinese manufacturing output and reduced
demand for coal and iron ore in China will also lower dry bulk
shipping demand, especially during the first half of 2020. As such,
the supply-demand balance will tilt towards oversupply for
container shipping and dry bulk cargo, although the situation is
more positive for tankers given the sharp drop in oil prices.
The rating affirmation considers the profits NYK derives from its
car carrier, and dry bulk shipping liquid tankers, LNG and offshore
businesses operating under long-term contracts. The affirmation
also considers NYK's large scale, relatively diversified shipping
segments, and well-established market presence.
The negative outlook reflects weakening global shipping demand from
the industrial segments affected by the spreading coronavirus
outbreak. Although NYK secures close to JPY70 billion in profits
from mid-to-long term contracts, the remaining spot contacts are
affected by lower shipping volumes and volatile freight rates.
NYK's air cargo business operated through its subsidiary, Nippon
Cargo Airlines, also remains loss-making, despite a temporary
increase in demand as many passenger flights -- along with their
cargo space -- have been grounded.
NYK's credit quality is weakly positioned to absorb the expected
decline in demand and profits, due to its high leverage following
intense competition in the shipping industry and NYK's active
investments in growth areas.
Factors that would lead to an upgrade or downgrade of the rating:
The rating could be downgraded if profitability and leverage remain
weak such that (1) debt/EBITDA stays materially above 7.0x, and (2)
RCF/net debt remains in the single digits in percentage terms for a
prolonged period.
An upgrade is unlikely until overall shipping demand returns to
pre-coronavirus levels. That said, the rating could be upgraded if
NYK materially reduces its debt and keeps its earnings stable by
reducing its market exposure such that (1) debt/EBITDA stays below
6.5x, and (2) retained cash flow (RCF)/net debt remains above 15%
for a sustained period.
The principal methodology used in this rating was Shipping Industry
(Japanese) published in January 2018.
Headquartered in Tokyo, Nippon Yusen Kabushiki Kaisha is one of the
world's largest shipping companies by fleet size with over 800
vessels.
O.S.K. LINES: Moody's Alters Outlook on Ba2 CFR to Negative
-----------------------------------------------------------
Moody's Japan K.K. has affirmed Mitsui O.S.K. Lines, Ltd.'s (MOL)
Ba2 corporate family rating.
At the same time, Moody's has changed the outlook on the rating to
negative from stable.
RATINGS RATIONALE
The rapid and widening spread of the coronavirus outbreak, the
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 shipping
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 MOL's credit profile, including
its high debt load and leverage, have left it vulnerable to shifts
in market sentiment in these unprecedented operating conditions,
and MOL remains vulnerable to the outbreak continuing to spread.
Moody's regards the coronavirus outbreak as a social risk under its
environmental, social and governance (ESG) framework, given the
substantial implications for public health and safety. The actions
reflect the impact on MOL of the breadth and severity of the shock,
and the broad deterioration in credit quality it has triggered.
Moody expects the coronavirus outbreak will restrain global
economic growth and trade activity, and in turn curtail container
shipping demand. Shrinking Chinese manufacturing output and reduced
demand for coal and iron ore in China will also lower bulk shipping
demand, especially during the first half of 2020. As such, the
supply-demand balance will tilt towards oversupply for container
shipping and dry bulk cargo, although the situation is more
positive for tankers given the sharp drop in oil prices.
The rating affirmation reflects the fact that MOL derives a large
share of revenue from fixed contracts, which should support its
profits during the expected market downturn. MOL expects to secure
over JPY55 billion of profit under fixed contacts for the fiscal
year ending March 2020 (fiscal 2020), offsetting potential losses
in short-term contracts. The affirmation also considers MOL's large
scale, relatively diversified shipping segments, and
well-established market presence.
The negative outlook reflects weakening global shipping demand from
the industrial segments affected by the spreading coronavirus
outbreak. Despite the secured portion of its profit, MOL's
remaining spot contacts will be affected by lower shipping volumes
and volatile freight rates. MOL's credit quality is weakly
positioned to absorb this weaker demand, due to its high leverage
following intense competition in the shipping industry and MOL's
active investments in growth areas.
Factors that would lead to an upgrade or downgrade of the rating:
Moody's could downgrade the rating if MOL's profitability and
leverage remain weak, whereby its (1) debt/EBITDA remains above the
7.5x-8.0x range, and (2) retained cash flow/net debt falls to below
5% for a prolonged period.
An upgrade is unlikely until overall shipping demand returns to
pre-coronavirus levels. That said, Moody's could upgrade the rating
if the companies materially reduce debt and improves profitability,
such that (1) debt/EBITDA stays below 7.0x and (2) retained cash
flow/net debt stays above 10%.
The principal methodology used in this rating was Shipping Industry
(Japanese) published in January 2018.
Headquartered in Tokyo, Mitsui O.S.K. Lines, Ltd. is one of the
world's largest shipping companies by fleet size with about 850
vessels.
=====================
N E W Z E A L A N D
=====================
FE INVESTMENTS: Goes Into Receivership
--------------------------------------
Anne Gibson at NZ Herald reports that Auckland headquartered
financier FE Investments, holding NZD53 million in term deposits,
has gone into receivership leaving deposit holders extremely
worried.
An FE Investments director has just confirmed the move although it
is yet to appear on the Companies Office website, the report says.
Andrew Schnauer, one of three directors, said KordaMentha was now
in charge of the business. But Mr. Schnauer said he could say
nothing more.
NZ Herald relates that the company announced further details on its
web site, saying Neale Jackson and Brendon Gibson of KordaMentha
were appointed joint receivers and managers of all of the assets
and undertaking of FE Investments.
Those two are now in control of the assets and undertakings of the
company, the report states.
Borrowers should keep paying, FE said, but those who had deposits
would not be paid.
"As a consequence of the receivership, all payments of principal
and interest to deposit holders have been suspended."
The receivers will soon write to all known deposit holders advising
them of the receivership and the likely next steps. Further
communication with deposit holders will likely be in May when the
receivers will provide further information about FEI and the
receivership, the business said.
Headquartered in Auckland, FE Investments is an ASX listed business
whose chief executive is Marcus Ritchie of Sydney.
Mr. Ritchie is also a director of the New Zealand-registered FE
Investments, along with Auckland's Jacob Ploeg. The New Zealand
business is wholly owned by FE Investments Group in Sydney.
KIKKI.K NZ: Placed Into Liquidation
-----------------------------------
NZ Herald reports that Glitzy stationery chain Kikki.K has been
moved into liquidation less than a month after being placed into
receivership.
The Australian company that has seven stores in New Zealand was
placed into liquidation on March 24.
Kikki.K was founded by Karlsson and Lacy in Melbourne in 2001. It
operates 65 stores across Australia, the United Kingdom, New
Zealand, Singapore and Hong Kong.
The company employs 450 full-time equivalent employees and turns
over AUD70 million in annual revenue.
On March 10, the company said Jim Downey of J.P Downey & Co has
been appointed as voluntary administrator, while Barry Wright and
Bruno Secatore of Cor Cordis have also been appointed receivers of
the company, which is continuing to trade.
=====================
P H I L I P P I N E S
=====================
[*] PHILIPPINES: Airlines Seek Government Help to Survive Virus
---------------------------------------------------------------
BusinessWorld Online reports that local airlines in the Philippines
are appealing for government help, as the "catastrophic impact" of
the coronavirus disease 2019 (COVID-19) pandemic threatens their
survival.
"The Philippine carriers are facing an existential threat to their
survival which is faced by other airlines in the region and in
other parts of the world," the Air Carriers Association of the
Philippines (ACAP) said in a March 25 letter addressed to the heads
of the Departments of Transportation, Finance, Tourism and Trade,
and the National Economic and Development Authority, BusinessWorld
relays.
BusinessWorld relates that the group, composed of Philippine
Airlines, Inc. (PAL), Cebu Air, Inc. (Cebu Pacific), Philippines
AirAsia, Inc., Air Philippines Corp. (PAL Express), and Cebgo,
Inc., emphasized that they are not seeking a "handout" at the
expense of the taxpayers but only want to have ready working
capital to allow them to restart and continue operations.
"Given these extraordinary times where the survival of the domestic
airline industry is at stake, ACAP member airlines urgently appeal
. . . for timely government intervention which is indispensable if
Philippine aviation will have the capacity to resume its vital role
of connecting people for trade, commerce and tourism," ACAP, as
cited by BusinessWorld, said.
ACAP said its member-airlines temporarily shut down passenger
operations until April 14 after Luzon was placed under enhanced
community quarantine (ECQ). Over 30,000 flights were canceled,
affecting nearly five million passengers.
Airlines are now unable to generate revenues in the next few weeks
or even months, while banks have tightened credit lines,
BusinessWorld says.
According to BusinessWorld, ACAP asked the government to provide a
credit guarantee scheme "that guarantees the banking sector's loans
and credit lines, most of which are secured with collateral, to
remove its aversion to the poor credit risk of the airline industry
under the present operating environment."
The group also requested the government to give them access to
emergency lines of credit to fund six months of operations of
airlines and other aviation-related companies, "in order for the
industry to remain viable until overall demand recovers,"
BusinessWorld says.
"We request that upon the lifting of the ECQ hopefully by April 14,
uniformity in aviation transport regulations would be implemented
in the entire country, and that LGUs be mandated to align with
National Government," it added.
To ensure airlines successfully recover, ACAP said they need a
"long-term facility with attractive rates or a guaranty facility to
allow them to restructure their debt at manageable levels, and
secure better terms from aircraft lessors, bankers and creditors,
according to BusinessWorld.
Lastly, the local airlines sought a full waiver of all navigational
and airport charges, which include airport office rentals and land
leases, until the end of 2020, BusinessWorld adds.
"ACAP member-airlines assure the government that these financing
will be used for legitimate business stabilizaton purposes with the
corresponding corporate governance in place," the local airlines
group said.
Sought for comment, Finance Secretary Carlos G. Dominguez III told
BusinessWorld in a mobile phone message that they "will ask the BSP
(Bangko Sentral ng Pilipinas) to support the banks that support
their clients, including airlines."
BusinessWorld relates that Transportation Assistant Secretary
Goddes Hope O. Libiran, speaking for Transportation Secretary
Arthur P. Tugade, said in a mobile phone message that ACAP's
request will be discussed during a meeting of the Inter-Agency Task
Force (IATF) for the Management of Emerging Infectious Diseases.
The International Air Transport Association (IATA) last week said
without government support, up to 50% of global airlines face
possible bankruptcy in the coming weeks. IATA estimated revenue
losses from the COVID-19 crisis to reach over $250 billion this
year, BusinessWorld says.
Earlier, the Australia-based Center for Asia Pacific Aviation
(CAPA) has said airlines in Asia-Pacific countries, including the
Philippines, will be the most badly affected by the COVID-19
pandemic, adds BusinessWorld.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2020. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding,
electronic re-mailing and photocopying) is strictly prohibited
without prior written permission of the publishers.
Information contained herein is obtained from sources believed
to be reliable, but is not guaranteed.
TCR-AP subscription rate is US$775 for 6 months delivered via e-
mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance
thereof are US$25 each. For subscription information, contact
Peter Chapman at 215-945-7000.
*** End of Transmission ***