/raid1/www/Hosts/bankrupt/TCRAP_Public/200504.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Monday, May 4, 2020, Vol. 23, No. 89
Headlines
A U S T R A L I A
AOLIDAY AU: Second Creditors' Meeting Set for May 7
CRINITIS CARLTON: Second Creditors' Meeting Set for May 12
CUDECO LTD: Mining Company Placed Into Liquidation
LATITUDE AUSTRALIA 2020-1: Moody's Reviews E Notes for Downgrade
R. SHRESTHA PTY: First Creditors' Meeting Set for May 8
RSD (QLD) PTY: First Creditors' Meeting Set for May 12
TIGER INTERNATIONAL: First Creditors' Meeting Set for May 11
TRAVEL ASIA: Placed Into Liquidation
TRAVEL EXPRESS: Jirsch Sutherland Appointed as Liquidator
VIRGIN AUSTRALIA: Government Still in Frame for Survival Plans
VIRGIN AUSTRALIA: Launches U.S. Suit to Stop Aircraft Repossession
VIRGIN AUSTRALIA: S&P Lowers ICR to 'D' on Chapter 15 Filing
[*] Moody's Reviews 6 Australian Sapphire RMBS for Downgrade
C H I N A
KAISA GROUP: Fitch Affirms 'B' LongTerm Issuer Default Rating
KWG GROUP: Moody's Affirms B1 Corp. Family Rating, Outlook Stable
MINSHENG BANKING: Fitch Affirms BB+ LongTerm Foreign Currency IDR
RONSHINE CHINA: Fitch Affirms BB- LongTerm Foreign Currency IDR
TAHOE GROUP: Fitch Puts 'B' LongTerm IDR on Watch Negative
I N D I A
ABDUL JALEEL: CRISIL Keeps B Debt Ratings in Not Cooperating
ANSHUL IMPEX: ICRA Lowers Rating on INR30cr LT Loan to B+
AVIA CERAMIC: ICRA Tags INR7.5cr Loans as Not Cooperating
AXIS BANK: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
B. P. SPICES: CRISIL Keeps B on INR8cr Loans in Not Cooperating
BABA BHUBANESWAR: CRISIL Keeps B- Ratings in Not Cooperating
BHARAT FOOD: ICRA Keeps D on INR27cr Bank Loans in Not Cooperating
DEORANI DEVI: ICRA Keeps D on INR15cr Bank Loans in Not Cooperating
DEWAN HOUSING: Insolvency Process May be Extended to June 30
DEWAN HOUSING: Mumbai Court Rejects Interim Bail Plea of Promoters
DHARAMRAJ CONTRACTS: ICRA Cuts Rating on INR59cr Loan to 'D'
FASTBUILD BLOCKS: CRISIL Keeps B- Debt Ratings in Not Cooperating
GAYATRI POULTRIES: CRISIL Keeps B on INR16cr Debt in NonCooperating
GOKUL KANNAN: CRISIL Keeps B on INR9cr Loans in Not Cooperating
HK ENNTERPRISES-DELHI: CRISIL Keeps B Rating in Not Cooperating
HONEY PROPERTIES: CRISIL Keeps B on INR7cr Loan in Not Cooperating
HY LINK OVERSEAS: CRISIL Keeps B- Debt Ratings in Not Cooperating
ICICI BANK: Fitch Affirms BB+ LongTerm IDR, Outlook Stable
IL&FS TAMIL: ICRA Keeps D on INR6,080cr Bank Debt in NonCooperating
JAY BHARAT: ICRA Keeps B+ on INR14.9cr Loans in Not Cooperating
JAYKRISHNA RICE: CRISIL Keeps B on INR10cr Loan in Not Cooperating
KAMAKSHI RAW: ICRA Keeps B+ on INR10cr Loans in Not Cooperating
KIWI ALLOYS: CRISIL Maintains 'B' Debt Ratings in Not Cooperating
KUNJ BIHARI: ICRA Withdraws B+ Rating on INR7.50cr LT Loan
MANMATHA NATH: ICRA Keeps B+ on INR7cr Credit in Not Cooperating
MERCURY INDUSTRIES: Ind-Ra Lowers LongTerm Issuer Rating to 'BB+'
NATURAL ORGANIC: CRISIL Keeps 'B' Ratings in Not Cooperating
NIRMLANAND STEELS: CRISIL Keeps B on INR6cr Loans in NonCooperating
PARAS FOODS: ICRA Keeps D on INR8cr Credit in Not Cooperating
PURBANCHAL VENEERS: Ind-Ra Keeps 'BB+' Rating in Non-Cooperating
R. P. STEEL INDUSTRIES: CRISIL Keeps D Ratings in Not Cooperating
R.S. AJIT SINGH: ICRA Lowers Rating on INR9cr LT Loan to 'D'
SOLAPUR TOLLWAYS: Ind-Ra Affirms 'D' on INR5,884-Bil. Term Loan
ST. WILFRED EDUCATION: ICRA Lowers Rating on INR20cr LT Loan to B+
SUNEJA SONS: Ind-Ra Moves BB+ LT Issuer Rating to Non-Cooperating
SURYA VIKAS: ICRA Maintains 'D' Debt Ratings in Not Cooperating
TAXUS INFRASTRUCTURE: CRISIL Lowers Ratings on INR20cr Loans to D
V.I.R. FOODS: ICRA Maintains 'D' Debt Ratings in Not Cooperating
YAMUNA CABLE: Ind-Ra Lowers Issuer Rating to 'BB+/Not Cooperating'
[*] Moody's Withdraws Ratings on Syndicate Bank & Oriental Bank
I N D O N E S I A
ALAM SUTERA: S&P Lowers ICR to 'CCC+', Outlook Negative
PT INDOSAT: Posts US$40.37MM Loss in First Quarter Ended March 30
SAKA ENERGI: Moody's Cuts CFR to B1 & Alters Outlook to Negative
J A P A N
SOFTBANK GROUP: International Arm Cuts Roughly 10% of Staff
S I N G A P O R E
EZRA HOLDINGS: Judicial Management Bid Hearing Moved to June 22
HONTOP ENERGY: In Talks with Banks to Manage Debts, Sources Say
S R I L A N K A
SRI LANKA INSURANCE: Fitch Cuts Financial Strength Rating to B
- - - - -
=================
A U S T R A L I A
=================
AOLIDAY AU: Second Creditors' Meeting Set for May 7
---------------------------------------------------
A second meeting of creditors in the proceedings of Aoliday AU Pty
Ltd, GDST Pty. Ltd., and Kootrip Pty Ltd has been set for May 7,
2020, at 2:30 p.m. via Webinar/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 May 5, 2020, at 4:00 p.m.
Philip Campbell-Wilson & John McInerney of Grant Thornton Australia
Limited were appointed as administrators of Aoliday AU on March
24, 2020.
CRINITIS CARLTON: Second Creditors' Meeting Set for May 12
----------------------------------------------------------
A second meeting of creditors in the proceedings of:
-- Crinitis Carlton Trading Pty Ltd
-- Crinitis Castle Hill Trading Pty Ltd
-- Crinz Media Pty Ltd
-- Criniti Holdings Pty Ltd
-- Crinitis Wetherell Park Trading Pty Ltd
-- Crinitis Kotara Trading Pty Ltd
-- Crinitis Parramatta Tradin
has been set for May 12, 2020, at 11:30 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 May 11, 2020, at 5:00 p.m.
Graeme Beattie, Aaron Lucan and Christopher Darin of Worrells
Solvency & Forensic Accountants were appointed as administrators of
Crinitis Carlton et al. on Nov. 18, 2019.
CUDECO LTD: Mining Company Placed Into Liquidation
--------------------------------------------------
Morning Bulletin reports that liquidators have been appointed to
collapsed miner Cudeco Ltd with its assets now expected to be
retained by its secured Chinese financiers.
CuDeco Limited -- http://www.cudeco.com.au/-- explores and
evaluates mineral properties in Australia. The company explores for
copper, cobalt, and gold deposits. It primarily owns a 100%
interest in the Rocklands Group copper project located in
Cloncurry, Queensland, Australia. The company was formerly known as
Australian Mining Investments Ltd. CuDeco Limited is headquartered
in Southport, Australia.
As reported in the Troubled Company Reporter-Asia Pacific in July
2019, Northwest Star said CuDeco, the owners of Rocklands Copper
mine near Cloncurry, has officially gone into receivership. The
mine has been closed since August 2018 and this was the company's
first announcement to the ASX since early May 2019 when it said it
was conducting an operational restart review.
On July 2, 2019, China Tonghai International Financial Limited
(CTIFL) appointed Kelly-Anne Trenfield, Ian Francis and Michael
Ryan of FTI Consulting as receivers and managers of CuDeco.
Matthew Joiner and Jeremy Nipps of Cor Cordis were appointed Joint
and Several Voluntary Administrators of the Company on July 5,
2019.
LATITUDE AUSTRALIA 2020-1: Moody's Reviews E Notes for Downgrade
----------------------------------------------------------------
Moody's Investors Service has placed on review for downgrade the
ratings of three Australian asset-backed securities notes issued by
Latitude Australia Personal Loans Series 2020-1 Trust.
The affected ratings are as follows:
Issuer: Latitude Australia Personal Loans Series 2020-1 Trust
Class C Notes, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 26, 2020 Definitive Rating Assigned A2 (sf)
Class D Notes, Baa2 (sf) Placed Under Review for Possible
Downgrade; previously on Feb 26, 2020 Definitive Rating Assigned
Baa2 (sf)
Class E Notes, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 26, 2020 Definitive Rating Assigned Ba2 (sf)
RATINGS RATIONALE
The rating action reflects the increased likelihood of a
deterioration in the performance of the underlying consumer loans
as a result of the expected contraction in Australian economic
activity in 2020 due to the coronavirus outbreak. The underlying
portfolio consists of mostly unsecured consumer loans, that are
more susceptible to increased default risk in an economic
slowdown.
Moody's analysis has considered an up to 40% increase in expected
losses on the underlying loans and various prepayment rate
scenarios to evaluate the resiliency of the ratings amid the
uncertainty surrounding the pool's performance. Moody's original
expected loss assumption at the time the definitive ratings were
assigned on February 26, 2020 was 8.8%, which compared to a
historical loss rate of 7.3%.
The affected ratings are from the mezzanine and junior notes that
have lower credit enhancement available to protect them, making
them more vulnerable to an increase in losses relative to the
senior tranches.
During the review period, Moody's will evaluate the impact from the
ongoing and projected macroeconomic conditions on the performance
of underlying loans. Specifically, an increase in unemployment and
underemployment caused by the ongoing economic downturn will likely
affect the future performance of the consumer loans.
Moody's analysis has also considered the increased uncertainty
relating to the effect of the coronavirus outbreak on the
Australian economy as well as the effects that government measures
to contain the virus will have on the performance of the
portfolios. 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 Moody's forecasts is unusually high.
Latitude Australia Personal Loans Series 2020-1 is an Australian
ABS. It is a cash securitization of personal loans extended to
obligors located in Australia. The receivables are typically
unsecured, although a portion is partially secured by collateral
including motor vehicles. All receivables were originated by
Latitude Personal Finance Pty Limited.
The transaction is supported by a liquidity facility of 1.5% of the
balance of the notes, subject to a floor of AUD1,200,000, which can
cover approximately 4 months of interest payments if no collections
come in at all.
The principal methodology used in these ratings was Moody's
Approach to Rating Consumer Loan-Backed ABS published in March
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 the notes' available
credit enhancement.
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.
R. SHRESTHA PTY: First Creditors' Meeting Set for May 8
-------------------------------------------------------
A first meeting of the creditors in the proceedings of R. Shrestha
Pty Ltd will be held on May 8, 2020, at 2:00 p.m. via telephone
conference.
Gavin Moss and Desmond Teng of Chifley Advisory were appointed as
administrators of R. Shrestha on April 28, 2020.
RSD (QLD) PTY: First Creditors' Meeting Set for May 12
------------------------------------------------------
A first meeting of the creditors in the proceedings of RSD (QLD)
Pty Ltd will be held on May 12, 2020, at 10:00 a.m. via virtual
meeting.
Frank Lo Pilato and Jonathon Colbran of RSM Australia Partners were
appointed as administrators of RSD (QLD) on April 30, 2020.
TIGER INTERNATIONAL: First Creditors' Meeting Set for May 11
------------------------------------------------------------
A first meeting of the creditors in the proceedings of Tiger
International Number1 Pty Ltd will be held on May 11, 2020, at 2:00
p.m. at the offices of Deloitte, Level 25, Riverside Centre, at 123
Eagle Street, in Brisbane, Queensland.
Richard John Hughes of Deloitte was appointed as administrator of
Tiger International on April 28, 2020.
TRAVEL ASIA: Placed Into Liquidation
------------------------------------
Travel Weekly reports that Travel Asia Pty Ltd was placed into
liquidation following a general company meeting.
Setter Shepard, the firm appointed to wind up the company, refused
to provide any details on Travel Asia's collapse to Travel Weekly.
Sydney-based Travel Asia Pty Ltd operated tours to Asia, and is
understood to have counted the likes of Sichuan Airlines and Luxury
Escapes among its partners. Travel Asia also had its ATAS
accreditation cancelled when it was placed into liquidation, the
report notes.
TRAVEL EXPRESS: Jirsch Sutherland Appointed as Liquidator
---------------------------------------------------------
Travel Weekly reports that Travel Express Courier Systems Pty Ltd,
which traded as Travel Express and Tex Visas, was wound up on March
27, the Australian Securities and Investments Commission's records
showed.
In a statement to Travel Weekly, Jirsch Sutherland national
managing partner Bradd Morelli, who was appointed as liquidator of
Travel Express Courier Systems, said the COVID-19 pandemic
certainly played a role in the company's collapse.
"As Australia and the world closed their borders, nobody was
applying for visas to travel anywhere," Travel Weekly quotes Mr.
Morelli as saying.
"Based on current claims and creditors, there are 24 creditors owed
AUD885,000. It's early stages, so this number is likely to change.
Jirsch Sutherland continues to undertake investigations."
Mr. Morelli noted there were no ‘burnt' customer creditors to
Jirsch Sutherland's knowledge - that is, people who put money down
for a holiday or tickets and didn't receive them, Travel Weekly
relates.
Travel Express Courier Systems Pty Ltd was contracted by travel
agencies to prepare visa applications for their clients.
VIRGIN AUSTRALIA: Government Still in Frame for Survival Plans
--------------------------------------------------------------
Patrick Hatch and Sarah Danckert at The Sydney Morning Herald
report that Virgin Australia's administrators have told creditors
that federal and state governments are critical to the collapsed
airline's revival plans, raising the prospect taxpayers' money
could yet be used to ensure its survival.
According to SMH, Deloitte partner and lead administrator Vaughan
Strawbridge told the first meeting of creditors on April 30 that
his team was working with the federal and state governments "on a
daily basis" about restructuring and recapitalising Virgin.
"They are very important in respect to the voluntary
administration, the recapitalisation process and the speed with
which we want to come out of voluntary administration," Mr.
Strawbridge said, according to a transcript of the closed
creditors' meeting seen by the Sydney Morning Herald and The Age.
Mr. Strawbridge said Deloitte and the governments were working to
"explore all options . . . to ensure we maximise the chances of a
successful recapitalisation".
SMH notes that Australia's number-two carrier went into voluntary
administration on April 20, owing almost AUD7 billion, after the
Morrison government refused it financial assistance to help it
survive the coronavirus shutdown, saying it was confident a
"commercial solution" could be found.
However, federal treasurer Josh Frydenberg has appointed former
Macquarie chief Nicholas Moore as a government "emissary" dealing
with Virgin's administrators and potential bidders, the report
says.
SMH relates that multiple sources close to creditors and bidders
for the company said they are confused about the purpose of Mr.
Moore's role, while others have taken the veteran dealmaker's
appointment as a sign the federal government may step in to ensure
a deal gets over the line.
Meanwhile, the Queensland state government has offered AUD200
million to keep Virgin headquartered in Brisbane, while the NSW
government is looking at how it can lure the airline to Sydney, SMH
reports. The Victorian government had considered a AUD500 million
rescue package with trucking tycoon Lindsay Fox prior to Virgin
going into administration, but Melbourne Airport has since pitched
for Virgin to relocate to Tullamarine.
SMH adds that Deloitte said last week 20 potential bidders had
expressed an interest in taking over Virgin and that eight had
signed non-disclosure agreements to grant them access to its data
room. Binding offers are due in June and Mr. Strawbridge said he
was confident of having a buyer locked down by July.
Leading contenders include local private equity firm BGH Capital
and its partner AustralianSuper, American airline investor Indigo
Partners, distressed debt specialist Oaktree, and Canadian asset
manager Brookfield, which is exploring a joint bid with Macquarie,
SMH discloses.
Mining tycoon Andrew "Twiggy" Forest has also emerged as a
potential bidder after talking to investment bankers at Credit
Suisse, SMH says.
SMH adds that labor and the union movement pushed the Morrison
government to take an equity stake in Virgin prior to its collapse,
and Australian Council of Trade Unions president Michelle O'Neil
said it could still play a part in ensuring Virgin gets out of
administration as quickly as possible.
About Virgin Australia
Brisbane, Queensland-based Virgin Australia is Australia's
second-largest airline. It commenced services in 2000 as Virgin
Blue, wholly owned by the Virgin Group.
As reported in the Troubled Company Reporter-Asia Pacific on April
22, 2020, Bloomberg News related that Virgin Australia Holdings
Ltd. became Asia's first airline to fall to the coronavirus after
the outbreak deprived the debt-burdened company of almost all
income. Administrators at Deloitte, who have taken control of the
Brisbane-based carrier, aim to restructure the business and find
new owners within months. More than 10 parties have expressed an
interest, Deloitte related on April 21.
According to Bloomberg, Virgin Australia, which has furloughed 80%
of its 10,000 workers, will continue to operate some flights for
essential workers, freight and the repatriation of Australians. The
airline's frequent flyer program is a separate company and is not
in administration.
Richard John Hughes, John Greig, Vaughan Strawbridge and Sal Algeri
of Deloitte were appointed as administrators of Virgin Australia et
al. on April 20, 2020.
VIRGIN AUSTRALIA: Launches U.S. Suit to Stop Aircraft Repossession
------------------------------------------------------------------
Guardian Australia reports that Virgin Australia has launched legal
action in the United States to protect itself from creditors there
who are owed billions of dollars.
The move, made on April 29 ahead of a meeting of creditors in
Australia on April 30, is also designed to protect from seizure
four of Virgin's planes that are currently undergoing maintenance
at an airport in Nashville, Tennessee.
It comes as the Western Australian mining magnate Andrew "Twiggy"
Forrest reportedly put together a consortium to bid for the
airline, which collapsed into administration on April 20 after the
federal government rebuffed its plea for a bailout to cope with the
coronavirus crisis.
Virgin, which has been all but grounded by the crisis, owes AUD6.8
billion to about 12,000 creditors, the report notes.
Guardian Australia relates that the administrators, partners at
Deloitte, told creditors at a meeting on April 30 that they had
received bids from a number of "high quality" parties interested in
buying the airline, but would not name any of them.
They said they would ask a court to delay a second meeting of
creditors by three months. This would push the date of the meeting
into late August, by which time the administrators hope to have
sold the airline, the report says.
According to Guardian Australia, Deloitte said eight parties had
already signed confidentiality agreements, giving them access to
Virgin Australia financial information, and the administrators were
in negotiations with an additional dozen.
"They said the reason for this level of interest at such an early
stage was partly down to the 'exceptional team' Virgin has in its
workforce," the Transport Workers Union national secretary, Michael
Kaine, who attended the meeting, told Guardian Australia.
According to Guardian Australia, the administration has frozen
debts in Australia, but on April 29 the administrators told a
bankruptcy court in New York that unless it orders the insolvency
to be recognised in the US "there is nothing to prevent creditors
in the United States from commencing enforcement actions against
the foreign debtors [the Virgin group] or their assets".
"This would undermine the administration process in Australia,"
they said in documents filed with the court, Guardian Australia
relays.
US holders of high-interest debt are owed US$775 million and there
are also American entities among a group of airline financiers and
banks owed almost AUD2.3 billion.
"It would be unfair and contrary to the policies underlying chapter
15 for any creditors in the United States to unilaterally pursue
remedies in the United States that advantage them over similarly
situated creditors in Australia that are complying with the stay
and procedures in Australia," the administrators told the court.
They said that because Virgin Australia was providing repatriation
flights to bring Australians home from the US, it was also
important "as a matter of public health to avoid disruption
resulting from enforcement action taken by creditors in the United
States".
The US court has yet to rule on the request, Guardian Australia
states.
Guardian Australia says creditors at the meeting on April 30, which
was held by videolink, are understood to have asked the
administrators about the entitlements of Virgin's 9,000 staff and
whether payments for suppliers would continue.
They also elected a 33-strong committee to oversee the work of the
administrators whose members include Mr. Kaine, other union
representatives, aircraft leasing and finance companies and
bondholders, the report adds.
About Virgin Australia
Brisbane, Queensland-based Virgin Australia is Australia's
second-largest airline. It commenced services in 2000 as Virgin
Blue, wholly owned by the Virgin Group.
As reported in the Troubled Company Reporter-Asia Pacific on April
22, 2020, Bloomberg News related that Virgin Australia Holdings
Ltd. became Asia's first airline to fall to the coronavirus after
the outbreak deprived the debt-burdened company of almost all
income. Administrators at Deloitte, who have taken control of the
Brisbane-based carrier, aim to restructure the business and find
new owners within months. More than 10 parties have expressed an
interest, Deloitte related on April 21.
According to Bloomberg, Virgin Australia, which has furloughed 80%
of its 10,000 workers, will continue to operate some flights for
essential workers, freight and the repatriation of Australians. The
airline's frequent flyer program is a separate company and is not
in administration.
Richard John Hughes, John Greig, Vaughan Strawbridge and Sal Algeri
of Deloitte were appointed as administrators of Virgin Australia et
al. on April 20, 2020.
VIRGIN AUSTRALIA: S&P Lowers ICR to 'D' on Chapter 15 Filing
------------------------------------------------------------
S&P Global Ratings, on May 1, 2020, lowered its issuer credit
rating on Virgin Australia to 'D' from 'CC', and lowered its
related issue ratings on the airline's unsecured debt to 'D' from
'C'.
S&P said, "We lowered the ratings on Virgin Australia to 'D' to
reflect the moratorium on all creditor payments while the company
is in voluntary administration. The airline's administrators have
announced that the company will not pay its next coupon payment on
its US$425 million senior unsecured notes on May 15, 2020, due to a
moratorium on all creditor payments. Following the first creditor
meeting on April 30, 2020, the company's administrators are seeking
to schedule the next creditor meeting for August 22, 2020, with no
creditor payments expected to be made during the intervening
period.
"We consider the payment moratorium to represent a default under
our criteria. During the administration process, the company will
explore options to recapitalize the business, or otherwise, realize
value from the company's asset base to maximize returns to
creditors. We expect that unsecured lenders will be forced to
accept less value for amounts owing under the terms of the existing
unsecured debt facilities as part of the anticipated debt
restructuring and recapitalization process."
The 'D' ratings also reflect the company's filing of a Chapter 15
bankruptcy petition. On April 29, 2020, the company and certain
affiliates filed petitions pursuant to Chapter 15 of the Bankruptcy
Code in the U.S. Bankruptcy Court for the Southern District of New
York with regard to the company's voluntary administration
proceedings in Australia, under supervision of the Federal Court of
Australia.
The company's administrators filed for Chapter 15 to protect
ongoing global operations, and to ensure fairness to all creditors
and stakeholders, wherever located, by preventing commencement of
competing proceedings in other jurisdictions.
The ratings are expected to remain at 'D' until the
recapitalization process is complete and the outstanding senior
unsecured notes have been restructured.
Virgin Australia's credit quality has deteriorated following
intensifying pressure on the airline's cash outflow and liquidity
due to government-led COVID-19-related restrictions.
Environmental, Social, and Governance (ESG) Credit Factors for this
rating change:
-- Social Management Factors
[*] Moody's Reviews 6 Australian Sapphire RMBS for Downgrade
------------------------------------------------------------
Moody's Investors Service has placed 13 classes of notes from six
Australian non-conforming residential mortgage-backed securities
issued by Sapphire trusts on review for downgrade.
The affected ratings are as follows:
Issuer: Sapphire XVII Series 2017-2 Trust
Class F Notes, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 8, 2017 Definitive Rating Assigned B2 (sf)
Issuer: Sapphire XVIII Series 2018-1 Trust
Class E Notes, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 27, 2018 Definitive Rating Assigned Ba2 (sf)
Class F Notes, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb 27, 2018 Definitive Rating Assigned B2 (sf)
Issuer: Sapphire XIX Series 2018-2 Trust
Class D Notes, Baa2 (sf) Placed Under Review for Possible
Downgrade; previously on Sep 6, 2018 Definitive Rating Assigned
Baa2 (sf)
Class E Notes, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Sep 6, 2018 Definitive Rating Assigned Ba2 (sf)
Class F Notes, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Sep 6, 2018 Definitive Rating Assigned B1 (sf)
Issuer: Sapphire XX Series 2018-3 Trust
Class D Notes, Baa2 (sf) Placed Under Review for Possible
Downgrade; previously on Dec 14, 2018 Definitive Rating Assigned
Baa2 (sf)
Class E Notes, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec 14, 2018 Definitive Rating Assigned Ba2 (sf)
Class F Notes, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec 14, 2018 Definitive Rating Assigned B2 (sf)
Issuer: Sapphire XXI Series 2019-1 Trust
Class E Notes, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 10, 2019 Definitive Rating Assigned Ba1 (sf)
Class F Notes, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 10, 2019 Definitive Rating Assigned B1 (sf)
Issuer: Sapphire XXII Series 2019-2 Trust
Class E Notes, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 1, 2019 Definitive Rating Assigned Ba2 (sf)
Class F Notes, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 1, 2019 Definitive Rating Assigned B2 (sf)
RATINGS RATIONALE
The rating action reflects the increased likelihood of a
deterioration in the performance of the underlying mortgage loans
as a result of the expected contraction in Australian economic
activity in 2020 due to the coronavirus outbreak.
The six mortgage loan portfolios have a high proportion of
self-employed borrowers (52%-56%) and borrowers with impaired
credit histories (17%-42%), with both groups more susceptible to
increased default risk under a stressed economic scenario.
In addition, the average delinquency rate across the six
transactions was higher than the average for the Australian
non-conforming RMBS sector prior to the coronavirus outbreak.
As of February 2020, 30-plus day delinquent loans ranged between
2.6% and 15.3% and 90-plus day delinquent loans ranged between 1.2%
and 10% across the six outstanding portfolios.
Sapphire XXI Series 2019-1 Trust and Sapphire XXII Series 2019-2
Trust have relatively lower proportions of delinquent loans
compared to the earlier Sapphire deals.
Sapphire XVII Series 2017-2 Trust and Sapphire XVIII Series 2018-1
Trust were both unable to make pro-rata principal repayments on
some payment dates because their average 90-plus days arrears
ratio, one of the step-down conditions for pro-rata principal
repayment, had been in breach of the 8% trigger.
Based on the high delinquency rates observed, Moody's expected loss
assumptions for the six transactions were already the highest among
the RMBS it rates.
Moody's analysis tested the impact of a 20% increase to its
standard expected loss assumption on the underlying pools to
evaluate the resiliency of the ratings amid the uncertainty
surrounding the pools' performance. Moody's has also factored in
individual transaction specifics such as the expected levels of
excess spread and continued deleveraging of the deals in the coming
months.
The affected ratings are for mezzanine and junior notes that have
lower credit enhancement available to protect them, making them
more vulnerable to any increase in losses relative to the senior
notes in the deals.
During the review period, Moody's will evaluate the effects of
ongoing and projected macroeconomic conditions. An increase in
unemployment and underemployment, key indicators for the
performance of RMBS, would negatively impact the future performance
of the mortgage loans. Moody's will also monitor the servicer's
efforts in collecting on the delinquent loans.
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 the
portfolios. 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 transactions are Australian RMBS secured by portfolios of
residential mortgage loans, originated by Bluestone Group Pty
Limited, an Australian non-bank mortgage lender.
The transactions are supported by a liquidity reserve in the amount
of 2.00% of the note balance, which can cover approximately nine to
eleven months of interest payments if no collections come in at
all.
The principal methodology used in these ratings was Moody's
Approach to Rating RMBS Using the MILAN Framework 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 the notes' available
credit enhancement.
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.
=========
C H I N A
=========
KAISA GROUP: Fitch Affirms 'B' LongTerm Issuer Default Rating
-------------------------------------------------------------
Fitch Ratings has affirmed China-based homebuilder Kaisa Group
Holdings Limited's Long-Term Issuer Default Rating at 'B' with a
Stable Outlook. Fitch has also affirmed the unsecured rating and
the ratings of the outstanding senior unsecured issues at 'B' with
Recovery Rating of RR4.
Kaisa's ratings are underpinned by a strong asset base that
supports scale expansion, which is at a level comparable with 'BB'
category homebuilders. The company had a large and well-located
land bank consisting of 176 projects in 47 cities across five major
economic regions at end-2019. Its geographical diversification
mitigates project and region-related risks and gives it flexibility
when launching new projects to support sales growth. Kaisa is able
to secure a large land bank at low cost in China's Greater Bay Area
through its urban regeneration project (URP) business, which
supports its high EBITDA margin of over 30%. Kaisa is acquiring
land through bidding and M&A, although more than 30% of its
projects are URPs.
Kaisa's ratings are constrained by high leverage - measured by net
debt/adjusted inventory (URPs and investment properties at original
cost) - of 63% at end-2019, although this has fallen from above 70%
in 2018. Fitch expects Kaisa's leverage to increase to around
66%-67% in 2020-2021 as Fitch assumes slowing contracted sales and
sales collection and a fall in non-property development revenue in
2020 stemming from the coronavirus pandemic.
KEY RATING DRIVERS
URPs a Business Strength: Fitch believes Kaisa's URP business
offers operational flexibility, as its high profitability allows
the company to sustain price cuts in a market downturn. Kaisa can
also sell stakes in its URPs at a profit because of their low land
cost. Kaisa's long experience in the URP business has enabled it to
secure a large land bank with a high gross profit margin of over
40%. This supports its EBITDA margin, excluding capitalised
interest in cost of goods sold, of 30%-33%. A large URP pipeline of
147 projects, covering 40 million square metres, will provide a
consistent stream of projects entering the sales phase.
Kaisa's long record of converting URP offers some operational
flexibility with land replenishment. URPs require a longer
development cycle and thus funds are trapped for a longer period
and incur higher funding costs without immediate cash flow and
profit contribution, raising Kaisa's leverage above that of peers
without as large an exposure to URPs. The nature of the business
and the high profitability mean Kaisa can operate at a higher
leverage than other Chinese homebuilders for a sustained period.
High Leverage Constrains Rating: Fitch estimates that Kaisa's
leverage stayed above 66%-67% in 2020-2022, compared with 63% in
2019 and 73% in 2018. The lower leverage in 2019 was due to URP
disposals to minority shareholders, which boosted available cash.
Fitch believes Kaisa's scale will be insufficient to support
deleveraging due to its high land-replenishment budget and interest
burden in the next year or two. Reliance on the non-URP
homebuilding business, which has a lower margin, and business
growth that is faster than Fitch expects, may limit Kaisa's
capacity to deleverage. Fitch expects Kaisa to spend 35%-36% of
sales receipts on land replenishment and conversion of URP into
land bank, from 23%-31% in 2018-2019.
Large and Premium Land Bank: Fitch believes Kaisa's quality land
bank will support contracted sales in the next two years. Its
premium asset base can also buffer liquidity if conversion of its
URP land bank takes longer than the company expects, as it can
easily find buyers for its well-located URPs, especially in
Shenzhen. Kaisa's land bank totaled 26.8 million square metres,
with estimated sellable resources of CNY527 billion, at end-2019,
of which just over half was in the Greater Bay Area and 3.3 million
square metres in Shenzhen.
Limited Near-Term Impact from Non-Controlling Interests: Kaisa's
non-controlling interests rose to CNY30.0 billion in 2019, from
CNY14.7 billion 2018, and its minority interests as a portion of
total equity increased to 54%, from 39%. Fitch believes that higher
non-controlling interest may reduce the company's financial
flexibility in the medium term, but the effect on cash flow in the
next 12 months is likely to be limited, as the non-controlling
interest projects are still in early development stages. Around one
third the non-controlling interests were related to unconverted
land in Shenzhen's Nanshan district. In 2019, the company sold some
minority interests in projects in the Greater Bay Area to
developers, including CIFI Holdings (Group) Co. Ltd. (BB/Stable),
Yango Group Co., Ltd. (B+/Stable) and Agile Property Holdings
Limited.
Lower Contracted Sales: Fitch believes Kaisa's attributable
contracted sales target of CNY100 billion in 2020 is challenged by
China's slowing economy. The company only achieved 11.5% of its
contracted sales target in 1Q20 (15.7% in 1Q19), which is similar
to 'B+' and 'B' rated peers. Fitch expects Kaisa's contracted sales
to fall by 3% to CNY85 billion in 2020, from CNY88 billion in 2019,
with lower gross floor area sales contributing to the decline, and
for the company to achieve CNY90 billion in contracted sales in
2021. However, as more than 80% of its land bank is residential and
more than half is located in the Greater Bay Area, Kaisa's
contracted sales are more predictable than those of 'B' and 'B-'
rated peers.
DERIVATION SUMMARY
Kaisa's attributable sales scale in 2019 was comparable with that
of 'BB' category peers, such as Logan Property Holdings Company
Limited (BB/Stable) and China Aoyuan Group Limited (BB-/Positive),
and exceeded the CNY40 billion-50 billion sales of Yuzhou
Properties Company Limited (BB-/Stable), KWG Group Holdings Limited
(BB-/Stable) and Times China Holdings Limited (BB-/Stable). Over
half of Kaisa's land bank gross floor area is in the Greater Bay
Area, a similar level to that of Logan, China Aoyuan and Times
China. Kaisa's EBITDA margin of over 30%, excluding capitalised
interest, is at the higher end of 'BB' category peers due to its
high-margin URPs.
Kaisa's closest peer among 'B' category issuers is Yango Group.
Yango's sales scale is larger than that of Kaisa and its land bank
is more diversified, but its EBITDA margin of around 28%, excluding
capitalised interest, is narrower than Kaisa's more than 30%.
Yango's leverage, measured by net debt/adjusted inventory, of 63%
in 2019 was similar to Kaisa's leverage level. Yango's moderately
stronger business justifies the one-notch rating difference.
Kaisa's leverage of around 63%-67% is lower than Tahoe Group Co.,
Ltd's. (B-/Rating Watch Negative) above 70%. Kaisa and Tahoe, whose
land bank is more exposed to the Pan-Bohai Area, the Yangtze River
Delta and Fujian province, have similar scale and margin. However,
Tahoe's shorter land-bank life of two to three years pressures its
leverage and its liquidity is tighter than that of Kaisa. The
company's rating is comparable with 'B' rated peers, including
Modern Land (China) Co., Limited (B/Stable), which has a smaller
land bank life and a lower attributable contracted sales scale, but
a better leverage ratio than Kaisa.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Attributable contracted sales to drop by 3% in 2020, but rise
by 6% in 2021 (2019: up by 26%)
- Attributable land premium/contracted sales at 36% in 2020 and
35% in 2021 (2019: 31%)
- Cash collection rate of around 75% in 2020 and 83% in 2021
(2019: 72%)
- Construction cost/sales proceeds at 30%-32% in 2020-2021
(2018-2019: 30%-33%)
- Dividend payout ratio of 15% of net income (2019: 15%)
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Leverage, measured by net debt/adjusted inventory, sustained
below 60%
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Leverage, measured by net debt/adjusted inventory, above 70%
for a sustained period
- EBITDA margin, excluding capitalised interest in cost of goods
sold, below 25% for a sustained period
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
Cash Meets Short-Term Obligations: Kaisa had cash and cash
equivalents of CNY27 billion at end-2019, short-term bank deposit
of CNY2.5 billion, long-term bank deposit of CNY1.6 billion and
restricted cash of CNY6.0 billion, against CNY32 billion in
short-term debt. Kaisa raised USD800 million of senior unsecured
notes in January 2020 maturing in five years and USD400 million of
short-term notes, greatly improving liquidity.
The company also has total credit lines of CNY184 billion, of which
CNY146 billion is unused. In addition, Kaisa obtained a CNY11
billion asset-backed securities quota in 2019, of which CNY2.6
billion was issued. Kaisa's average funding cost reached 8.8% in
2019 (8.4% in 2018).
SUMMARY OF FINANCIAL ADJUSTMENTS
Face value adjustment has been applied to the company's outstanding
bonds. Interest bearing borrowings from non-financial institutions,
which the company booked in other payables, was adjusted to debt.
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
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on Kaisa, either due
to their nature or the way in which they are being managed by the
company.
Fitch rates the 'waste and hazardous materials management;
ecological impact' sub-factor under the 'environmental' factor a
score of 4, as Kaisa is one of the key URP developers in Guangdong
province and this is considered as one of the key supportive rating
drivers for the company.
KWG GROUP: Moody's Affirms B1 Corp. Family Rating, Outlook Stable
-----------------------------------------------------------------
Moody's Investors Service has affirmed KWG Group Holdings Limited's
B1 corporate family rating.
The outlook remains stable.
RATINGS RATIONALE
"The affirmation of KWG's CFR reflects its expectation that the
company will maintain a good liquidity buffer, stable profit
margins and healthy contracted sales growth, while gradually
improving its key credit metrics over the next 12-18 months," says
Celine Yang, a Moody's Assistant Vice President.
"Additionally, the B1 CFR reflects the company's (1) strong brand
name in its main operating regions and good operating track record;
(2) quality land bank, which focuses on tier 1 and tier 2 cities;
and (3) good liquidity and access to funding," adds Yang.
However, the CFR is constrained by KWG's high debt leverage as a
result of its growing development and investment properties
portfolio. The rating also factors in its significant exposure to
joint ventures, which adds uncertainty around control over project
cash flow and raises the risk of a capital call in case of
financial weakness at its JV partners.
Moody's expects KWG's EBIT/interest will improve towards 2.1x and
revenue/adjusted debt will improve to 25%-30% in the next 12-18
months from 1.9x and 21.3% in 2019 as the company will grow its
revenue.
KWG's contracted sales from its property development business grew
to RMB86.1 billion in 2019 from RMB38 billion in 2017, and will
support revenue growth over the next 12-18 months.
Moody's expects KWG's gross contracted sales will achieve mild 5%
annual growth to around RMB90 billion in 2020 from RMB86.1 billion
in 2019. KWG's presales fell 16% in the first three months of 2020
compared to the same period last year due to the impact of the
coronavirus outbreak.
Moody's further expects KWG will maintain its good liquidity,
providing it with a buffer against contingent liabilities
associated with its JV projects.
The company's large cash holdings and diversified funding channels
also provide it with good financial flexibility to execute its
business plans when compared to many of its B-rated property
peers.
KWG has a long track record of maintaining good liquidity and
access to various funding channels at reasonable cost. Its cash to
short-term debt has remained above 2x in the past nine years. The
company had cash on hand of RMB56.7 billion as of the end of
December 2019, which could cover 2.4x of its short-term debt of
RMB23.7 billion as of the same date.
Moody's expects KWG's cash holdings, together with its operating
cash flow after deducting basic cash flow items, will be sufficient
to cover its maturing debt, committed land payments and dividend
payments over the next 12-18 months.
KWG's B1 rating also takes into account the company's concentrated
ownership by its key shareholder, Kong Jianmin and his family, who
held a total 63% stake in the company as of December 31, 2019. Such
risk is partly mitigated by (1) the company's internal governance
structures and disclosure standards, as required under the
Corporate Governance Code for companies listed on the Hong Kong
Stock Exchange; (2) its Audit Committee, Remuneration Committee and
Nomination Committee, with the first two chaired by independent
nonexecutive directors (INEDs) and its Audit Committee comprising
solely INEDs.
The stable outlook reflects Moody's expectation that KWG will
maintain sufficient liquidity, high profit margins and good
interest coverage.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
KWG's rating could be upgraded if the company (1) improves its debt
leverage, such that revenue/adjusted debt exceeds 60%-65% and EBIT
interest coverage exceeds 3x, both on a sustained basis; (2)
maintains a strong liquidity position, such that its
cash/short-term debt exceeds 2.0x-2.5x; and (3) achieves a
significant increase in its business scale while maintaining a
healthy profit margin.
A material reduction in contingent liabilities associated with JVs
or a decline in the risk that it may need to provide funding
support to JVs could also be positive to the ratings. This could be
the result of reduced usage of joint ventures or of a material
improvement in the financial strength of its JV projects.
Moody's could downgrade KWG's rating if (1) its liquidity
deteriorates, as reflected by cash/short-term debt falling below
1.50x-1.75x; (2) EBIT/interest coverage weakens below 1.5x-2.0x on
a sustained basis; or (3) its contracted sales growth or profit
margin decline significantly.
Moody's could also downgrade the rating if contingent liabilities
associated with the company's JVs increase, or if there is a
material increase in the risk that it will need to provide funding
support to JVs. This could be the result of a material
deterioration in the financial strength and liquidity of its JV
projects, or of a substantial increase in investments in new JV
projects.
The principal methodology used in this rating was Homebuilding And
Property Development Industry published in January 2018.
KWG Group Holdings Limited is a Chinese property developer, which
was founded in 1995. As of the end of December 2019, the company
had 156 projects, with a total attributable land bank of around
17.7 million square meters in gross floor area across 39 cities,
which could support three to four years of development. KWG mainly
develops medium- to high-end residential properties, office
buildings, shopping malls and hotels.
The company was listed on the Hong Kong Stock Exchange in July
2007. Kong Jianmin, the company's chairman, and his family owned
about 63% of the company as of December 31, 2019.
MINSHENG BANKING: Fitch Affirms BB+ LongTerm Foreign Currency IDR
-----------------------------------------------------------------
Fitch Ratings has downgraded the Viability Rating on China Minsheng
Banking Corp., Ltd. to 'b', from 'b+'. At the same time, Fitch has
affirmed the Long-Term Foreign-Currency Issuer Default Ratings of
CMBC and four other Chinese mid-tier commercial banks at 'BB+',
which are driven by sovereign support. The Outlooks are Stable.
The four other banks are Bank of Beijing Co., Ltd., Ping An Bank
Co., Ltd., Hua Xia Bank Co., Limited and China Guangfa Bank Co.,
Ltd.
KEY RATING DRIVERS
IDRS, SUPPORT RATINGS AND SUPPORT RATING FLOORS
All of the banks' IDRs are based on state support and are at the
banks' Support Rating Floors of 'BB+'. This reflects Fitch's
expectation of a moderate probability of extraordinary support from
the Chinese sovereign (A+/Stable) in the event of stress. This is
based on the banks' size, domestic significance and ownership
structure. The banks do not have direct central-government
ownership or history of direct government support, despite their
status as national joint-stock commercial banks (except for BOB,
which is a city commercial bank). The Stable Outlook reflects
Fitch's expectations that the propensity for sovereign support
remains unchanged, despite the coronavirus pandemic.
State-owned investors, including insurers, have become strategic
investors in a few joint-stock banks. Fitch does not factor in
institutional support from these investors, as their long-term
strategic intentions are unclear. In addition, the high risk of
financial-system contagion may limit the investors' ability to
assist the banks, while the banks' size relative to that of the
shareholders creates doubt over the investors' ability to provide
support. As such, Fitch expects support to come primarily from the
state, unless the portion of private ownership increases
significantly and results in a meaningful reduction of state or
policy influence.
VIABILITY RATINGS
Fitch expects Chinese banks to face sharp asset quality and
profitability pressures due to the pandemic, as Fitch estimates
China's GDP growth will fall to 0.7% in 2020, before recovering to
7.9% in 2021. The extent of deterioration is contingent on the
duration of the economic disruption, both domestically and abroad,
though recognition of asset impairment may lag, leading to some
core financial metrics being less comparable relative to other
jurisdictions. Near-term profitability will be hurt by narrowing
net interest margins and higher asset impairment charges, as
reflected in a negative outlook for earnings and profitability at
some banks, even as they lower their allowance ratios. Erosion of
capital is possible, especially if banks accelerate lending to
support the domestic economy. The presence of large shadow
financing activities in China, although improving since tighter
regulations took place since 2017, may also understate asset
quality risk and risk appetite.
Most Chinese commercial banks have expressed deteriorating trends
in their consumer asset quality, with some reporting escalating
delinquencies in consumer and credit-card loans since February 2020
due to pandemic-related lockdown measures. Fitch believes the
weaker global growth outlook will drag on China's economic recovery
and banks' financial performance, even though customer activity had
largely recovered in March. Regulatory relief has been extended to
mitigate the impact from the pandemic, including liquidity support
to medium and small enterprises (MSE), loan rollovers and interest
waivers for affected sectors as well as repayment holidays for
troubled retail borrowers. These measures will delay recognition of
asset impairment into 2H20 and 2021.
The five mid-tier banks have significantly reduced their exposure
to entrusted investments in the past few years and their exposure
to wealth-management products has declined, albeit still ranging
from 12%-22% of assets based on the most recent disclosure of each
bank. Broader regulatory commitment to containing financial-sector
risks and system leverage will have a more lasting impact on its
assessment of China's operating environment than near-term asset
quality and profitability pressure. The outlook on the operating
environment for the five mid-tier banks is stable, reflecting its
view that the 'bb+' mid-point adequately captures systemic risk.
There are downside risks to its macroeconomic forecasts, but Fitch
does not expect the pandemic to lead to a sustained deterioration
in economic conditions beyond what is captured by the current
mid-point.
The Viability Ratings of the five mid-tier banks, which are in the
'b' category and denote weak intrinsic strength, reflect the banks'
perceived high-risk appetite and limited risk buffers.
CMBC
The downgrade of CMBC's Viability Rating reflects its limited risk
buffers relative to its higher exposure to MSE loans and
credit-card lending, with each contributing 13% to total loans in
2019. Its entrusted investments, at around 12% of assets, and
outstanding off-balance-sheet WMPs, at around 25% of deposits and
13% of assets, were also large relative to the bank's thin capital
buffers; its common equity Tier 1 ratio was a low 8.9% at end-2019.
CMBC's reported non-performing loan ratio was 1.6% at end-2019, and
while the allowance coverage ratio increased to 156%, it was one of
the lowest among Fitch-rated Chinese banks, providing limited room
to absorb expected deterioration due to the pandemic relative to
more highly-rated peers. CMBC issued CNY40 billion in additional
Tier 1 perpetual bonds in May 2019, but these do not quality as
core capital.
BOB
BOB's Viability Rating benefits from its higher loan concentration
in Beijing, at around half of its loans, with a reported NPL ratio
of around 1.5% at end-1Q20. BOB heavily relies on corporate
banking, especially for loans to Beijing-based state-owned
enterprises, and has the lowest exposure to sectors that are most
affected by the pandemic, such as consumer lending. Its loan mix
should mitigate capitalisation pressure relative to the other
mid-sized banks in this review, but BOB is one of the few banks
that are still expanding its entrusted investments, which were
around 16% of assets at end-1H19. This may indicate a rising risk
appetite relative to peers. BOB plans to issue up to CNY40 billion
in additional Tier 1 preference shares, which could lift its pro
forma Tier 1 ratio by around 2pp; its CET1 ratio was 9.5% at
end-1Q20.
PAB
PAB's Viability Rating takes into account its higher exposure and
rapid growth in credit-card receivables and consumer loans. This
may render its asset quality and earnings more susceptible to
deterioration given the pandemic, although Fitch believes the risks
are already captured in its Viability Rating. Full conversion of
CNY26 billion in convertible bonds lifted PAB's CET1 ratio to 9.8%
by end-3Q19, but the capital was quickly consumed by rapid loan
growth in 4Q19; its CET1 ratio was 9.2% at end-1Q20. PAB's reported
stage-three loan ratio improved to 2.0% in 2019, from 2.9% in the
previous year, under IFRS9, but remained higher than its reported
non-performing loans of 1.6%. PAB's operating profit/risk-weighted
assets also remained below the mid-tier average due to its higher
loan-impairment charges.
HXB
HXB's Viability Rating takes into account its higher corporate loan
exposure, greater geographic focus on north and north-eastern China
as well as faster loan growth. HXB's reported non-performing loan
ratio remained the highest among Fitch-rated Chinese banks, at 1.8%
at end-2019. Manufacturing and wholesale/retail trade loans, which
it considers to be more vulnerable to the pandemic, remained at a
high 10% and 8%, respectively, of total loans at end-2019. HXB has
a lower exposure to entrusted investments than mid-tier peers, at
around 7% of assets in 2019, but this is balanced against its
above-peer WMP exposure, at around 22% of assets. Rapid loan growth
in recent years has weakened the bank's capitalisation and
liquidity profile; its CET1 ratio fell to 9.3% in 2019, while its
loan/deposit ratio of 113% was the highest among Fitch-rated
Chinese banks.
CGB
CGB's Viability Rating reflects its weaker profitability and
above-peer exposure to credit-card lending, though efforts to
increase cooperation with its largest shareholder, China Life
Insurance Company Limited (A/Stable), may strengthen CGB's
corporate franchise over time. CGB's reported NPL ratio was around
1.5% at end-2018, but credit-card lending contributed around 36% of
CGB's total loans. CGB's profitability was the weakest among
Fitch-rated mid-tier banks due to its small deposit franchise and
high operating costs in 2018. This is balanced against its smaller
shadow-banking exposure, with entrusted investments and WMPs both
below the mid-tier sector average. The bank's CET1 ratio improved
to 9.4% in 2018, after the completion of a private share placement
during the year. CGB also plans a public listing, but the timing
and size remains uncertain.
RATING SENSITIVITIES
IDRS, SUPPORT RATINGS AND SUPPORT RATING FLOORS
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The banks' IDR will come under pressure if Fitch perceives that the
state's ability to support the banking sector is undermined by the
increasing size of the financial system. In addition, significant
changes in the sector's liability structure, such as the banks
becoming more reliant on wholesale or offshore funding, may affect
the ability and propensity of the state to support the entire
financial system - especially less systemically important banks -
in the longer term.
Fitch expects the state's propensity to support the banking sector
to remain high (and extremely high for systemically important
banks) in the near term, but Fitch believes the state's ability and
propensity to support different tiers of banks would vary in the
event of system wide stress, with mid-tier banks unlikely to
receive the same level of support as larger state banks. A
reduction in state ownership, either directly or indirectly through
local governments or SOEs, may also lower the propensity of the
state to support the banks if the reduction is significant and
limits state influence and the level of perceived systemic
importance of the banks.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade of the sovereign ratings could lead to positive rating
action on the banks' Support Rating Floors and support-driven IDRs
if that was to indicate greater ability to support the banks (with
no less propensity to support them), though this is not its base
case under a deep global recession. The designation of domestic
systemically important banks (D-SIB) could also lead to changes in
Support Ratings, Support Rating Floors and, in turn, IDRs, if this
implies the systemic importance of the selected banks is higher
than what is implied in its support assessment.
VIABILITY RATINGS
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
CMBC
CMBC's Viability Rating could be downgraded if the bank's
acceleration in growth, especially in MSE loans and shadow-banking
activities, results in a sharp increase in asset impairments.
Deterioration in asset quality that leads to a significant decline
in profitability and capital buffers may also lead to a downgrade,
as could a sustained deterioration in the bank's reported financial
metrics, including a combination of impaired loans/gross loans
increasing to above 5% and the CET1 ratio falling below 7.5%
without a credible plan to return it to current levels.
BOB
BOB's Viability Rating could be downgraded if there is a sustained
increase in BOB's risk appetite, evident from continuous growth in
entrusted investments or WMPs that significantly erodes asset
quality and capital buffers. A deterioration of the following
reported core metrics could also lead to a Viability Rating
downgrade; impaired loans/gross loans increasing to above 5% and
the CET1 ratio falling below 8.5% without a credible plan to return
it to current levels.
PAB
PAB's Viability Rating could be downgraded if excessive loan growth
in credit-card receivables, at the expense of lower underwriting
standards or significant household affordability deterioration,
leads to a sharp deterioration in asset quality and capital
buffers. A sustained deterioration in the bank's reported financial
metrics could also lead to Viability Rating downgrade, including a
combination of impaired loans/gross loans increasing to above 5%
and the CET1 ratio falling below 7.5% without a credible plan to
return it to current levels.
HXB
HXB's Viability Rating could be downgraded if acceleration in loan
growth, especially in manufacturing and wholesale/retail loans,
further drags on asset quality and capital buffers. Deterioration
of the following reported core metrics could also lead to a
downgrade; impaired loans/gross loans increasing to above 5% and
the CET1 ratio falling below 7.5% without a credible plan to return
it to current levels.
CGB
CGB's Viability Rating could be downgraded if aggressive growth in
credit-card loans or significant household affordability
deterioration continues to expose the bank to additional risk
taking and results in weaker asset quality. Higher impairment
charges could further drag earnings, profitability, capital
generation and ultimately, its Viability Rating. Deterioration of
the following reported core metrics could also lead to a downgrade;
impaired loans/gross loans increasing to above 5% and the CET1
ratio falling below 7.5% without a credible plan to return it to
current levels.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Positive action on the Viability Rating is not probable until there
is a sustained recovery and stabilisation of China's and the global
economy to ease pressure on the operating environment. Fitch does
not expect this to occur until well into 2021.
BEST/WORST CASE RATING SCENARIO
International scale credit 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.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The five mid-tier banks' Issuer Default Ratings are link to the
Chinese sovereign rating.
ESG CONSIDERATIONS
All five banks have an ESG relevance score of 4 for financial
transparency risk due to under-reporting of non-performing loans
and risk-weighted assets stemming from the use of off-balance-sheet
transactions. This negatively affects the banks' credit profiles
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).
RONSHINE CHINA: Fitch Affirms BB- LongTerm Foreign Currency IDR
---------------------------------------------------------------
Fitch Ratings has affirmed China-based homebuilder Ronshine China
Holdings Limited's Long-Term Foreign-Currency Issuer Default
Rating, senior unsecured rating and the rating on its outstanding
US dollar senior notes at 'BB-'. The Outlook is Stable.
The affirmation of Ronshine's ratings reflects its stable
attributable sales scale and continued deleveraging in 2019, which
are both within Fitch's expectations. Its leverage, measured by net
debt/ adjusted inventory, improved to 38.5% by end-2019 from 43% at
end-June 2019 on slowing land acquisitions. Fitch believes the
company has the ability to keep leverage at around 40%, supported
by its quality land bank that is sufficient for development over
the next three to four years and allows flexibility in land
acquisition.
KEY RATING DRIVERS
Commitment to Deleveraging: Fitch expects leverage - measured by
net debt/adjusted inventory, including guarantees provided to and
net assets of joint ventures and associates - to stay at around 40%
over the next two years. Fitch assumes the company will spend
around 40% of attributable sales proceeds to acquire land, as it
has sufficient land bank to support its contracted sales scale with
a moderate sales growth target. Ronshine deleveraged in 2019 and
2018 and management is committed to optimising its debt structure
and lowering funding costs.
High Quality, Diversified Land Bank: Fitch expects Ronshine's
diversified land bank and focus on higher-tier cities to sustain
the company's sales scale over the next two years. Ronshine had
attributable land bank of 13.3 million square metres (sq m) at
end-2019, up from 12.9 million sq m at end-2018. Ronshine's 200
projects cover 44 cities across China, with a focus on Tier 1 and 2
cities, which accounted for 80% of its land bank by area at
end-2019.
Healthy Margin: Fitch sees Ronshine's land cost as competitive in
light of its high-quality land bank and believe it will maintain an
EBITDA margin of 25%-28%. Ronshine has been securing low-cost
primary and secondary co-development projects in the cities of
Zhengzhou in Henan province and Taiyuan in Shanxi province since
2016 and continues to co-operate with large developers to bid for
land in high-tier cities to limit competition and acquire land at
reasonable prices in auctions. Its EBITDA margin, after adding back
capitalised interest in cost of goods sold was 29% in 2019. Its
average land bank cost of CNY6,897/sq m accounted for 32% of its
contracted average selling price in 2019.
Scale Constrains Rating: Ronshine's attributable contracted sales
scale of CNY64 billion in 2019 was slightly higher than that of
most of its 'BB-' peers but significantly lower than that of 'BB'
peers whose attributable contracted sales were around CNY90 billion
and above. Fitch estimates that Ronshine's attributable sales scale
will remain stable at CNY60 billion-70 billion in 2020 as Ronshine
has set its total sales target at CNY150 billion for 2020 in light
of its diversified and quality land bank as well as sellable
resources of CNY220 billion in 2020. Fitch believes the company's
moderate sales growth of 6% means that it will not need to
aggressively increase land reserves. The company's total contracted
sales rose 16% to CNY141.3 billion in 2019, mainly driven by an
increase in gross floor area sold.
Improved Debt Structure and Liquidity: Ronshine has improved its
debt structure by extending its debt maturity through a swap of
USD390 million in senior notes in February 2019, the early
redemption of a CNY1.8 billion private corporate bond and the
repurchase of its USD65 million 8.25% senior notes due 2021 in June
2019. Its cash/short-term debt ratio improved to 1.9x by end-2019
from 1.0x at end-2018.
High Non-Controlling Interest: Ronshine's non-controlling interest
(NCI) accounted for about 60% of total equity, which is high among
peers. This reduces its financial flexibility whereby homebuilders
with less NCI can potentially dispose of stakes in projects to
reduce leverage.
DERIVATION SUMMARY
Ronshine's attributable contracted sales scale of about CNY64
billion is slightly larger than that of most 'BB-' peers of around
CNY50 billion-60 billion. Its diversified and quality land bank is
comparable with that of Yuzhou Properties Company Limited
(BB-/Stable). Ronshine's leverage is slightly better than that of
'BB-' rated peers, as its leverage has continuously improved to
below 40%, but it has a higher ratio of NCI to total equity.
Ronshine's attributable sales of CNY64 billion in 2019 are less
than that of 'BB' peers, such as Logan Property Holdings Company
Limited (BB/Stable) whose attributable sales in 2019 were around
CNY90 billion.
Ronshine's business scale and asset quality are stronger than that
of 'B+' rated peers, such as Helenbergh China Holdings Limited
(B+/Stable) and Zhongliang Holdings Group Company Limited
(B+/Stable). Ronshine has stronger profitability and lower leverage
than Helenbergh and more sustainable and predictable financials
than Zhongliang.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Attributable contracted sales growth of 0% in 2020 and 3% in
2021-2022 (2019: 4%)
- EBITDA margin, after adding back capitalised interest in COGS,
of 25%-30% in 2020-2022 (2019: 29%)
- Land acquisitions to account for around 40% of contracted sales
proceeds in 2020-2022 (2019: 31%)
- Construction cash outflow to account for around 32%-35% of
contracted sales proceeds in 2020-2022. (2019: 27%)
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Leverage, measured by net debt/adjusted inventory, including
guaranteed debt for joint ventures and associates, sustained below
35% (2019: 38.5%)
- Significant increase in attributable contracted sales scale to
be in line with those of 'BB' rated peers
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Leverage, measured by net debt/adjusted inventory, including
guaranteed debt for joint ventures and associates, above 45% for a
sustained period
- EBITDA margin, after adding back capitalised interest in COGS,
below 25% for a sustained period
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: Ronshine had a cash balance of CNY34.3
billion at end-2019, including restricted cash of CNY3.3 billion,
sufficient to cover its short-term debt of CNY18.7 billion.
Ronshine in 2019 issued USD600 million of 11.25% senior unsecured
notes due 2021, a total of USD500 million of 10.5% senior notes due
2022, a total of USD435 million 8.75% senior notes due 2022 and
USD300 million 8.95% senior notes due 2023. All of the proceeds
were for refinancing purposes.
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
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).
TAHOE GROUP: Fitch Puts 'B' LongTerm IDR on Watch Negative
----------------------------------------------------------
Fitch Ratings has placed China-based homebuilder Tahoe Group Co.,
Ltd.'s Long-Term Foreign-Currency Issuer Default Rating and senior
unsecured rating of 'B-' on Rating Watch Negative.
This reflects a possible weakening of Tahoe's access to borrowings
from non-bank financial institutions after being sued by TTCO Trust
Corporation Limited and placed on a debtors' blacklist by China's
Supreme Court on 22 April 2020. This introduces uncertainty for
Tahoe's refinancing, as 60% of its short-term debt obligations at
end-9M19 came from NBFIs. The RWN also reflects potential problems
with the repayment of the company's offshore capital market
maturities over the next 12 months, especially the USD530 million
senior notes due next January.
Tahoe also announced a proposed acquisition of the Hong Kong and
Macau insurance businesses from its parent, Tahoe Investment. Fitch
will consider the implications of this transaction once more
details are available.
KEY RATING DRIVERS
Chairman on Debtors' Blacklist: Tahoe and its chairman were placed
on a debtors' blacklist by China's Supreme Court in late April,
after one subsidiary failed to repay loans to a Chinese trust
company. The CNY800 million trust loan was jointly guaranteed by
Tahoe and its chairman, of which CNY680 million had been repaid by
September 2019. However, the project company and Tahoe, as its loan
guarantor, failed to repay the remaining CNY120 million based on an
agreed schedule, as they believe part of this obligation should be
borne by the non-controlling shareholders. As a result, Tahoe was
sued by TTCO Trust and placed on the blacklist.
According to management, Tahoe has reached a verbal agreement with
TTCO Trust and expects to be dropped from the blacklist by the end
of this month.
Uncertainty in Refinancing: Tahoe is highly reliant on borrowings
from trust and asset management companies, which account for around
60% of total debt, while only 17% of total borrowings as of
end-9M19 were from bank development loans. Fitch believes Tahoe has
limited access to the domestic bond market, as it has not issued
any domestic corporate bonds since August 2018. The recent lawsuit
may further reduce Tahoe's access to funding from NBFIs. Tahoe has
a USD550 million offshore note issuance quota, but Fitch sees
heightened refinancing risk for its offshore senior notes under
current market conditions.
Tight Liquidity: Tahoe had CNY32 billion in debt maturing or
puttable within 12 months as of end-9M19, including CNY25 billion
in loans and CNY7 billion in capital market debt. Its cash balance
of CNY15 billion, including restricted cash of CNY2.5 billion, can
only cover 46% of short-term debt. Any decrease in sales and cash
collection could further pressure its liquidity this year. Its high
interest expense of CNY11 billion-12 billion a year will continue
to be a drag on its cash flow.
High Leverage: Fitch expects Tahoe's leverage, measured by net
debt/adjusted inventory, to stay at 70%-75% for the next 12 months,
after considering the company's limited land acquisition appetite.
Leverage fell to 68% in 9M19, from a historical high of 83% in
2017, following an asset sale to Shimao Property Holdings Limited
(BBB-/Stable) and a drop in land acquisitions. Tahoe did not
acquire any land in 2019 and budgets 20% of sales proceeds for land
acquisition in 2020. Tahoe's leverage, despite improving, is still
one of the highest among peers.
ESG Governance - Management Strategy: Tahoe has an ESG Relevance
Score of 4 for management strategy given its weak liquidity
management. Tahoe's management strategy has a negative impact on
the credit profile, and is relevant to the rating in conjunction
with other factors. Fitch believes management needs to establish a
clearer and longer record of consistently improving liquidity
before the rating constraint is removed.
DERIVATION SUMMARY
Tahoe's ratings are constrained by its tight liquidity and
aggressive financial profile, which are comparable with peers in
the low 'B' category. Tahoe's business profile is similar to that
of higher-rated peers because of its large contracted sales scale,
premium land bank and diversification across regions and products.
Tahoe and Kaisa Group Holdings Limited (B/Stable), whose land bank
is more exposed to the Greater Bay Area, have similar scale and
margin. However, Tahoe's leverage of 70%-75% is higher than Kaisa's
65%. In addition, Tahoe's liquidity is tighter than that of Kaisa,
with an available cash/short-term debt ratio of 0.4x-0.5x against
Kaisa's around 1.0x.
Tahoe's attributable sales scale of around CNY70 billion is much
larger than the around CNY20 billion of Guorui Properties Limited
(B-/Negative), which also have tight liquidity. However, Guorui's
leverage of 50%-55% is lower than that of Tahoe and it has a longer
land bank life of over 10 years, compared with Tahoe's three
years.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Contracted sales decreased by 9% to CNY85 billion in 2019
- No land acquisition expenditure in 2019 and a replenishment
rate, measured by attributable gross floor area
acquired/attributable gross floor area sold, of 0.5x in 2020
- Cash collection rate of 75% in 2019 and 80% in 2020 (9M19:
80%)
- Assets disposed to Shimao have been factored in the rating
case
KEY RECOVERY RATING ASSUMPTIONS
- The recovery analysis assumes that Tahoe would be liquidated in a
bankruptcy rather than continue as a going-concern, given the
asset-heavy nature of the China homebuilding sector
- Fitch has assumed a 10% administrative claim
- The liquidation estimate reflects Fitch's view of the value of
balance-sheet assets that can be realised in a sale or liquidation
processes conducted during a bankruptcy or insolvency proceeding
and distributed to creditors
- Cash balance is adjusted such that only cash in excess of the
higher of accounts payables and three months of contracted sales is
factored in
- 25% haircut to net inventory and joint venture net assets in
light of Tahoe's high EBITDA margin
- 65% haircut to investment properties, considering Tahoe's low
rental yield and the quality of its investment property assets
- 30% haircut to accounts receivables
- 40% haircut to net plant, property and equipment
- 70% haircut to available-for-sale financial securities
Based on its calculation of the adjusted liquidation value after
administrative claims, Fitch estimates the Recovery Rate of the
offshore senior unsecured debt to within the 'RR4' recovery range.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
- Funding access continues to weaken
- The ratings may be downgraded to RD if the dispute is not
resolved and Fitch is able to establish that the failure to repay
the loan constitutes a default
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
- The RWN will be resolved and the ratings will be affirmed if
access to funding remains intact and there is a concrete
refinancing plan to address non-bank debt maturities over 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
Tight Liquidity: Tahoe's cash balance of CNY14.7 billion, including
restricted cash of CNY2.5 billion, was insufficient to cover its
CNY32.0 billion in debt maturing or puttable within 12 months at
end-9M19. Tahoe's short-term debt obligations included CNY19.2
billion in NBFI loans, CNY5.6 billion in bank loans and CNY7.2
billion in capital market debt. Fitch thinks Tahoe's access to NBFI
borrowings may be affected by the recent lawsuit, despite the
company having unencumbered assets of CNY89 billion at end-9M19.
ESG CONSIDERATIONS
Tahoe has an ESG relevance score of 4 for Governance - Management
Strategy, which has a negative impact on the company's 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).
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.
=========
I N D I A
=========
ABDUL JALEEL: CRISIL Keeps B Debt Ratings in Not Cooperating
------------------------------------------------------------
CRISIL said the ratings on bank facilities of Abdul Jaleel MM (AJ)
continues to be 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 3.5 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Proposed Long Term 4.5 CRISIL B/Stable (ISSUER NOT
Bank Loan Facility COOPERATING)
Term Loan 2.0 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with AJ for obtaining
information through letters and emails dated November 30, 2019 and
March 9, 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 AJ, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on AJ is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Based on the last available information, the ratings on bank
facilities of AJ continues to be 'CRISIL B/Stable Issuer not
cooperating'.
AJ is a proprietorship firm involved in civil construction works
such as construction of roads, bridges and construction and
maintenance for irrigation facilities in Kerala. The firm is
managed by Mr. Abdul Jaleel MM.
ANSHUL IMPEX: ICRA Lowers Rating on INR30cr LT Loan to B+
---------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Anshul Impex Private Limited (AIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term-Fund 30.00 [ICRA]B+(Stable) ISSUER NOT
Based/CC COOPERATING; Rating downgraded
from [ICRA]BB+(Stable) ISSUER
NOT COOPERATING and continues
to remain under 'Issuer Not
Cooperating' category
Short Term- 45.00 [ICRA]A4 ISSUER NOT
Non-Fund Based COOPERATING; Rating downgraded
from [ICRA]A4+ ISSUER NOT
COOPERATING and continues to
remain under 'Issuer Not
Cooperating' category
Rationale
The rating downgrade is because of lack of adequate information
regarding AIPL performance and hence the uncertainty around its
credit risk. ICRA assesses whether the information available about
the entity is commensurate with its rating and reviews the same as
per its "Policy in respect of non-cooperation by the rated entity".
The lenders, investors and other market participants are thus
advised to exercise appropriate caution while using this rating as
the rating may not adequately reflect the credit risk profile of
the entity, despite the downgrade.
As part of its process and in accordance with its rating agreement
with Anshul Impex Private Limited, ICRA has been trying to seek
information from the entity so as to monitor its performance, but
despite repeated requests by ICRA, the entity's management has
remained non-cooperative. In the absence of requisite information
and in line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119,
dated November 1, 2016, ICRA's Rating Committee has taken a rating
view based on the best available information.
Incorporated in 1989 in Nagpur, Maharashtra, AIPL is engaged in
trading of indigenous and imported coal along with providing
logistic services to the customers. AIPL has its sales depots
across Maharashtra, Madhya Pradesh and Gujarat. The company is
promoted by Mr. Yugpradhan Mehta, an engineer having extensive
experience of more than 25 years in the coal trading business.
AVIA CERAMIC: ICRA Tags INR7.5cr Loans as Not Cooperating
---------------------------------------------------------
ICRA has moved the ratings for the INR7.50 crore bank facilities of
Avia Ceramic Pvt. Ltd. The rating is now denoted as
"[ICRA]B+(Stable)/A4; ISSUER NOT COOPERATING"; Ratings moved to
issuer not cooperating category on information."
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 2.50 [ICRA]B+(Stable) ISSUER NOT
COOPERATING; Rating moved to
'issuer not cooperating category'
Term Loan 1.02 [ICRA]B+(Stable) ISSUER NOT
COOPERATING; Rating moved to
'issuer not cooperating category'
Bank Guarantee 1.00 [ICRA]A4 ISSUER NOT COOPERATING;
Rating moved to 'issuer not
cooperating category'
Unallocated 2.98 [ICRA]B+(Stable)/A4 ISSUER NOT
Limits COOPERATING; Rating moved to
'issuer not cooperating category'
As part of its process and in accordance with its rating agreement
with Avia Ceramic Pvt. Ltd, ICRA has been trying to seek
information from the entity so as to monitor its performance, but
despite repeated requests by ICRA, the entity's management has
remained non-cooperative. In the absence of requisite information
and in line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119,
dated November 1, 2016, ICRA's Rating Committee has taken a rating
view based on the best available information.
Avia Ceramic Pvt. Ltd (ACPL) is a wall and floor tiles manufacturer
and its plant is situated at Morbi in Gujarat. The company was
established in 2013 and commenced operations in July 2014. At
present, the plant has an installed manufacturing capacity of
39,60,000 boxes per annum and manufactures wall tiles of size
8"x12" and floor tiles of size 12"x12".
AXIS BANK: Fitch Affirms 'BB' LongTerm IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed India-based Axis Bank's Long-Term Issuer
Default Rating at 'BB+', with a Stable Outlook. The agency has also
downgraded the bank's Viability Rating by one notch to 'bb' from
'bb+'.
The rating actions are driven by rapid deterioration in the
operating environment for banks in India following the coronavirus
pandemic and measures to contain its spread.
Fitch has cut its forecast for India's GDP growth in the financial
year ending March 2021 (FY21) to 0.8% from a pre-pandemic forecast
of 5.1% (FY20: 4.9%). The revised estimate highlights the impact
that the sharp slowdown in business and consumer activity is likely
to have across sectors, which will create fresh asset-quality
challenges for Indian banks. Fitch lowered the operating
environment score for Indian banks to 'bb' from 'bb+' in March 2020
while keeping it on a negative outlook due to the uncertainty
surrounding the severity and duration of the pandemic and the
associated effects on India's banks from restrictions on economic
activity. This is despite relief measures implemented by the
authorities to support the economy and protect borrowers, which
indirectly benefit the banks.
The downgrade of Axis's VR highlights heightened risks to its asset
quality and earnings from the ongoing disruption in business and
consumer activity, which Fitch expects to continue well beyond the
lockdown in India. Uncertainty about how severely key credit
metrics will be affected and the potential for further negative
impact on Axis's intrinsic creditworthiness mean there is a risk of
further negative action on the VR. However, Axis's better income
and capital buffers would support its VR longer than lower-rated
peers with weaker loss-absorption buffers.
KEY RATING DRIVERS
IDR, SUPPORT RATING AND SUPPORT RATING FLOOR
Axis's IDR is driven by its Support Rating Floor of 'BB+', which is
anchored to its Support Rating of '3'. The SRF reflects Fitch's
expectation that Axis has a moderate probability of receiving
extraordinary state support, if required, due to its size and
systemic importance. The likelihood of state support for Axis is
lower than that of the large state banks (with SRF of BBB-) due to
its private ownership, but similar to that of other large private
banks.
Fitch believes that the sovereign's constrained finances and the
large number of majority government-owned banks that are
systemically important and have weak capitalisation means that
these banks will have priority in terms of timeliness of government
support. Nevertheless, the state has a track record of supporting
systemically important banks, which Fitch views Axis to be,
although Axis has not required support in the past. The recent
rescue of Yes Bank, which is a smaller private-sector bank,
reinforces its view.
The Stable Outlook on the IDR mirrors the Stable Outlook on India's
sovereign IDR and reflects its expectation of limited downside
pressure on the IDR in the foreseeable future, provided the
sovereign's ability and propensity to support the bank remains
intact.
VIABILITY RATING
Axis's VR of 'bb' reflects a moderate degree of fundamental
financial strength. The VR considers Axis's adequate franchise and
stable funding, but is limited by the significant impact that the
coronavirus containment measures and GDP slowdown will have on
Axis's operations and its core credit metrics, particularly asset
quality and earnings and profitability. Axis's financial profile
could deteriorate further if the economic fallout from the
coronavirus deepens and lingers. While Axis's better core capital
and income buffers provide some headroom at the current VR, they
could be vulnerable under high stress.
The bank's core equity Tier 1 (CET1) capital ratio rose to 13.3% by
the end of the financial year to March 2020 (FYE20) from 11.3% at
FYE19, as the bank benefited from the addition of fresh equity of
USD1.7 billion in September 2019. The ratio is now slightly above
Fitch's minimum threshold for a 'bb' score for capitalisation and
leverage and reflects moderate buffers over the regulatory minimum
amid heightened stress. Axis's loan loss cover of around 69% has
improved, but it is only slightly above the sector average and
results in a moderately high net impaired loans/equity ratio of 11%
at FYE20.
Fitch expects asset quality to come under pressure due to the
weakening operating environment. The impaired loan ratio is likely
to increase due to lower growth and a sharp increase in net
slippages. The impaired loan ratio improved slightly to 5.1% by
FYE20 (FYE19: 5.3%), and compares well against lower rated
state-owned banks. However, the ratio is well above Fitch's
benchmarks for higher rated peers and above the threshold for banks
with asset quality scores in the 'bb' category. Fitch expects loans
to SMEs (9MFY20: 11% of loans) and retail customers (9MFY20: 53% of
loans) to be more vulnerable in the immediate future. The bank, as
with peers, had expanded in these segments in recent years,
particularly in unsecured retail. Pressures in corporate lending
are also expected to materialise as second-order effects of the
slowdown start to appear on generally weak corporate balance sheets
over FY21.
Risks in the retail book are somewhat cushioned due to the share of
collateralised loans, such as home loans (36% of retail loans), and
auto loans (13%), but risks can be pronounced in riskier segments,
such as personal loans (12%), credit cards (5%), and other retail
segments (34%, including loans against property) comprising
small-business banking and rural lending. Industries like tourism,
infrastructure (4.5% of funded exposure), auto (0.7%) and real
estate (2.2%) would also be at risk, although corporate
underwriting has been more cautious in recent years. Axis's
exposure to non-banks is about 9% of loans, but risks are limited
as these are mainly to government and entities backed by large
corporates.
Fitch expects a weakening in earnings and profitability, driven by
deteriorating asset quality. Operating profit/risk weighted assets
declined to 0.80% in FY20 (FY19: 1.3%), driven by higher loan
impairment charges (FYE20: 3.4% of loans) in anticipation of
coronavirus-related pressures. However, the bank enjoys
significantly better pre-impairment profit cushion (FY20: 4.4% of
loans) than state banks, which makes the probability of capital
erosion lower than for lower-rated peers.
Axis's VR also factors in its adequate franchise in retail banking,
as well as a reasonably stable funding profile with low-cost
deposit ratio of 41% at FYE20. However, funding for private-sector
banks is generally more confidence-sensitive and could be
vulnerable if the generally weak depositor sentiment, in the
aftermath of Yes Bank's failure and worsening economic conditions,
were to escalate into a depositor flight to safety.
SENIOR DEBT
Axis's senior debt ratings are being affirmed at 'BB+' in line with
the IDR, as the debt represents the bank's unsecured and
unsubordinated obligations.
ESG - Financial Transparency: Axis 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 a negative 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,
including some observations on the bank's assumptions for its
liquidity coverage ratio.
RATING SENSITIVITIES
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND SENIOR DEBT
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The Support Rating and Support Rating Floor are most sensitive to
the agency's assessment of the government's propensity and ability
to extend timely support to the bank, based on its size and
systemic importance. Should Fitch perceive any decline in such
ability or propensity to provide support, the agency will could
downgrade the Support Rating and/or Support Rating Floor, and in
turn, the bank's IDRs, although that is not its base case.
Nevertheless, there could be downside pressure to the IDR if Fitch
believes that the sovereign's ability and propensity to support the
bank is weaker, which could be the case if the sovereign rating
(BBB-/Stable) was downgraded.
There is limited downside risk to the IDR in the event of a
downgrade in Axis's VR so long as the SRF remains unchanged, and
providing that its assessment of the sovereign's ability and
propensity to support the bank remains intact.
The senior debt ratings would be downgraded if the bank's Long-Term
IDR were downgraded.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Axis's IDR is now driven by its SRF, which is above the VR. An
improvement in the bank's VR beyond the SRF would lead to an
equivalent increase in the IDR. However, Fitch views such an
upgrade is highly unlikely given the weak operating environment and
subdued outlook. Similarly, a sovereign rating upgrade, which also
appears unlikely in the near term, would also not lead to an
upgrade in the bank's IDR unless a sovereign rating upgrade
coincided with a strengthening of the sovereign's ability and more
importantly, propensity to support the bank, in Fitch's view.
The senior debt ratings would be upgraded if the bank's Long-Term
IDR were upgraded.
VIABILITY RATING
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Axis's VR could be downgraded if the economic environment
deteriorates significantly beyond its base case scenario. Under
this scenario, Fitch would lower the operating environment score,
which would result in a reduction of its assessment of most
financial profile factors. In this scenario, the VR is most
sensitive to changes in Axis's profitability, which is linked to
asset quality performance and, in turn, would influence
capitalisation levels.
The VR could be further downgraded if the impaired loan ratio
approached 8%, which would put pressure on the bank's profitability
and weaken the bank's moderate capital buffers (relative to its
assessment of the operating environment) with CET1 ratio closer to
or below 12%. If the bank were to face significant deposit outflow
in a weakening operating environment, which would be evident in a
liquidity coverage ratio below 100% or a sharp jump in
loans/customer deposits, Fitch may review the bank's VR, although
Fitch does not view this as a high risk in the near term.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade to the VR is unlikely in the foreseeable future as risks
to the bank's intrinsic profile from a weakening the operating
environment are firmly on the downside. However, an upgrade could
materialise only if the bank demonstrates a steady improvement in
its impaired loan ratio to well below 5% while ensuring core
capitalisation is well above 13% on a sustained basis.
BEST/WORST CASE RATING SCENARIO
International scale credit 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
ESG - Financial Transparency: Axis 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,
including some observations on the bank's assumptions for its
liquidity coverage ratio.
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.
B. P. SPICES: CRISIL Keeps B on INR8cr Loans in Not Cooperating
---------------------------------------------------------------
CRISIL said the ratings on bank facilities of B. P. Spices (BP)
continues to be 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Key Cash Credit 3 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Overdraft 2 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Proposed Long Term 3 CRISIL B/Stable (ISSUER NOT
Bank Loan Facility COOPERATING)
CRISIL has been consistently following up with BP for obtaining
information through letters and emails dated December 31, 2019 and
March 9, 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 BP, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on BP is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Based on the last available information, the ratings on bank
facilities of BP continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Established in 2012 and based out of Unjha, Gujarat, BP Spices
repackages and trades cumin (Jeera) and fennel (saunf) seeds. Mr.
Pavan Kumar Patel and Mr. Brijesh Patel are the partners.
BABA BHUBANESWAR: CRISIL Keeps B- Ratings in Not Cooperating
------------------------------------------------------------
CRISIL said the ratings on bank facilities of Baba Bhubaneswar Cold
Storage Private Limited (BBSCPL) continues to be 'CRISIL B-/Stable
Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5.75 CRISIL B-/Stable (ISSUER NOT
COOPERATING)
Proposed Long Term .47 CRISIL B-/Stable (ISSUER NOT
Bank Loan Facility COOPERATING)
Term Loan 4.28 CRISIL B-/Stable (ISSUER NOT
COOPERATING)
Working Capital .50 CRISIL B-/Stable (ISSUER NOT
Term Loan COOPERATING)
CRISIL has been consistently following up with BBSCPL for obtaining
information through letters and emails dated September 30, 2019 and
March 09, 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 BBSCPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on BBSCPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Based on the last available information, the ratings on bank
facilities of BBSCPL continues to be 'CRISIL B-/Stable Issuer not
cooperating'.
The company was incorporated in 2015, by the promoters, Mr. Radha
Raman Mondal, Mr. Rajib Kumar Nandy, Mr. Manas Kumar Dhara, Mr.
Swapan Kumar Ghosh, and Mr. Basudeb Majhi. The unit at Burdwan has
a storage capacity of 19,500 million tonnes, which is divided into
two chambers.
BHARAT FOOD: ICRA Keeps D on INR27cr Bank Loans in Not Cooperating
------------------------------------------------------------------
ICRA said the ratings for the INR27.00 crore bank facilities of
Bharat Food & Agro Products continue to remain under Issuer Not
Cooperating category. The long-term rating is denoted as [ICRA]D
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 12.65 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
the 'Issuer Not Cooperating'
category
Term Loan 14.35 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
the 'Issuer Not Cooperating'
category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis dated information on the
issuers' performance. Accordingly, the lenders, investors and other
market participants are advised to exercise appropriate caution
while using this rating as the rating may not adequately reflect
the credit risk profile of the entity.
Incorporated in 2008, BFAP is a partnership firm involved in
milling and processing of basmati and non-basmati rice. The firm's
plant at Payal, Ludhiana (Punjab) has a milling capacity of 6
ton/hour. It sells its products under its registered brand names
'Nature Gold', and 'Royal Taste of India'.
DEORANI DEVI: ICRA Keeps D on INR15cr Bank Loans in Not Cooperating
-------------------------------------------------------------------
ICRA said the rating for the INR15.00 crore bank facilities of
Deorani Devi Memorial Trust continue to remain under 'Issuer Not
Cooperating' category. The rating is denoted as "[ICRA]D/[ICRA]D;
ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based 14.13 [ICRA]D ISSUER NOT COOPERATING;
Limit–Term Rating continues to remain under
Loan 'Issuer Not Cooperating' category
Untied Limit 0.87 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
'Issuer Not Cooperating' category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis best
available/dated/limited information on the issuers' performance.
Accordingly, the lenders, investors and other market participants
are advised to exercise appropriate caution while using this rating
as the rating may not adequately reflect the credit risk profile of
the entity.
Deorani Devi Memorial Trust is a public charitable trust formed in
March 2010. It currently runs a school in the name of 'Open Minds -
a Birla K-12 School' in Patna, Bihar. It is in a franchisee
agreement with Birla Edutech Limited, which has other similar
ventures like Shloka School, Globe Tot'ers (Preschool), SPEED (for
sports and physical education of children), Birla Institute for
Teacher Training, in the sphere of education. The school commenced
its operations from the academic session 2010-11.
DEWAN HOUSING: Insolvency Process May be Extended to June 30
------------------------------------------------------------
The Hindu BusinessLine reports that the date of closure of the
corporate insolvency resolution process (CIRP) of the financially
distressed Dewan Housing Finance Corporation Ltd (DHFL) is expected
to be extended to June 30 from May 31.
This will give more time to the investors (resolution applicants)
who participated in the Expression of Interest (EOI) to submit
their resolution plans, the report says.
About DHFL
Dewan Housing Finance Corporation Limited (DHFL) operates as a
housing finance company in India. The company's deposit products
include fixed deposit products for individuals, and trusts and
institutions; and corporate, recurring, and Wealth2Health deposits
products. It also offers home loans, which include home improvement
loans, home construction loans, home extension loans, plot
loans/land loans, plot and construction loans, and balance transfer
of home loans, as well as home loans for the self-employed; small
and medium enterprise loans, including property term, plant and
machinery, medical equipment, and business loans; mortgage loans,
such as loans against property, loan for purchase of commercial
premises, and loan through lease rental discounting; and NRI home
loans.
As reported in the Troubled Company Reporter-Asia Pacific on Dec.
5, 2019, Deccan Herald said the Mumbai bench of the National
Company Law Tribunal (NCLT) on Dec. 2, 2019, admitted a petition by
the Reserve Bank of India (RBI) seeking bankruptcy proceedings to
resolve DHFL. The move came in after the Reserve Bank on Nov. 29,
2019, made an application for bankruptcy proceedings to resolve the
credit and liquidity crisis at the company, which became the first
financial sector player being sent for bankruptcy. RBI appointed R
Subramaniah Kumar as the company's administrator. Financial
creditors to DHFL have submitted claims worth INR86,892 crore
against the mortgage lender, BloombergQuint disclosed.
DEWAN HOUSING: Mumbai Court Rejects Interim Bail Plea of Promoters
------------------------------------------------------------------
Livemint.com reports that a Mumbai court on April 28 rejected the
interim bail plea of Dewan Housing Finance Corporation Ltd (DHFL)
promoter Kapil Wadhawan and his brother Dheeraj Wadhawan.
Kapil and Dheeraj Wadhawan are in the custody of the Central Bureau
of Investigation (CBI) until May 4, the report says.
Livemint.com relates that the duo was arrested on April 26 from
their bungalow at Mahabaleshwar in Satara for their alleged
involvement in the Yes Bank fraud case.
According to the report, lawyers of Wadhawan brothers on April 28
sought an extension on the interim order till May 4, but it was
opposed by the Enforcement Directorate lawyer.
Rejection of interim bail has cleared the way for the Enforcement
Directorate to take Wadhawan brothers in custody on May 4 when
their CBI custody ends, Livemint.com states.
Kapil Wadhawan, the 46-year-old Chairman and Managing Director of
DHFL, was arrested on January 27 this year by the ED for his
dubious dealings with gangster Iqbal Mirchi, who died in 2013, and
was booked under provisions of Prevention of Money Laundering Act
(PMLA).
He was granted bail on February 21 by a special PMLA court in
Mumbai, the report notes.
About DHFL
Dewan Housing Finance Corporation Limited (DHFL) operates as a
housing finance company in India. The company's deposit products
include fixed deposit products for individuals, and trusts and
institutions; and corporate, recurring, and Wealth2Health deposits
products. It also offers home loans, which include home improvement
loans, home construction loans, home extension loans, plot
loans/land loans, plot and construction loans, and balance transfer
of home loans, as well as home loans for the self-employed; small
and medium enterprise loans, including property term, plant and
machinery, medical equipment, and business loans; mortgage loans,
such as loans against property, loan for purchase of commercial
premises, and loan through lease rental discounting; and NRI home
loans.
As reported in the Troubled Company Reporter-Asia Pacific on Dec.
5, 2019, Deccan Herald said the Mumbai bench of the National
Company Law Tribunal (NCLT) on Dec. 2, 2019, admitted a petition by
the Reserve Bank of India (RBI) seeking bankruptcy proceedings to
resolve DHFL. The move came in after the Reserve Bank on Nov. 29,
2019, made an application for bankruptcy proceedings to resolve the
credit and liquidity crisis at the company, which became the first
financial sector player being sent for bankruptcy. RBI appointed R
Subramaniah Kumar as the company's administrator. Financial
creditors to DHFL have submitted claims worth INR86,892 crore
against the mortgage lender, BloombergQuint disclosed.
DHARAMRAJ CONTRACTS: ICRA Cuts Rating on INR59cr Loan to 'D'
------------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Dharamraj Contracts India Private Limited, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based 18.00 [ICRA]D ISSUER NOT COOPERATING;
Rating downgraded from [ICRA]BB
(Stable) and continues to remain
under 'Issuer Not Cooperating'
category
Non-fund 59.00 [ICRA]D ISSUER NOT COOPERATING;
based Rating downgraded from [ICRA]A4+
and continues to remain under
'Issuer Not Cooperating' category
Unallocated 13.00 [ICRA]D/[ICRA]D ISSUER NOT
COOPERATING; Rating downgraded
from [ICRA]BB (Stable)/[ICRA]A4+
and continues to remain under
'Issuer Not Cooperating' category
Rationale
The rating downgrade reflects the delay in debt-servicing. The
rating is based on limited information on the entity's performance
since the time it was last rated in January 29,
2019. The lenders, investors and other market participants are thus
advised to exercise appropriate caution while using this rating as
the rating may not adequately reflect the credit risk profile of
the entity, despite the downgrade.
As part of its process and in accordance with its rating agreement
with Dharamraj Contracts India Private Limited, ICRA has been
trying to seek information from the entity so as to monitor its
performance, but despite repeated requests by ICRA, the entity's
management has remained non-cooperative. In the absence of
requisite information and in line with SEBI's Circular No.
SEBI/HO/MIRSD4/CIR/2016/119, dated November 1, 2016, ICRA's Rating
Committee has taken a
rating view based on the best available information.
Liquidity position: Poor
Dharamraj Contracts India Private Limited liquidity profile is weak
as reflected by irregularities in debt servicing by entity.
Incorporated in 2010 by Mr. Chaman Singh and his father Mr. Raj
Singh, DCIPL is involved in the construction of both residential
and commercial complexes along with roads and subways for both
government and private entities. It is a class "AA" contractor with
Ghaziabad Development Authority, Noida Development Authority and
various Public welfare departments (PWD's) and is eligible to bid
contracts upto INR250 crore. The promoters of the company have been
in this line of business since the past two decades.
FASTBUILD BLOCKS: CRISIL Keeps B- Debt Ratings in Not Cooperating
-----------------------------------------------------------------
CRISIL said the ratings on bank facilities of Fastbuild Blocks
Private Limited (FBPL) continues to be 'CRISIL B-/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 4 CRISIL B-/Stable (ISSUER NOT
COOPERATING)
Term Loan 14.55 CRISIL B-/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with FBPL for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 FBPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on FBPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Based on the last available information, the ratings on bank
facilities of FBPL continues to be 'CRISIL B-/Stable Issuer not
cooperating'.
FBPL, incorporated in December 2012, manufactures autoclaved
aerated concrete (AAC) blocks and has its manufacturing unit in
Cuttack, Odisha. Mr. Ashish Rungta, Mr. Sandeep Kumar Bhartia, and
Mr. Vineet Chand are directors of the company. Its operations are
primarily managed by Mr. Rungta who is its managing director.
GAYATRI POULTRIES: CRISIL Keeps B on INR16cr Debt in NonCooperating
-------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Gayatri Poultries
Private Limited (GPPL) continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 3 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Term Loan 13 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with GPPL for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 GPPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on GPPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Based on the last available information, the ratings on bank
facilities of GPPL continues to be 'CRISIL B/Stable Issuer not
cooperating'.
GPPL was incorporated in 2011 in Ganjum (Odisha). The company is
promoted by Mr. Srinivasa Rao Vadlamundi, Mr Shivanand Karanama,
Mr. Prasad Vadlamudi, and Mr. Y Kranti Kumar. GPPL does not have
any operations as on date, and is undertaking capex to set up a
poultry farm (layer unit) with a capacity of 250,000 eggs per day.
GOKUL KANNAN: CRISIL Keeps B on INR9cr Loans in Not Cooperating
---------------------------------------------------------------
CRISIL said the ratings on bank facilities of Sri Gokul Kannan
Modern Rice Mill (SGK) continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 6 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Long Term Loan 2 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Proposed Long Term
Bank Loan Facility 1 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with SGK for obtaining
information through letters and emails dated September 30, 2019 and
March 09, 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 SGK, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SGK is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Based on the last available information, the ratings on bank
facilities of SGK continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Set up in 2007, SGK mills and processes paddy. The firm is managed
by Mr. S A Ramar.
HK ENNTERPRISES-DELHI: CRISIL Keeps B Rating in Not Cooperating
---------------------------------------------------------------
CRISIL said the ratings on bank facilities of HK Ennterprises-Delhi
(HK) continues to be 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 20 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with HK for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 HK, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on HK is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Based on the last available information, the ratings on bank
facilities of HK continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Set up as a partnership firm in 2017 by Mr. Ramesh Kumar and Mr.
Ravindra Alhawat, HK is engaged into supply of construction and
building materials primarily in and around Delhi.
HONEY PROPERTIES: CRISIL Keeps B on INR7cr Loan in Not Cooperating
------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Honey Properties (HP)
continues to be 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 7.05 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with HP for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 HP, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on HP is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Based on the last available information, the ratings on bank
facilities of HP continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Established in 2014, HP is engaged in real estate development. The
company is promoted by Mr. K.S. Sameeulla and Mr. K.S. Suna
Miandad.
HY LINK OVERSEAS: CRISIL Keeps B- Debt Ratings in Not Cooperating
-----------------------------------------------------------------
CRISIL said the ratings on bank facilities of Hy Link Overseas
Private Limited (HOPL) continues to be 'CRISIL B-/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 8.5 CRISIL B-/Stable (ISSUER NOT
COOPERATING)
Proposed Cash
Credit Limit 12.5 CRISIL B-/Stable (ISSUER NOT
COOPERATING)
Working Capital
Demand Loan 4.0 CRISIL B-/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with HOPL for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 HOPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on HOPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Based on the last available information, the ratings on bank
facilities of HOPL continues to be 'CRISIL B-/Stable Issuer not
cooperating'.
HOPL, based in New Delhi and established in 1998 by Mr Sidharth
Gulati and his family, trades in steel pipes and tubes, aluminium
foil, biaxially-oriented polyethylene terephthalate (BOPET) films,
refined oil, and clarified butter.
ICICI BANK: Fitch Affirms BB+ LongTerm IDR, Outlook Stable
----------------------------------------------------------
Fitch Ratings has affirmed India-based ICICI Bank's Long-Term
Issuer Default Rating at 'BB+', with a Stable Outlook. The agency
has also downgraded the bank's Viability Rating by one notch to
'bb' from 'bb+'.
The rating actions come amid rapid deterioration in the operating
environment for banks in India following the coronavirus pandemic
and measures to contain the spread of the coronavirus.
Fitch has cut its forecast for India's GDP growth in the financial
year ending March 2021 (FY21) to 0.8% from a pre-pandemic forecast
of 5.1% (FY20: 4.9%). The revised estimate underscores the impact
that the sharp slowdown in business and consumer activity will have
across sectors, which will create fresh asset-quality challenges
for Indian banks. Fitch lowered the operating environment score for
Indian banks to 'bb' from 'bb+' in March 2020 and kept a negative
outlook due to the uncertainty surrounding the severity and
duration of the pandemic and the associated effects on India's
banks from restrictions on economic activity. This is despite the
authorities implementing relief measures to support the economy and
protect borrowers, indirectly benefiting the banks.
The downgrade of ICICI's VR highlights heightened risks to its
asset quality and earnings from the disruption in business and
consumer activity that Fitch expects to continue well beyond the
lockdown in India. Uncertainty about how severely key credit
metrics will be affected and the potential for further impact on
ICICI's intrinsic creditworthiness mean there is a risk of more
negative action on the VR. However, it also factors in ICICI's
better loss-absorption buffers, which would support its VR longer
than peers with weaker income and capital levels.
KEY RATING DRIVERS
IDR, SUPPORT RATING AND SUPPORT RATING FLOOR
ICICI's IDR is driven by its Support Rating Floor of 'BB+', which
is anchored to its Support Rating of '3'. The SRF reflects Fitch's
expectation that ICICI is likely to receive moderate extraordinary
state support, if required. However the likelihood of state support
for ICICI is lower than that for the large state banks (with SRFs
of BBB-) due to its private ownership, notwithstanding its
significant market share (5.8% of sector assets and 5.1% of
deposits).
Fitch believes that the sovereign's constrained finances, and the
large number of majority government-owned banks that are
systemically important and have weak capitalisation, means that
these banks will have priority in terms of timeliness of government
support. Nevertheless, the state has a record of supporting
systemically important banks, which Fitch views ICICI to be,
although ICICI has not required support in the past. The recent
rescue of Yes Bank, which is a smaller private-sector bank,
reinforces its view.
The Stable Outlook on the IDR mirrors the Outlook on India's
sovereign IDR (BBB-/Stable) and reflects its expectation of limited
downside pressure on the IDR, provided the sovereign's ability and
propensity to support the bank remains intact.
VIABILITY RATING
ICICI's VR of 'bb' reflects a moderate degree of fundamental
financial strength. The VR considers ICICI's adequate franchise and
stable funding, but particularly factors in the significant impact
that the coronavirus containment measures and GDP slowdown will
have on ICICI's operations and core credit metrics, particularly
asset quality, earnings and profitability. ICICI's financial
profile could deteriorate further if the economic fallout from the
coronavirus deepens. The prospect of capital erosion is viewed to
be lower than peers' given satisfactory loss-absorption buffers,
but it could be vulnerable under high stress.
The bank's common equity Tier 1 capital ratio of 13.4% at 9MFY20 is
slightly above Fitch's threshold for capitalisation and leverage
factor of 'bb', in light of its assessment of 'bb' category for the
operating environment. The available buffer of 540bp above the 8%
minimum regulatory level required by September 2020 is better than
for peers, but risks being impaired under a severe stress scenario.
However, core capitalisation has been more stable than that of
peers amid heightened stress due to ICICI's better capital
fungibility. It has generated capital through the sale of stakes in
its profitable subsidiaries and repatriated capital from
over-capitalised overseas subsidiaries in recent years, which is an
option still available to the bank. Fitch's assessment also factors
in ICICI's low net impaired loans/equity ratio of 8.4%, which has
improved over the last four years, but is at risk of rising again
due to asset-quality disruptions.
Fitch expects the impaired loans ratio to increase on lower growth
and a sharp increase in net slippages. This would reverse the
improving trend in the impaired loans ratio (9MFY20: 6.2%; FYE19:
7.1%) and would put also pressure on the bank's loan-loss coverage,
which was 76% at 9MFY20. Fitch expects SME loans (9MFY20: 3.4% of
loans) to be the most vulnerable, but it also expects higher
slippages in the retail segment (63%) where risk appetite has been
above-average in recent years, demonstrated by the bank's high
growth levels particularly in riskier retail segments, such as
personal loans (11% of retail loans), credit cards (4%) and
business banking (6%). Secured retail loans, such as home loans
(49%) and auto loans (15%), may have some inbuilt safeguards and
are unlikely to be affected first, but these too would face
pressure as unemployment rises. Fitch also expects pressure from
the corporate portfolio due to heightened stress in sectors such as
tourism, real estate (6.6% of funded exposure), infrastructure
(4.5%) and auto (1.3%). Exposure to non-bank financial institutions
is about 5.6% of loans, although the inherent risks are limited as
these loans are mainly to government and large corporate-backed
entities.
Operating profit/risk weighted assets improved to 2.7% in 9MFY20
(FY19: 1.0%), driven by decline in loan impairment costs (9MFY20:
1.6% of loans, FY19: 3.2%), improved fee income, and higher
treasury profits. The bank's pre-impairment profit (9MFY20: 4.7% of
loans) offers significant cushion against loan impairment charges
(9MFY20: 1.7% of loans; FY19: 3%). The imminent risk of a loss is
therefore seen to be low, although Fitch expects income buffers to
narrow because of declining income and rising impaired loans,
adding to earnings volatility.
ICICI's VR also factors in the bank's adequate franchise,
particularly in retail, as well as a generally stable funding
profile with the loans/customer deposits ratio of 98% and low-cost
deposit ratio of 47% at 9MFY20. The funding for private banks in
India is confidence sensitive, and ICICI's funding costs have been
stable amid the ongoing stress, which compares well with other
state-run lenders.
SENIOR DEBT
ICICI's senior debt rating is at the same level as its IDR, as the
debt represents its unsecured and unsubordinated obligations.
ESG - Financial Transparency: ICICI 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 a negative effect on the VR. These factors have become
more prominent in the past few years because of the financial
deterioration on account of the wide reported divergences in
non-performing loan recognition between the bank and the
regulator.
RATING SENSITIVITIES
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND SENIOR DEBT
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The Support Rating and Support Rating Floor are most sensitive to
the agency's assessment of the government's propensity and ability
to extend timely support to the bank, based on its size and
systemic importance. Fitch will downgrade the Support Rating and
Support Rating Floor, and in turn, the bank's IDRs if it perceives
any decline in such ability or propensity to support, although that
is not its base case. Nevertheless, there could be downside
pressure to the IDR if Fitch believes that the sovereign's ability
and propensity to support the bank is weaker, which could be the
case if the sovereign rating was downgraded.
There is limited downside risk to the IDR in the event of a VR
downgrade so long as SRF remains unchanged, implying that its
assessment of the sovereign's ability and propensity to support the
bank remains intact.
The senior debt ratings would be downgraded if the bank's Long-Term
IDR was downgraded.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
ICICI Bank's IDR is now driven by its SRF, which is above the VR.
An improvement in the bank's VR beyond the SRF would lead to an
equivalent increase in the IDR. However, Fitch views such an
upgrade as highly unlikely at this time. Similarly, a sovereign
rating upgrade would also not lead to an upgrade in the bank's IDR
unless a sovereign rating upgrade coincides with a strengthening of
the sovereign's ability and more importantly, propensity to support
the bank, in Fitch's view.
The senior debt ratings would be upgraded if the bank's Long-Term
IDR was upgraded.
VIABILITY RATING
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
ICICI's VR could be downgraded if the economic environment
deteriorates significantly beyond its base-case scenario. Under
this scenario, Fitch would lower the operating environment score,
which would result in a reduction of its assessment of most
financial profile factors.
In this scenario, the VR is most sensitive to changes in ICICI's
profitability and capitalisation levels, both of which are linked
to asset quality. In that context, the VR would be under pressure
if the impaired loans ratio was to approach 10% or the CET1 ratio
dipped closer to or below 12%. Fitch may review the bank's VR if
the bank faced significant deposit outflow in a weakening operating
environment, which would be evident in a liquidity coverage ratio
below 100% or a sharp jump in the loans/customer deposits ratio,
although Fitch does not view this as a high risk in the near term.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade to the VR appears unlikely in the near-term as the risks
to the bank's intrinsic profile from a weakening operating
environment are on the downside. However, a VR upgrade could be
considered if the bank demonstrated a steady improvement in its
impaired loan ratio to well-below 5% while ensuring stable core
capitalisation at or above current levels on a sustained basis.
BEST/WORST CASE RATING SCENARIO
International scale credit 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
ICICI 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 financial deterioration on account of
the wide reported divergences in NPL recognition between the bank
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,
either due to their nature or to the way in which they are being
managed by the entity.
IL&FS TAMIL: ICRA Keeps D on INR6,080cr Bank Debt in NonCooperating
-------------------------------------------------------------------
ICRA said the ratings for the INR6,080.00 crore bank facilities and
INR500 crore Non-Convertible Debenture Programme of IL&FS Tamil
Nadu Power Company Limited (ITPCL) continue to remain under Issuer
Not Cooperating category. The long-term rating is denoted as
[ICRA]D ISSUER NOT COOPERATING. ICRA had earlier moved the rating
to 'ISSUER NOT COOPERATING' category due to non-submission of
monthly 'No Default Statement' ("NDS") by the company.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loan 6,080 [ICRA]D ISSUER NOT COOPERATING;
Rating Continues to remain under
the 'Issuer Not Cooperating'
category
Non-Convertible 500 [ICRA]D ISSUER NOT COOPERATING;
Debenture Rating Continues to remain under
Programme the 'Issuer Not Cooperating'
category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis dated information on the
issuers' performance. Accordingly, the lenders, investors and other
market participants are advised to exercise appropriate caution
while using this rating as the rating may not adequately reflect
the credit risk profile of the entity.
ITPCL is a special purpose vehicle promoted by IL&FS Energy
Development Company Limited (IEDCL), which is a subsidiary of IL&FS
Limited, for the development of a 3180-MW coal-based thermal power
plant at Cuddalore in Tamil Nadu. The project would be implemented
in phases and in the first phase, the company has set up a 1200 MW
(2x600 MW) power plant based on imported coal with sub-critical
technology. IL&FS has an established track record of financing
various infrastructure projects as well as developing projects
through the SPV route. IEDCL is a subsidiary of IL&FS and the
holding company for project SPVs in the power domain. The total
project cost in the first phase, which was estimated at INR 6371
crore initially, was revised by the lenders to INR 9116 crore
because of execution delays and increase in project scope and was
financed be INR 6080 crore of term loans and balance through
equity.
JAY BHARAT: ICRA Keeps B+ on INR14.9cr Loans in Not Cooperating
---------------------------------------------------------------
ICRA said the rating for the INR 14.95 crore bank facilities of Jay
Bharat Spices Private Limited continue to remain under 'Issuer Not
Cooperating' category. The rating is denoted as "[ICRA]B+ (Stable);
ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based 13.00 [ICRA]B+ (Stable) ISSUER NOT
Limit-Cash COOPERATING; Rating continues
Credit to remain under 'Issuer Not
Cooperating' category
Fund Based 1.95 [ICRA]B+ (Stable) ISSUER NOT
Limit–Term COOPERATING; Rating continues
Loan to remain under 'Issuer Not
Cooperating' category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis best
available/dated/limited information on the issuers' performance.
Accordingly, the lenders, investors and other market participants
are advised to exercise appropriate caution while using this rating
as the rating may not adequately reflect the credit risk profile of
the entity.
JBSPL was incorporated in 2003 by the Panda family based in
Cuttack, Odisha. The company procures whole spices and grinds them
into powder. The produce is marketed by JBSPL under the brand name
– Bharat. JBSPL's product portfolio includes spices like haldi,
mirchi, jeera, dhania, garam masala, etc. JBSPL is also engaged in
selling products manufactured by its group company 'Jay Bharat Food
Process Private Limited' outside Odisha.
JAYKRISHNA RICE: CRISIL Keeps B on INR10cr Loan in Not Cooperating
------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Jaykrishna Rice
industries (JKRI) continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 10 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with JKRI for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 JKRI, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on JKRI is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Based on the last available information, the ratings on bank
facilities of JKRI continues to be 'CRISIL B/Stable Issuer not
cooperating'.
Incorporated in 2009, JKRI mills and processes paddy into rice. The
manufacturing plant is in Nellore, Andhra Pradesh. Mr K.
Bramhanandam and Mr K. Kumar and their families are the promoters.
KAMAKSHI RAW: ICRA Keeps B+ on INR10cr Loans in Not Cooperating
---------------------------------------------------------------
ICRA said the rating downgrade is because of lack of adequate
information regarding Sree Kamakshi Raw and Boiled Rice Mill's
(SKRBRM) performance and hence the uncertainty around its credit
risk. ICRA assesses whether the information available about the
entity is commensurate with its rating and reviews the same as per
its "Policy in respect of non-cooperation by the rated entity". The
lenders, investors and other market participants are thus advised
to exercise appropriate caution while using this rating as the
rating may not adequately reflect the credit risk profile of the
entity, despite the downgrade.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
LT: Fund Based 7.00 [ICRA]B+(Stable) ISSUER NOT
Limit COOPERATING; continues to
remain 'Issuer Not Cooperating'
category
LT: Unallocated 3.00 [ICRA]B+(Stable) ISSUER NOT
COOPERATING; continues to
remain 'Issuer Not Cooperating'
category
As part of its process and in accordance with its rating agreement
with SKRBRM, ICRA has been trying to seek information from the
entity so as to monitor its performance, but despite repeated
requests by ICRA, the entity's management has remained
non-cooperative. In the absence of requisite information and in
line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119, dated
November 1, 2016, ICRA's Rating Committee has taken a rating view
based on the best available information.
Founded in 2000, M/s. Sree Kamakshi Raw and Boiled Rice Mill
(SKRBRM) is located in Allipuram village of Nellore District. Mr.
K. Suneel Kumar is the managing partner of the firm. The firm has
one raw rice mill unit of 4 MTPH and one boiled rice mill unit of 8
TPH capacity. During 2012, the raw rice mill was renovated, and old
machineries were replaced. The rice is sold under "Double Hearts"
brand. The firm's clients are predominantly located in Kerala,
Gujarat, Tamil Nadu and Karnataka.
KIWI ALLOYS: CRISIL Maintains 'B' Debt Ratings in Not Cooperating
-----------------------------------------------------------------
CRISIL said the ratings on bank facilities of Kiwi Alloys Limited
(KAL) continues to be 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5.25 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Proposed Long Term
Bank Loan Facility 1.75 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Term Loan 1.00 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with KAL for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 KAL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KAL is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Based on the last available information, the ratings on bank
facilities of KAL continues to be 'CRISIL B/Stable Issuer not
cooperating'.
KAL, incorporated in 2010, was promoted by Mr. Nitin Gupta and his
family members. It manufactures mild steel ingots. Its
manufacturing plant, located in Bhiwadi, Rajasthan, has an ingot
manufacturing capacity of 21,000 tonne per annum. KAL also trades
in rice.
KUNJ BIHARI: ICRA Withdraws B+ Rating on INR7.50cr LT Loan
----------------------------------------------------------
ICRA has withdrawn the ratings on certain bank facilities of Kunj
Bihari Lal Radhe Shyam Metals Private Limited, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-Term Fund 7.50 [ICRA]B+ (Stable) ISSUER NOT
based/Cash COOPERATING; Withdrawn
Credit
Rationale
The ratings have been withdrawn in accordance with ICRA's policy on
withdrawal and suspension, and as desired by the company on receipt
of no objection certificate provided by the bank. ICRA does not
have adequate information to suggest that the credit risk has
changed since the time the ratings were last reviewed.
Key rating drivers and their description
Key rating drivers have not been captured for the rating withdrawal
due to inadequacy of incremental information since the time the
ratings were last reviewed.
Liquidity position
Liquidity position has not been captured for the rating withdrawal
due to inadequacy of incremental information since
the time the ratings were last reviewed.
Rating sensitivities
Sensitivities have not been captured for the rating withdrawal due
to inadequacy of incremental information since the time the ratings
were last reviewed.
Incorporated in 1987, Kunj Bihari Lal Radhe Shyam Metals Private
Limited is a private limited company based in Mirzapur Uttar
Pradesh. The company is a manufacturer and distributor for brass
kitchen utensils and brass sheet circles. The manufacturing
facility for the company is located in Mirzapur area of Uttar
Pradesh. The current operations of the company are managed by Mr
Rajesh Agarwal who holds over three decades of experience in the
industry and is assisted by other family members including Mr Kashi
Agarwal and Mr Triveni Agarwal The company's major product line
comprises of Brass Kitchen Utensils and Brass Sheet Circles, the
major raw material for which is Brass, Copper and Nickel.
The company procures raw material from various domestic players
based in Karnataka, West Bengal, Bihar and others, this apart the
company also procures imported raw material depending upon the
price and the quality. The imported brass is procured from agents
and other dealers based in India only where the transactions take
place in domestic currency only. The details about the client
concentration and procurement have not been shared as it keeps
varying depending upon the price and quality.
MANMATHA NATH: ICRA Keeps B+ on INR7cr Credit in Not Cooperating
----------------------------------------------------------------
ICRA said the rating for the INR14.00 crore bank facilities of
Manmatha Nath Kundu & Sons Construction Co. Pvt. Ltd. continue to
remain under 'Issuer Not Cooperating' category. The rating is
denoted as "[ICRA]B+ (Stable)/[ICRA]A4; ISSUER NOT COOPERATING".
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based 7.00 [ICRA]B+ (Stable) ISSUER NOT
Limit–Cash COOPERATING; Rating continues
Credit to remain under 'Issuer Not
Cooperating'category
Non fund- 7.00 [ICRA]A4 ISSUER NOT COOPERATING;
based Limit– Rating continues to remain under
Bank Guarantee 'Issuer Not Cooperating' category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis best available/dated/
limited information on the issuers' performance. Accordingly, the
lenders, investors and other market participants are advised to
exercise appropriate caution while using this rating as the rating
may not adequately reflect the credit risk profile of the entity.
Manmatha Nath Kundu & Sons, a partnership firm, was established in
1996. The firm was promoted by Mr. Subrata Kundu and his family
members. In April 2011, the firm was converted into a private
limited company and subsequently, the name was changed to Manmatha
Nath Kundu & Sons Construction Co. Pvt. Ltd. The company is engaged
in the construction and maintenance of roads.
MERCURY INDUSTRIES: Ind-Ra Lowers LongTerm Issuer Rating to 'BB+'
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Mercury
Industries Limited's (MIL) Long-Term Issuer Rating to 'IND BB+
(ISSUER NOT COOPERATING)' from 'IND BBB- (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:
-- INR7.5 mil. Term loan due on March 2018 downgraded with IND
BB+ (ISSUER NOT COOPERATING) rating;
-- INR120 mil. Fund-based facility downgraded with IND BB+
(ISSUER NOT COOPERATING) rating; and
-- INR15.5 mil. Non-fund-based facility downgraded with IND A4+
(ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best available information
KEY RATING DRIVERS
The downgrade reflects the deterioration in MIL's credit metrics in
FY19 due to an increase in debt levels (FY19: INR255 million; FY18:
INR238 million), and the resultant rise in interest expenses
(INR30.63 million; INR29.22 million). The interest coverage
(operating EBITDA/interest) was 2.63x in FY19 (FY18: 2.74x), while
the net leverage (total adjusted net debt/operating EBITDA) was
3.13x (2.97x).
Furthermore, the operating margins declined to 7.14% in FY19 (FY18:
8.76%).
The ratings reflect the continued medium scale of operations
despite an increase in the company's revenue to INR1,128.74 million
in FY19 (FY18: INR915 million).
Additionally, the company is engaged in the business of
commodity-based manufacturing, which exposes it to frequent input
price fluctuations and risks related to foreign exchange price
movements.
The ratings have been maintained in the non-cooperating category as
MIL has not provided information about the working capital
utilization, latest financials, revised projections, sanction
letters, and updated management certificate despite continuous
requests and follow-ups.
COMPANY PROFILE
Incorporated in 1985, MIL manufactures paint cans, metal
containers, packaging tins, metal gift boxes, and others and
supplies them to companies that primarily operate in the paint
industry globally. Mercury Industries has an installed capacity of
12 million cans per month.
NATURAL ORGANIC: CRISIL Keeps 'B' Ratings in Not Cooperating
------------------------------------------------------------
CRISIL said the ratings on bank facilities of Natural Organic Farms
(NOF) continues to be 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 14 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Term Loan 0.92 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with NOF for obtaining
information through letters and emails dated September 30, 2019 and
March 9, 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 NOF, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on NOF is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Based on the last available information, the ratings on bank
facilities of NOF continues to be 'CRISIL B/Stable Issuer not
cooperating'.
NOF is a sole proprietorship that gins and presses cotton. Mr.
Manjeet Chawla is the proprietor. The firm's ginning unit is at
Kesinga (Kalahandi District, Odisha).
NIRMLANAND STEELS: CRISIL Keeps B on INR6cr Loans in NonCooperating
-------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Shri Nirmlanand
Steels Casting Private Limited (SNSCPL) continues to be 'CRISIL
B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 4 CRISIL B/Stable (ISSUER NOT
COOPERATING)
Term Loan 2 CRISIL B/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with SNSCPL for obtaining
information through letters and emails dated November 30, 2019 and
March 9, 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 SNSCPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on SNSCPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Based on the last available information, the ratings on bank
facilities of SNSCPL continues to be 'CRISIL B/Stable Issuer not
cooperating'.
SNSCPL, incorporated in 2007 and based in Raigarh, Chhattisgarh, is
promoted by Mr Kamal Jindal and his brother Mr Raman Kumar Agarwal.
The company manufactures mild steel ingots and thermo-mechanically
treated (TMT) bars. Its daily operations are managed by Mr Kamal
Jindal's son, Mr Ashish Jindal.
PARAS FOODS: ICRA Keeps D on INR8cr Credit in Not Cooperating
-------------------------------------------------------------
ICRA said the ratings for the INR8.00 crore bank facilities of
Paras Foods continue to remain under Issuer Not Cooperating
category. The long-term rating is denoted as [ICRA]D ISSUER NOT
COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 8.00 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
the 'Issuer Not Cooperating'
category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis dated information on the
issuers' performance. Accordingly, the lenders, investors and other
market participants are advised to exercise appropriate caution
while using this rating as the rating may not adequately reflect
the credit risk profile of the entity.
Incorporated in the 2005, Paras Foods is a partnership firm engaged
in processing and sorting of basmati and nonbasmati rice. The
firm's milling unit is based out of Karnal, Haryana, in close
proximity to the local grain market. The firm sells rice under its
registered brands in the domestic market – Mulberry and Namstey
Jee. The firm is also involved in export of rice. The management
has increased its focus on sales of rice under its own brand name
in order to increase its realization. The focus on branded rice
sales is expected to increase further in the current year. The
entity tries to differentiate itself by selling branded rice in the
domestic rice which are sold in different packs of 5, 10, 25 and
40kg respectively.
PURBANCHAL VENEERS: Ind-Ra Keeps 'BB+' Rating in Non-Cooperating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has maintained Purbanchal
Veneers' (PV) Long-Term Issuer Rating of 'IND BB+ (ISSUER NOT
COOPERATING)' in the non-cooperating category and has
simultaneously withdrawn it.
The instrument-wise rating actions are:
-- INR8.00 mil. Cash credit (Long-term)* maintained in non-
cooperating category and withdrawn; and
-- INR100.00 mil. Non-fund based limit (Short-term)# maintained
in non-cooperating category and withdrawn.
* Maintained at 'IND BB+ (ISSUER NOT COOPERATING)' before being
withdrawn
# Maintained at 'IND A4+ (ISSUER NOT COOPERATING)' before being
withdrawn
KEY RATING DRIVERS
The ratings have been maintained in the non-cooperating category
because the issuer did not participate in the rating exercise
despite continuous requests and follow-ups by Ind-Ra.
Ind-Ra is no longer required to maintain the ratings, as the agency
has received a no-objection certificate from the lender. This is
consistent with the Securities and Exchange Board of India's
circular dated March 31, 2017, for credit rating agencies.
COMPANY PROFILE
PV is engaged in the trading of timber and manufacturing and
trading of laminates and plywood. Its facilities are located in
Gandhidham, Gujarat. PV manufactures veneers.
R. P. STEEL INDUSTRIES: CRISIL Keeps D Ratings in Not Cooperating
-----------------------------------------------------------------
CRISIL said the ratings on bank facilities of R. P. Steel
Industries (RP Steel) continues to be 'CRISIL D/CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 7 CRISIL D (ISSUER NOT
COOPERATING)
Letter of Credit 10 CRISIL D (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with RP Steel for
obtaining information through letters and emails dated September
30, 2019 and March 9, 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 RP Steel, which restricts
CRISIL's ability to take a forward looking view on the entity's
credit quality. CRISIL believes information available on RP Steel
is consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Based on the last available information, the ratings on bank
facilities of RP Steel continues to be 'CRISIL D/CRISIL D Issuer
not cooperating'.
RP Steel was set up in 1984, by Mr Purushotam Agarwal. It trades in
iron and steel long products such as rounds, billets, blooms, pig
iron, wire rods, thermo-mechanically treated bars/rebars, and
imported scrap.
R.S. AJIT SINGH: ICRA Lowers Rating on INR9cr LT Loan to 'D'
------------------------------------------------------------
ICRA has downgraded the rating of bank facilities of R.S. Ajit
Singh & Co.(Automotives) Pvt. Ltd. (RSACPL) to [ICRA]D from
[ICRA]B+. The rating is now denoted as "[ICRA]D ISSUER NOT
COOPERATING". The revision in on the basis of publicly available
information reflecting the insolvency proceedings which were
initiated against the company.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term– 9.00 [ICRA]D ISSUER NOT COOPERATING;
Fund Based Downgraded from [ICRA]B+ (Stable)
Cash Credit and continues to remain in Issuer
Not Cooperating category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis best
available/dated/limited information on the issuers' performance.
Accordingly, the lenders, investors and other market participants
are advised to exercise appropriate caution while using this rating
as the rating may not adequately reflect the credit risk profile of
the entity.
R.S. Ajit Singh & Co. (Automotives) Private Limited is an
authorized dealership of vehicles manufactured by Volvo Eicher
Commercial Vehicles Limited (VECV) in the Delhi region. The company
trades in Medium and Heavy Commercial vehicle (M&HCV), Light
commercial vehicle (LCV) and Buses for VECV. The head office for
the company is located in Wazirpur Industrial Area, Delhi from
where all the sales activity is controlled. The day to day
operations for the company are looked after by Mr. Bhavinder Singh
Khurana with the support of other directors.
SOLAPUR TOLLWAYS: Ind-Ra Affirms 'D' on INR5,884-Bil. Term Loan
---------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed Solapur Tollways
Private Limited's (STPL) bank facilities as follows:
-- INR5,884.2 bil. Senior project term loan due on March 31, 2030
affirmed with IND D rating.
KEY RATING DRIVERS
The affirmation reflects STPL's continued delays in interest
servicing due to cash flow mismatches. The company attained
provisional commercial operation on January 23, 2020, and started
toll collection from February 2020. The principal repayment is
scheduled to start from July 2020. The toll collection prior to the
ongoing nationwide lockdown was insufficient to make the principal
repayment and the project had to rely on sponsor support. The
company envisages completing the balanced stretch in 2020 and
subsequently, the toll collection is likely to jump.
RATING SENSITIVITIES
Positive: Timely debt servicing for at least three consecutive
months could result in a positive rating action.
COMPANY PROFILE
STPL is incorporated by Bharat Road Network Limited which is a
subsidiary of Srei Infrastructure Finance Limited and holds a
majority stake in STPL. It was incorporated to implement a lane
expansion project under a 25-year concession from National Highways
Authority of India ('IND AAA'/Stable). The project road is a 100km
stretch from Solapur to Maharashtra-Karnataka border and is part of
the National Highway 9. The project was bagged on the basis of
highest annual premium of INR279.9 million payable to NHAI with an
annual escalation of 5%. The concession agreement was signed on
February 29, 2012 and the appointment date was declared as June 3,
2014. The project was initially scheduled to complete within 910
days from the appointment date by November 28, 2016 but got delayed
due to various reasons including land acquisition and utility
shifting issues.
ST. WILFRED EDUCATION: ICRA Lowers Rating on INR20cr LT Loan to B+
------------------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of St.
Wilfred Education Society, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-Term Fund 20.00 [ICRA]B+ (Stable); ISSUER NOT
based/Term Loan COOPERATING; Rating downgraded
from [ICRA]BB+ (Stable) and
continues to remain under
'Issuer Not Cooperating'
Category
Rationale
The rating downgrade is because of lack of adequate information
regarding St. Wilfred Education Society's performance and hence the
uncertainty around its credit risk. ICRA assesses whether the
information available about the entity is commensurate with its
rating and reviews the same as per its "Policy in respect of
non-cooperation by the rated entity".
The lenders, investors and other market participants are thus
advised to exercise appropriate caution while using this rating as
the rating may not adequately reflect the credit risk profile of
the entity, despite the downgrade.
As part of its process and in accordance with its rating agreement
with St. Wilfred Education Society, ICRA has been trying to seek
information from the entity so as to monitor its performance, but
despite repeated requests by ICRA, the entity's management has
remained non-cooperative. In the absence of requisite information
and in line with SEBI's Circular No. SEBI/HO/MIRSD4/CIR/2016/119,
dated November 1, 2016, ICRA's Rating Committee has taken a rating
view based on the best available information.
St. Wilfred Group of colleges was set up in 2010 starting with a
single campus and eleven courses in the city of Jaipur. Since its
inception, the group has widened its horizon and is running various
professional, post graduate, law, and education & engineering
colleges as well. The first campus was established at Mansarovar,
Jaipur. With the passage of time, the group has expanded to over 5
campuses and total 19 colleges spanning across three different
cities. The colleges' offer a number of courses in science,
commerce, management, humanities, law, engineering, mass
communication, I.T., Computers and so on. Further,the e-Library,
equipped laboratories, gymnasiums, hostel facilities, cafeterias,
swimming pool, sports facilities and art of state infrastructures
are some of the salient features.
SUNEJA SONS: Ind-Ra Moves BB+ LT Issuer Rating to Non-Cooperating
-----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has migrated Suneja Sons'
Long-Term Issuer Rating to the non-cooperating category. The issuer
did not participate in the rating exercise despite continuous
requests and follow-ups by the agency. Therefore, investors and
other users are advised to take appropriate caution while using the
rating. The rating will now appear as 'IND BB+ (ISSUER NOT
COOPERATING)' on the agency's website.
The instrument-wise rating actions are:
-- INR150 mil. Fund-based working capital limit migrated to non-
cooperating category with IND BB+ (ISSUER NOT COOPERATING) /
IND A4+ (ISSUER NOT COOPERATING) rating; and
-- INR140 mil. Non-fund-based working capital limit migrated to
non-cooperating category with IND A4+ (ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: The ratings were last reviewed on
April 22, 2019. Ind-Ra is unable to provide an update, as the
agency does not have adequate information to review the ratings.
COMPANY PROFILE
Formed in 1971, Suneja Sons is engaged in the trading of various
varieties of paper. The firm has been operating as an authorized
distributor for ITC Limited's paperboards and specialty papers
division since 2009.
SURYA VIKAS: ICRA Maintains 'D' Debt Ratings in Not Cooperating
---------------------------------------------------------------
ICRA said ratings for the INR50.00 crore bank facilities of Surya
Vikas Plywood Limited continue to remain under Issuer Not
Cooperating category. The long-term rating is denoted as [ICRA]D
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based 47.54 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
the 'Issuer Not Cooperating'
category
Unallocated 2.46 [ICRA]D ISSUER NOT COOPERATING;
Fund based Rating continues to remain under
the 'Issuer Not Cooperating'
category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis dated information on the
issuers' performance. Accordingly, the lenders, investors and other
market participants are advised to exercise appropriate caution
while using this rating as the rating may not adequately reflect
the credit risk profile of the entity.
Surya Vikas Plywood Limited (SVPL), the flagship company of the
Jitendra Kijriwal Group, was incorporated in 2002 to carry out the
business of manufacturing and trading of timber products. The
company's product profile includes plywood, block board, flush
doors, panel doors, shutter doors, resins, veneers, and other
allied products. It is also engaged in fabric trading. The
company's manufacturing facility is located at Yamuna Nagar,
Haryana. The day-to-day operations are looked after by Mr. Jitendra
Kejriwal, one of the directors of SVPL.
TAXUS INFRASTRUCTURE: CRISIL Lowers Ratings on INR20cr Loans to D
-----------------------------------------------------------------
CRISIL has downgraded the ratings on bank facilities of Taxus
Infrastructure and Power Projects Private Limited (TIPPPL) to
'CRISIL D/CRISIL D Issuer Not Cooperating' from 'CRISIL C/CRISIL A4
Issuer Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5 CRISIL D (ISSUER NOT COOPERATING;
Downgraded from 'CRISIL C ISSUER
NOT COOPERATING')
Letter Of 15 CRISIL D (ISSUER NOT COOPERATING;
Guarantee Downgraded from '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
The rating reflects the account of TIPPPL being NPA since May 2019
due to continuous delay in servicing debt obligations.
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'.
Therefore, on account of inadequate information, lack of management
cooperation, and delays in debt servicing, the ratings on bank
facilities of TIPPPL have been downgraded to 'CRISIL D/CRISIL D
Issuer Not Cooperating' from '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.
V.I.R. FOODS: ICRA Maintains 'D' Debt Ratings in Not Cooperating
----------------------------------------------------------------
ICRA said the ratings for the INR18.00 crore bank facilities of
V.I.R. Foods Limited continue to remain under Issuer Not
Cooperating category. The long-term rating is denoted as [ICRA]D
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 16.00 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
the 'Issuer Not Cooperating'
category
Term Loan 2.00 [ICRA]D ISSUER NOT COOPERATING;
Rating continues to remain under
the 'Issuer Not Cooperating'
category
ICRA has been trying to seek information from the entity so as to
monitor its performance, but despite repeated requests by ICRA, the
entity's management has remained non-cooperative. The current
rating action has been taken by ICRA basis dated information on the
issuers' performance. Accordingly, the lenders, investors and other
market participants are advised to exercise appropriate caution
while using this rating as the rating may not adequately reflect
the credit risk profile of the entity.
Incorporated in the year 2005, V.I.R Foods Limited is a public
limited company involved in milling of basmati and nonbasmati rice.
The company's plant at Payal, Ludhiana (Punjab) has a milling
capacity of 15 tons/hour. The company sells its products under its
registered brand names "Nature Gold", and "Royal Taste of India".
YAMUNA CABLE: Ind-Ra Lowers Issuer Rating to 'BB+/Not Cooperating'
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Yamuna Cable
Accessories Private Limited's (YCAPL) Long-Term Issuer Rating to
'IND BB+ (ISSUER NOT COOPERATING)' from 'IND BBB- (ISSUER NOT
COOPERATING)'. The issuer did not participate in the surveillance
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:
-- INR100 mil. Fund-based working capital limits downgraded with
IND BB+ (ISSUER NOT COOPERATING) / IND A4+ (ISSUER NOT
COOPERATING) rating;
-- INR53.7 mil. Non-fund-based working capital limits downgraded
with IND BB+ (ISSUER NOT COOPERATING) / IND A4+ (ISSUER NOT
COOPERATING) rating; and
-- INR14.5 mil. Term loan downgraded with IND BB+ (ISSUER NOT
COOPERATING) rating.
Note: ISSUER NOT COOPERATING: Ind-Ra is unable to provide an
update, as the agency does not have adequate information to review
the ratings.
KEY RATING DRIVERS
YCAPL has a lower public rating from another credit rating agency,
with which the company has been cooperative.
RATING SENSITIVITIES
Positive: A substantial improvement in the revenue and operating
profitability, leading to an improvement in the overall credit
metrics, will be positive for the ratings.
Negative: Any decline in the revenue or EBITDA margin, leading to
deterioration in the overall credit metrics, will be negative for
the ratings.
COMPANY PROFILE
Formed in 1996 by Shyam Sunder Sardana, Yamuna Cable Accessories
manufactures cable jointing kits and accessories at its facilities
in Yamuna Nagar, Haryana. It sells its products under the brand
DENSONS.
[*] Moody's Withdraws Ratings on Syndicate Bank & Oriental Bank
---------------------------------------------------------------
Moody's Investors Service has withdrawn all ratings and assessments
of Syndicate Bank and Oriental Bank of Commerce.
Prior to withdrawal, the outlook on the banks' long-term deposit
ratings was stable.
RATINGS RATIONALE
The withdrawal follows the merger of Syndicate into Canara Bank
(Canara, Baa3 stable, ba3) and OBC into Punjab National Bank (PNB,
Ba1 positive, b1) on April 1, 2020. As a result of the mergers,
Syndicate and OBC ceased to exist as separate legal entities. All
of Syndicate and OBC's assets and liabilities have been directly
assumed by Canara and PNB respectively.
Syndicate Bank is headquartered in Bangalore, and reported assets
of INR3.3 trillion at December 31, 2019.
Oriental Bank of Commerce is headquartered in Delhi, and reported
assets of INR2.7 trillion at December 31, 2019.
List of Withdrawals:
Issuer: Oriental Bank of Commerce
Adjusted Baseline Credit Assessment, Withdrawn, previously rated
ba3
Baseline Credit Assessment, Withdrawn, previously rated ba3
Long-term/Short-term Counterparty Risk Assessment, Withdrawn,
previously rated Baa3(cr)/P-3(cr)
Long-term Counterparty Risk Rating (Foreign Currency/Local
Currency), Withdrawn, previously rated Baa3
Short-term Counterparty Risk Rating (Foreign Currency/Local
Currency), Withdrawn, previously rated P-3
Long-term Deposit Rating (Foreign Currency/Local Currency),
Withdrawn, previously rated Baa3, outlook withdrawn from stable
Short-term Deposit Rating (Foreign Currency/Local Currency),
Withdrawn, previously rated P-3
Outlook, Changed to Rating Withdrawn from stable
Issuer: Syndicate Bank
Adjusted Baseline Credit Assessment, Withdrawn, previously rated
ba3
Baseline Credit Assessment, Withdrawn, previously rated ba3
Long-term/Short-term Counterparty Risk Assessment, Withdrawn,
previously rated Baa3(cr)/P-3(cr)
Long-term Counterparty Risk Rating (Foreign Currency/Local
Currency), Withdrawn, previously rated Baa3
Short-term Counterparty Risk Rating (Foreign Currency/Local
Currency), Withdrawn, previously rated P-3
Long-term Deposit Rating (Foreign Currency/Local Currency),
Withdrawn, previously rated Baa3, outlook withdrawn from stable
Short-term Deposit Rating (Foreign Currency/Local Currency),
Withdrawn, previously rated P-3
Senior Unsecured Medium-Term Note Program (Foreign Currency),
Withdrawn, previously rated (P)Baa3
Subordinate Medium-Term Note Program (Foreign Currency), Withdrawn,
previously rated (P)Ba3
Junior Subordinate Medium-Term Note Program (Foreign Currency),
Withdrawn, previously rated (P)B1
Outlook, Changed to Rating Withdrawn from stable
Issuer: Syndicate Bank, London Branch
Long-term/Short-term Counterparty Risk Assessment, Withdrawn,
previously rated Baa3(cr)/P-3(cr)
Long-term Counterparty Risk Rating (Foreign Currency/Local
Currency), Withdrawn, previously rated Baa3
Short-term Counterparty Risk Rating (Foreign Currency/Local
Currency), Withdrawn, previously rated P-3
Senior Unsecured Medium-Term Note Program (Foreign Currency),
Withdrawn, previously rated (P)Baa3
Subordinate Medium-Term Note Program (Foreign Currency), Withdrawn,
previously rated (P)Ba3
Junior Subordinate Medium-Term Note Program (Foreign Currency),
Withdrawn, previously rated (P)B1
Outlook, Changed to Rating Withdrawn from stable
=================
I N D O N E S I A
=================
ALAM SUTERA: S&P Lowers ICR to 'CCC+', Outlook Negative
-------------------------------------------------------
S&P Global Ratings, on April 30, 2020, lowered its long-term issuer
credit rating on Alam Sutera to 'CCC+' from 'B-'. At the same time,
S&P lowered the issue rating on the company's guaranteed senior
unsecured notes to 'CCC+' from 'B-'. All ratings have been removed
from CreditWatch, where they were placed with negative implications
on March 24, 2020.
S&P said, "The downgrade reflects our expectation that Alam
Sutera's refinancing plans for its US$175 million notes maturing in
April 2021 will likely be delayed due to the rapidly evolving
COVID-19 outbreak in Indonesia.
"In our view, the likelihood of Alam Sutera raising an additional
US$115 million to fully repay its 2021 notes has reduced with the
deepening COVID-19 outbreak in Indonesia."
Refinancing risk has risen as options have become increasingly
limited during this pandemic. S&P believes the company's
refinancing progress will be stalled by various social restrictions
in Greater Jakarta, which have been extended until May 22, 2020.
Due to the rapidly deteriorating credit environment, S&P believes
domestic banks have become much more selective in granting new
credit lines.
Alam Sutera has been unable to secure further domestic bank loans
after getting an Indonesian rupiah (IDR) 200 billion bank loan from
PT Bank Permata Tbk. and an IDR500 billion facility from PT Bank
Central Asia Tbk. in early March. The company recently completed a
partial redemption of US$60 million of its 2021 bond. The
redemption was funded by a mixture of hedging benefits payout of
US$22.8 million and proceeds from recently approved domestic bank
loans.
In S&P views, without an improvement in Alam Sutera's operating
environment, access to international bond markets for refinancing
and capital raising remains uncertain. Recovery in market sentiment
could be some time away given the country's deepening COVID-19
outbreak and weak rupiah.
S&P assesses Alam Sutera's liquidity as weak for the next 12
months.
S&P believes the company's cash on hand by the end of 2020 could
address no more than about 35% of its US$115 million funding gap.
Alam Sutera's cash on hand is expected to decline this year, given
the negative discretionary cash flow of IDR100 billion-IDR300
billion. The company reported cash of IDR1.2 trillion as of
end-2019 and S&P believes its cash balance has declined to
approximately IDR1 trillion by the end of March 2020, excluding the
amount set aside for the partial bond redemption in April.
S&P estimates Alam Sutera will record lower marketing sales of
IDR2.0 trillion-IDR2.5 trillion in 2020, including IDR300 billion
of land sales to China Fortune Land Development Co. Ltd. This is
lower than its marketing and land sales of IDR3.1 trillion in 2019.
Majority of its sales and new launches in 2020 are likely to occur
toward the year end on the assumption that the ongoing social
restrictive measures will gradually ease by end June 2020.
Alam Sutera will face sustained liquidity pressure over the next
two years.
Apart from the 2021 notes, the company has US$370 million of notes
due in March 2022 and will have to manage that maturity.
Environmental, social, and governance (ESG) factors relevant to the
rating action:
-- Health and Safety
The negative outlook on Alam Sutera indicates the prospect of a
further downgrade by the third quarter of 2020 in the absence of
concrete refinancing progress.
S&P said, "We could lower the ratings further if Alam Sutera does
not fully address the maturity of its US$175 million notes due
April 2021 by the third quarter of 2020. We could also lower the
ratings if the company refinances with short-tenor debt, resulting
in a chunky debt maturity profile and an unsustainable capital
structure.
"We would lower the ratings to 'SD' if Alam Sutera undertakes
capital market transactions related to its 2021 or 2022 notes that
we assess as constituting a distressed exchange, such as material
capital market purchases below par.
"We may raise the ratings if Alam Sutera is able to fully refinance
the 2021 notes with longer-tenor debt."
PT INDOSAT: Posts US$40.37MM Loss in First Quarter Ended March 30
-----------------------------------------------------------------
The Jakarta Post reports that PT Indosat has posted an increase in
losses during this year's first quarter despite growing revenue as
its organization rightsizing added to costs.
According to the Jakarta Post, the publicly listed company recorded
IDR605.61 billion (US$40.37 million) in loses in the January-March
quarter, 107.04 percent higher than the corresponding period last
year.
However, it booked a 7.9 percent year-on-year (yoy) increase in
revenue to IDR6.5 trillion during the quarter, largely driven by a
10.6 percent growth in cellular revenue to IDR5.4 trillion, the
company said in a statement on April 29.
It also saw an increase in average revenue per user (ARPU) to
IDR29,600, higher than the IDR26,500 recorded in the same period of
2019, thanks to a 63 percent annual jump in data traffic, the
report discloses.
"The rise in net losses was primarily driven by a one-off impact of
organization rightsizing and losses in foreign exchange," the
company said in the statement.
The firm announced earlier this year that it was laying off 677
employees as part of a change in its business strategy "to bring
the company's closer to market needs," the Jakara Post relays. The
company allocated IDR663 billion for compensation packages, with an
additional bonus of IDR18.3 billion to 92 percent of employees that
accepted the decision.
The Jakara Post adds that the company's costs went up by almost 9
percent annually in this year's first quarter to IDR6.33 trillion.
Despite the increased losses and looming risks from the COVID-19
pandemic, president director and chief executive officer Ahmad
Al-Neama was still upbeat about the company's performance, as it
was still on track with its three years turnaround plan, saying the
company still "sees positive momentum continuing in the coming
quarters."
Al-Neama also emphasized the company's commitment to improving its
network performance and services amid the implementation of
large-scale social restrictions (PSBB) in several regions.
"We have accelerated our network rollout plan to make sure people
can stay connected during these times and will continue to support
the country through this pandemic," he said in the statement.
Binaartha Parama Sekuritas equity analyst M. Nafan Aji told The
Jakarta Post on April 30 that the PSBB measures could benefit
Indosat's performance in the second quarter of this year onward.
He expected the measures, which require people to work and study
from home, to lead to an increase in data usage, which would boost
Indosat's revenue, the report relays.
He also advised the company to find ways to make its business more
efficient, the report adds.
"Without efficiency measures, the company is less likely to improve
its performance and turn its bottom line to a profit amid the
highly competitive climate of the telecommunications industry," the
report quotes M. Nafan Aji as saying.
Indosat Tbk. (P.T.) is a fully integrated telecommunications
network and services provider in Indonesia. The company is the
second-largest cellular operator in the country in terms of revenue
and active subscribers, as well as the leading provider of
international call services. It also provides multi-media, data
communications, and internet services. The company is 65% owned by
Ooredoo Q.S.C.
SAKA ENERGI: Moody's Cuts CFR to B1 & Alters Outlook to Negative
----------------------------------------------------------------
Moody's Investors Service has downgraded the corporate family
rating of Saka Energi Indonesia (P.T.) to B1 from Ba2. At the same
time, Moody's has downgraded the rating on its senior unsecured
notes to B1 from Ba2.
The outlook on the ratings has changed to negative from rating
under review.
Its rating action concludes the review for downgrade, which was
initiated on January 13, 2020.
RATINGS RATIONALE
"The downgrade reflects its view that Saka's strategic importance
to its parent, Perusahaan Gas Negara (P.T.) (PGN, Baa2 stable), and
its operating profile have both diminished," says Vikas Halan, a
Moody's Senior Vice President.
PGN's announcement in February 2020[1] of its plan to restructure
and streamline its subsidiaries in order to focus on midstream and
downstream businesses has reinforced Moody's view that Saka's
importance to PGN has declined.
Saka's upstream operations had previously served as a source of
feedstock security for PGN's gas pipelines, and was a key driver
behind PGN's vertical integration strategy. Since the completion of
the reorganization in 2018, where the Government of Indonesia (Baa2
stable) transferred its ownership in PGN to Pertamina (Persero)
(P.T.) (Baa2 stable), Saka's strategic importance to PGN has been
diminishing. This is because Pertamina's extensive gas production
in Indonesia can serve as feedstock for PGN's gas pipelines,
thereby displacing Saka.
Nonetheless, the two-notch uplift incorporated in Saka's B1 ratings
reflect Moody's expectations of extraordinary support from PGN in
an event of distress. Moody's assessment of parental support takes
into account (1) reputational and other funding risks to PGN should
Saka default; and (2) PGN's extensive involvement in the financial
and operational management of Saka.
On April 15, 2020, Saka paid $127.7 million to the tax authorities
following the Indonesian Supreme Court's decision in January 2020
to hold Saka liable for taxes of $127.7 million. Another $127.7
million of tax penalty that Saka has to pay is currently under
discussion with the tax authorities. The tax liability relates to
the purchase of a 65% stake in Pangkah block by Saka from Hess
Corporation (Ba1 stable) in 2014.
"Saka's payment to the tax authorities will weaken its liquidity
position amid a challenging price environment, and will constrain
the investments needed for Saka to stem a deterioration in its
operating profile," adds Vikas, who is also Moody's Lead Analyst
for Saka.
Without inorganic growth through acquisitions, Moody's expects
Saka's reserve life will remain below five years. Its capital
spending of $150-$200 million in 2020 will only allow the company
to focus on maintaining existing operations in oil and gas fields.
Saka's production levels will continue to decline to 30-31 thousand
barrels of oil equivalent per day (kboepd) in 2020 from 51.5 kboepd
in 2017. While Saka will benefit from an increase in its working
interest in Muriah gas block to 100% from 20% in 2020, Moody's
expects production from the gas block will yield less than 1.5
kboepd given the operational challenges at the field.
As such, Saka's credit metrics will remain weak over the next 12-18
months, with adjusted retained cash flow (RCF)/debt at 8%-10% and
adjusted EBITDA/interest around 4x-5x. Moody's projections
incorporate the assumptions that Saka will (1) pay the full tax
liability in 2020 using internal cash as it continues to pursue
legal avenues to contest the ruling, and (2) secure an extension
from PGN on the maturity of its shareholder loan due in January
2021.
Further, Moody's assumes that Indonesia's price cap on downstream
gas selling price at $6 per million british thermal units will not
materially affect Saka's earnings and cash flows. This is based on
Moody's expectation that Saka would receive compensation from the
government for the shortfall in margins, although there is
regulatory uncertainty on the mechanism and process of
reimbursement.
ESG CONSIDERATIONS
Saka's ratings incorporate the environmental risk that the company
is exposed to through its oil and gas operations. However, this
risk is somewhat mitigated by the high proportion of natural gas in
its production mix, which stands at about 83% of total production.
Saka also faces social risks, especially in terms of responsible
production and health and safety issues. However, this risk is
mitigated by the company's long track record of operating its
businesses without any major incidents.
As for governance factors, the rating incorporates Saka's
concentrated 100% ownership by PGN and its status as a private
company. Despite being unlisted, Saka publishes quarterly financial
statements and maintains a reasonable degree of transparency into
its operating performance.
RATING OUTLOOK
The negative outlook reflects heightened uncertainty over (1) the
outcome of PGN's planned restructuring, and (2) Saka's ability to
manage its production decline and replenish its depleting
reserves.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Given the negative outlook, a rating upgrade is unlikely.
Nonetheless, the rating outlook could be revised to stable if (1)
there are positive developments and clarity on Saka's strategic
role within the consolidated Pertamina/PGN group; (2) there is
clear financial support from PGN including equity injections and
conversion of shareholder loans to equity that significantly
improves Saka's liquidity position, and (3) Saka is able to improve
its operating profile without further straining its credit
metrics.
Quantitative metrics that Moody's would consider to revise Saka's
outlook to stable include (1) expansion of its reserves and
production organically or inorganically, resulting in a reserve
life of over five years; (2) its adjusted RCF/debt staying above
10%, and (3) its adjusted EBITDA interest cover staying above
2.5x.
Saka's ratings could be downgraded if (1) there is a material
change in Saka's ownership structure; (2) Saka's importance to PGN
deteriorates such that it does not qualify as a material subsidiary
under the terms and conditions of the unsecured notes due in 2024
issued by PGN; or (3) there is a change in the relationship between
Saka and PGN, including operational integration or management
oversight, that results in a lowering of Moody's support
expectation incorporated in the ratings.
In addition, Moody's would downgrade Saka's ratings if (1) it does
not secure an extension of the remainder of the shareholder loan
due on January 1, 2021 within the next six months, or (2) Saka
makes early repayments on the outstanding shareholder loan which
would further strain its own standalone credit profile.
The ratings could also be downgraded if Saka's standalone credit
profile deteriorates as a result of a large debt-funded acquisition
or if the company's reserves and production continue to decline.
Credit metrics indicative of a downgrade include adjusted RCF/debt
falling below 10% or adjusted EBITDA/interest falling below 2.5x.
The principal methodology used in these ratings was Independent
Exploration and Production Industry published in May 2017.
Saka Energi Indonesia (P.T.) is an independent oil & gas
exploration and production company in Indonesia. The company holds
working interests in eleven oil and gas blocks, six of which are
producing. In 2019, Saka reported net production of 34.4 thousand
barrels of oil equivalent per day.
Saka is wholly-owned by natural gas distribution and transmission
company, PGN. In turn, PGN is 56.96% owned by Indonesia's 100%
state-owned national oil company, Pertamina.
=========
J A P A N
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SOFTBANK GROUP: International Arm Cuts Roughly 10% of Staff
-----------------------------------------------------------
Gillian Tan at Bloomberg News reports that SoftBank Group
International, an arm of SoftBank Group Corp. led by Marcelo
Claure, has cut roughly 10% of its staff as part of a plan to
operate more efficiently, according to people with knowledge of the
matter.
Bloomberg relates that the reductions affected about two dozen
employees in cities including San Carlos, California, and Miami,
according to one of the people, who asked not to be identified
because they haven't been made public. SoftBank Group International
is prioritizing enabling its portfolio companies to emerge from the
coronavirus pandemic in a stronger position, while continuing to
make selective investments, the person said.
In addition to the job cuts, two managing partners of SoftBank's $5
billion Latin America fund, Murtaza Ahmed and Andres Freire,
voluntarily departed, one of the people said, Bloomberg relays.
Mike Bucy, an operating partner at the firm who had been appointed
as WeWork's chief transformation officer in November, also has left
SoftBank of his own accord, the person, as cited by Bloomberg,
said.
SoftBank said last week it expects a wider net loss for the fiscal
year ended in March, because of deeper struggles at one of its
largest investments, office-sharing startup WeWork. The Japanese
conglomerate expects to lose JPY900 billion (US$8.4 billion), up
from a previous estimate of about JPY750 billion, according to
Bloomberg.
Its Latin America fund has backed companies including
Colombia-based delivery startup Rappi, Brazilian fitness company
Gympass and Argentine financial-technology firm Uala, Bloomberg
notes.
About Softbank Group
Headquartered in Tokyo, SoftBank Group Corp. provides
telecommunication services. The Company also operates ADSL
(Asymmetric Digital Subscriber Line) and fiber optic high-speed
Internet connection, e-Commerce businesses, and Internet based
advertising and auction businesses.
As reported in the Troubled Company Reporter-Asia Pacific,
Egan-Jones Ratings Company, on April 27, 2020, Egan-Jones Ratings
Company, on April 14, 2020, downgraded the foreign currency and
local currency senior unsecured ratings on debt issued by SoftBank
Group Corporation to B from BB-. EJR also downgraded the rating on
commercial paper issued by the Company to B from A3.
The TCR-AP also reported that Moody's Japan K.K. downgraded
SoftBank Group Corp.'s corporate family rating and senior unsecured
rating to Ba3 from Ba1, and its subordinate rating to B2 from Ba3
in March 2020. At the same time, Moody's has placed the ratings
under review for further downgrade. The rating action follows SBG's
announcement on March 23, 2020 that it will monetize up to JPY4.5
trillion (about $41 billion) of its investment portfolio and use
the proceeds to repurchase up to JPY2 trillion ($18 billion) of its
own shares. It will use the remaining JPY2.5 trillion ($23 billion)
to pay back its debt at the holding company. The company plans to
execute these transactions over the next four quarters.
=================
S I N G A P O R E
=================
EZRA HOLDINGS: Judicial Management Bid Hearing Moved to June 22
---------------------------------------------------------------
Nisha Ramchandani at The Business Times reports that Ezra Holdings'
application for judicial management has been refixed to be heard on
June 22, it said in a filing to the Singapore Exchange on May 1.
The application - which was previously pushed from April 20 to May
18 - will now be heard at 10:00 a.m. on June 22, according to BT.
The troubled offshore and marine group first filed the application
in Singapore's High Court on Feb. 4 to be placed under judicial
management, the report recalls. The application means that a
moratorium will be in place until it is either granted or
dismissed. No resolution can be passed to wind up Ezra Holdings,
and no steps taken to enforce any security over its property.
Ezra Holdings had filed for bankruptcy protection under Chapter 11
in the US in 2017 after receiving two statutory demands from
creditors. Since then, its subsidiaries have also either been
placed under judicial management or liquidated, BT notes.
About Ezra Holdings
Founded in 1992, Ezra Holdings Limited --
http://www.ezraholdings.com/-- is an offshore contractor and
provider of integrated offshore solutions to the global oil and gas
industry. Ezra is incorporated in Singapore with its registered
office at 15 Hoe Chiang Road #28-01 Tower Fifteen Singapore 089316.
Its shares were listed on the SGX Sesdaq on Aug. 8, 2003, and moved
to the Mainboard of the Singapore Exchange since Dec. 8, 2005. It
also issued certain notes (S$150,000,000 4.875% Notes due 2018
comprised in Series 003) which have been listed on the Singapore
Exchange since 2013.
Ezra established and maintains an office in the United States
located at 75 South Broadway, Fourth Floor, Office Number 489,
White Plains, New York 10601. Ezra also has a wholly owned New
York subsidiary, Ezra Holdings (NY) Inc., which was incorporated in
the United States of America with 200 shares at a nominal issue
price per share.
EMITS, a wholly owned subsidiary of Ezra, provides supporting
information technology services to each of the Ezra Group's
business divisions. Ezra Marine, another wholly owned subsidiary
of Ezra, has a leasehold interest in the marine base in Singapore
located at 51 Shipyard Road, Singapore 628139 and leases out the
base's facilities and provides various support services in
connection with the marine base to the Ezra Group's operating
entities.
Ezra Holdings and two affiliates -- Ezra Marine Services Pte. Ltd.
and EMAS IT Solutions Pte Ltd -- filed voluntary Chapter 11
bankruptcy petitions (Bankr. S.D.N.Y. Lead Case No. 17-22405) on
March 18, 2017, before the Honorable Robert D. Drain. In the
petition signed by Tan Cher Liang, director, Ezra Holdings
estimated $500 million to $1 billion in assets and $100 million to
$500 million in liabilities. The Debtors' Chapter 11 Cases are
being jointly administered for procedural purposes only.
Lawyers at Saul Ewing, led by Sharon L. Levine, Esq., serve as the
Debtors' Chapter 11 counsel. The Debtors tapped as general
Singapore counsel Drew & Napier LLC; and claims and noticing agent,
Prime Clerk LLC. Foxwood LLC also serves as special counsel.
The Ezra Group's joint venture, EMAS CHIYODA Subsea Limited, and
certain of its affiliate companies filed voluntary Chapter 11
petitions (Bankr. S.D. Tex. Lead Case No. 17-31146) on Feb. 27,
2017. ECS' wholly-owned subsidiary, EMAS-AMC AS, has also been
placed under members' voluntary liquidation in Norway.
Ezra guaranteed substantial charter hire liabilities of the ECS
Group, as well as certain loans owed by the ECS Group to Financial
institutions, Ezra faces potentially significant contingent
liability if the creditors call on the guarantees.
Ezra received statutory demands from Svenska Handelsbanken AB
(Publ), Singapore Branch and Forland Subsea AS on Jan. 24, 2017,
and Feb. 6, 2017, respectively. These statutory demands have since
expired under Singapore law and these two creditors may commence
winding up applications against Ezra. Ezra also received a
statutory demand from VT Halter Marine, Inc. on March 9, 2017.
HONTOP ENERGY: In Talks with Banks to Manage Debts, Sources Say
---------------------------------------------------------------
Reuters reports that Hontop Energy (Singapore) Pte Ltd, the trading
arm of a Shandong-based refiner, is negotiating directly with banks
on managing its debts after it withdrew its application for a debt
moratorium, two sources with knowledge of the matter said.
According to Reuters, Hontop submitted last month a request to the
Singapore High Court to apply for a debt moratorium but the company
subsequently withdrew it, they said.
The company went into receivership in February after Singapore bank
DBS, one of Hontop's creditors, appointed accounting firm KPMG as
the receiver, Reuters recalls.
Hontop Energy (Singapore) Pte Ltd, a unit of China Wanda Group,
buys crude oil for the group's 100,000 barrels per day refinery in
Dongying, Shandong province, operated by Tianhong Chemicals Co
Ltd.
=================
S R I L A N K A
=================
SRI LANKA INSURANCE: Fitch Cuts Financial Strength Rating to B
--------------------------------------------------------------
Fitch Ratings has downgraded Sri Lanka-based Sri Lanka Insurance
Corporation Limited's Insurer Financial Strength Rating to 'B' from
'B+'. The Outlook is Negative. SLIC's National IFS Rating was not
covered in this review.
KEY RATING DRIVERS
The rating action follows Fitch's annual review of SLIC. The review
took into consideration Fitch's current assessment of the impact of
the coronavirus pandemic, including its economic impact. These
assumptions were used by Fitch to develop pro forma financial
metrics for SLIC that Fitch compared with both the rating
guidelines in its criteria and with previously established rating
sensitivities for SLIC.
The downgrade reflects the rising pressures in the operating
environment and in the insurer's business profile as well as
heightened investment and asset risks, all of which are caused
mainly by the deterioration in the sovereign's credit profile.
Fitch downgraded Sri Lanka's Long-Term Foreign- and Local-Currency
Issuer Default Ratings to 'B-' from 'B' on April 24, 2020.
The Negative Outlook on SLIC reflects the agency's expectations of
further weakening in the insurer's investment-related risks because
of its sizeable exposure to the sovereign-related assets and any
near-term volatility in earnings caused by the pandemic. Fitch
continues to factor in SLIC's above-industry capital position in
the IFS Rating.
Fitch believes that the sovereign's downgrade underscores SLIC's
investment risks as all the insurer's invested assets are in Sri
Lanka. Under Fitch's credit-factor scoring guidelines, the
insurer's investment and asset risk score is capped at 'ccc+' due
to its high exposure to sovereign-related investments. SLIC's risky
asset ratio was 219% in 2019 (2018: 203%).
Fitch has lowered SLIC's business profile score under its
credit-factor scoring guidelines to 'b+' from 'bb-' due to the
agency's view of a weakened operating environment. Fitch continue
to rank SLIC's business profile as 'Favourable' compared with that
of other Sri Lankan insurance companies due to the leading business
franchise, participation in well-diversified and stable
business-lines and large domestic operating scale. SLIC is Sri
Lanka's second-largest life insurer and third-largest non-life
insurer based on gross written premiums.
SLIC's capitalisation - measured by Fitch's Prism Factor-Based
Capital Model (Prism FBM) - was 'Strong' at end-2019. Under Fitch's
coronavirus rating case, the pro forma Prism FBM score drops to
'Somewhat Weak', which is commensurate with the guideline for 'BB'
rated insurers. Fitch expects the insurer's sufficient capital
buffers, strengthened partly by its large unallocated participating
surpluses, to mitigate the impact from any potential investment
losses stemming from volatile financial markets. SLIC's life and
non-life risk-based capital (RBC) ratios were 434% and 208%,
respectively, at end-2019 (2018: 437%, 200%), well above the
industry average and the 120% regulatory minimum.
Fitch thinks the government's measures to contain the spread of the
virus, and the subsequent halt in economic activities, could hamper
the industry's new business growth. For life insurance, Fitch
expects new business generation to be subdued over the near-term as
most insurers, including SLIC, predominantly use agency networks
that rely on human interaction for distribution. In addition, Fitch
expects non-life business growth to slow in light of the
government's temporary restriction on non-essential goods imports,
including motor vehicles, to control currency depreciation. SLIC's
three-year average combined ratio was 95%, comfortably beating
industry averages. The combined ratio increases to 97% under the
agency's pro forma rating case.
Assumptions for Coronavirus Impact (Rating Case)
Fitch used the following key assumptions in support of the pro
forma ratings analysis discussed above:
- Decline in key stock market indices by 35% relative to
January 1, 2020;
- Increase in two-year cumulative high-yield bond default rate
to 16%, applied to current non-investment grade assets;
- Both upward and downward pressure on interest rates, with
spreads widening (including high-yield by 400bp) coupled with
notable declines in government rates;
- A COVID-19 infection rate of 5% and a mortality rate (as a
percentage of infected) of 1%;
- For the non-life sector, COVID-19-related claims impact on
the industry-level accident year loss ratio at 3.5 percentage
points (pp) to be offset partially by an advantageous 1.5pp,
on average, from the auto line; and
- Impairment in the value of non-investment grade invested
assets by 12%.
RATING SENSITIVITIES
The IFS Rating remains sensitive to any material change in Fitch's
rating case assumptions on the pandemic. Periodic updates to its
assumptions are possible in light of the rapid pace of changes in
government action in response to the pandemic, and the speed with
which new information is available on the medical aspects of the
outbreak.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A material adverse change in Fitch's rating assumptions on the
coronavirus impact.
- A further increase in its investment and asset risks on a
sustained basis.
- Deterioration in Prism FBM score well below 'Somewhat Weak' for
a sustained period.
- Significant deterioration in financial performance and earnings
for a sustained period.
- Significant weakening in SLIC's business profile.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Significant reduction in SLIC's investment and asset risks on
a sustained basis will lead to a revision of the rating
Outlook to Stable.
- A material positive change in Fitch's rating assumptions on
the coronavirus impact.
- A positive rating action is prefaced by Fitch's ability to
reliably forecast the impact of the pandemic on the financial
profile of both the Sri Lankan insurance industry and SLIC.
- Sustained maintenance of SLIC's 'Favourable' business profile;
and
- Maintenance of Prism FBM score well into the 'Adequate' level
on a sustained basis.
Stress Case Sensitivity Analysis
- Fitch's stress case assumes the following: a 60% stock market
decline; two-year cumulative high-yield bond default rate of 22%;
high-yield bond spreads widening by 600bp and more prolonged
declines in government rates; heightened pressure on access to
capital markets; a COVID-19 infection rate of 15% and mortality
rate of 0.75%; an adverse non-life industry-level loss ratio impact
of 7pp for COVID-19 claims, partially offset by an advantageous 2pp
for motor; a one-notch lower sovereign rating; and impairment of
non-investment grade invested assets by 20%.
- The implied rating impact under the stress case would be an
additional one-notch downgrade to SLIC's IFS Rating.
BEST/WORST CASE RATING SCENARIO
International scale credit 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
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).
*********
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,
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Information contained herein is obtained from sources believed
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thereof are US$25 each. For subscription information, contact
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