/raid1/www/Hosts/bankrupt/TCRAP_Public/200521.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Thursday, May 21, 2020, Vol. 23, No. 102
Headlines
A U S T R A L I A
A.D. ENGINEERING: BRI Ferrier Appointed as Administrators
GOONDIWINDI CO-OP: New Owner Hopes to Re-Open Doors by July
HUDSON ENTERPRISES: Second Creditors' Meeting Set for May 28
SILVER HERITAGE: First Creditors' Meeting Set for May 28
VALUE DENTAL: First Creditors' Meeting Set for May 28
XTENDED PLUMBING: Second Creditors' Meeting Set for May 25
C H I N A
CHINA: Mulls More Relief as Deadline Nears on $211BB in Bad Debt
ENVISION ENERGY: Fitch Affirms Then Withdraws BB+ LT IDR
LUCKIN COFFEE: Stock Faces Wipeout After Nasdaq Delisting Plan
MIE HOLDINGS: Defaults on US$248MM Bond After Value Assets Fall
REDCO PROPERTIES: Fitch Rates New USD Senior Notes 'B'
H O N G K O N G
[*] HONG KONG: More Than 15K Shops May Close Without Rent Relief
I N D I A
ABRA MOTORS: Insolvency Resolution Process Case Summary
ACCORD LIFE: ICRA Keeps D INR50.0cr Debt Rating in Not Cooperating
ALKAS SPINNING: Insolvency Resolution Process Case Summary
AMRITA DEVELOPERS: ICRA Cuts INR14.75cr Loan Rating to B, Not Coop.
APPU HOTELS: Insolvency Resolution Process Case Summary
ASHIANA DWELLINGS: ICRA Lowers Rating on INR40cr Loan to 'C'
ASP COMPUTERS: Insolvency Resolution Process Case Summary
BAJRANG BRONZE: ICRA Keeps B- Debt Ratings in Not Cooperating
BETON CONCRETE: Insolvency Resolution Process Case Summary
CHOWDEL INDIA: Insolvency Resolution Process Case Summary
COSMOS JEWELLERS: ICRA Keeps D INR20cr Debt Rating in Not Coop.
DHARAMRAJ CONTRACTS: ICRA Withdraws 'D' Rating on INR59cr Loan
DINDAYAL JALAN: ICRA Lowers Rating on INR14cr Loan to 'B+'
EASUN REYROLLE: Insolvency Resolution Process Case Summary
GEMTREE NATURAL: ICRA Lowers Rating on INR15cr Loans to B+
GMW PRIVATE: Ind-Ra Reassigns BB- LT Issuer Rating, Outlook Stable
INDIAN CONSTRUCTION: ICRA Keeps B+ INR2.5cr Debt Rating in Not Coop
KADAM & KADAM: Ind-Ra Cuts LT Issuer Rating to 'D', Outlook Stable
KAPSONS ENGINEERS: ICRA Keeps D INR20cr Debt Rating in Not Coop.
LAKSHMI SUBBAIAAH: Insolvency Resolution Process Case Summary
MVP GROUP: ICRA Lowers Rating on INR641.60cr Loan to 'D', Not Coop.
NANDINI FITNESS: ICRA Keeps INR7cr Debt Rating in Not Cooperating
NARULA SOLVEX: ICRA Keeps D INR12cr Debt Rating in Not Cooperating
NEELKANTH YARN: Ind-Ra Lowers Long Term Issuer Rating to 'BB-'
PMR CONSTRUCTION: ICRA Keeps B+ INR5cr Debt Rating in Not Coop.
RAMKUMAR MILLS: ICRA Lowers Rating on INR19cr Loan to B+
RANGANATHAN RAJESWARI: ICRA Keeps INR8.5cr Debt Rating in Not Coop.
RANGE CERAMIC: ICRA Moves B+ Debt Ratings to Not Cooperating
RIDDHI SIDDHI: ICRA Keeps 'B' Debt Ratings in Not Cooperating
SCJ PLASTICS: ICRA Lowers Rating on INR5.50cr Loan to B+
SHANKARANARAYAN JEWELLERS: ICRA Keeps D Debt Ratings in Not Coop.
SINGHAL STRIPS: ICRA Keeps 'D' Debt Ratings in Not Cooperating
SKM INDUSTRIES: ICRA Cuts Rating on INR9.0cr Loan to 'D'
SRI KRISHNA: ICRA Keeps 'D' Debt Ratings in Not Cooperating
SSV FAB INDUSTRIES: Ind-Ra Affirms 'BB+' Long Term Issuer Rating
STEMCELL TRANSPLANTATION: Insolvency Resolution Case Summary
UTTARAYAN STEEL: ICRA Maintains B Debt Ratings in Not Cooperating
VIJETA PROJECTS: ICRA Lowers Rating on INR80cr Loan to B-
ZANDROS GRANITO: ICRA Migrates B+ Rating to Not Cooperating
I N D O N E S I A
JAPFA COMFEED: Fitch Affirms 'BB-' LT IDR, Alters Outlook to Neg.
N E W Z E A L A N D
AIR NEW ZEALAND: To Slash More Than 1,300 Jobs, Union Says
CHRISTIAN SAVINGS: Fitch Affirms LT IDRs at 'BB', Outlook Stable
CREDIT UNION: Fitch Affirms 'BB' LT IDR, Alters Outlook to Neg.
FIRST CREDIT: Fitch Alters Outlook on 'BB' LT IDR to Negative
GOOD GROUP: Makes More Than 150 Workers Redundant Amid COVID-19
NELSON BUILDING: Fitch Affirms LT IDR at 'BB+', Outlook Stable
SOUTHLAND BUILDING: Fitch Cuts Subordinated Debt Rating to BB+
WAIRARAPA BUILDING: Fitch Affirms 'BB+' LT IDR, Outlook Now Neg.
S I N G A P O R E
SINGAPORE PRESS: Two Subsidiaries Seek Judicial Management
T H A I L A N D
THAI AIRWAYS: Government OKs Plan for Court-Led Restructuring
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A U S T R A L I A
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A.D. ENGINEERING: BRI Ferrier Appointed as Administrators
---------------------------------------------------------
Shaun William Boyle of BRI Ferrier Western Australia was appointed
as administrator of A.D. Engineering International Pty Ltd on May
20, 2020.
GOONDIWINDI CO-OP: New Owner Hopes to Re-Open Doors by July
-----------------------------------------------------------
Ian Jones at Goondiwindi Argus reports that administrators for the
Goondiwindi Co-op have announced it has been sold and that it will
re-open.
"Operating since 1947 in the centre of town, it was well patronised
by locals, but had unfortunately fallen on difficult times," a
press release on May 19 said.
Helm Advisory's Stephen Hathway and Philip Hosking became came
voluntary administrators on April 14, the report discloses.
According to the report, the sale of the store in Herbert Street
including land and buildings for an amount of $2.1 million will go
towards clearing the Co-op's obligations.
Goondiwindi Argus relates that the Co-op also owns an adjacent car
park and house which will be subject to a proposed Deed of Company
Arrangement. The winning bidder is John Nguyen, who is also on the
Board of Directors for Australian United Retailers Limited, is an
experienced QLD regional food retailer, the report discloses.
The Nguyen family has been engaged in regional retail operations
since opening their first FoodWorks in 1996 in regional Miles,
Queensland. He also owned regional Queensland stores in Chinchilla
and Canungra. Mr. Nguyen and his family now operate FoodWorks
stores in Queensland at Miles, Woodridge, and Bupengary. He is
looking to add Loganholme FoodWorks to his portfolio.
The report says Mr. Nguyen is looking for a local operator and will
be running the Goondiwindi store either as a FoodWorks or IGA, as
early as commercially allowable and certainly by late July 2020.
"The Nguyen family also holds a fruit and vegetable operator's
licence at Rocklea markets in Brisbane which translates to gaining
the best prices for its customers. They strongly believe in
sourcing product from local suppliers of which they have a proud
record in regional Queensland," the release said.
While it might be the closing of one chapter of the local Co-op
that was set up to benefit its local members, the administrators
believe that the sale should guarantee a strong regional retailer
that engages with the town, and benefits local suppliers and its
customers. It is trusted that local jobs will be retained,
Goondiwindi Argus relays.
The administrators thanked the support given by the Goondiwindi
Regional Council and local solicitor, Mr. Andrew Doyle of Doyle
Wilson Solicitors, for assisting in the sale during the challenging
environment caused by Covid-19, the report adds.
It's welcome news according to GRC Mayor, Cr Lawrence Springborg.
Goondiwindi is a known regional hub servicing more than 20,000
people from within the region and beyond, but was left with only
one choice of supermarket after the Goondiwindi Co-Operative went
into voluntary administration in April 2020.
Cr Springborg said the announcement would ensure that the
marketplace for groceries in Goondiwindi remains open and
competitive, Goondiwindi Argus relays.
HUDSON ENTERPRISES: Second Creditors' Meeting Set for May 28
------------------------------------------------------------
A second meeting of creditors in the proceedings of Hudson
Enterprises (Aust) Pty Ltd has been set for May 28, 2020, at 3:00
p.m. via virtual meeting.
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 27, 2020, at 4:00 p.m.
Jonathon Kingsley Colbran and Frank Lo Pilato of RSM Australia
Partners were appointed as administrators of Hudson Enterprises on
April 22, 2020.
SILVER HERITAGE: First Creditors' Meeting Set for May 28
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Silver
Heritage Group Limited will be held on May 28, 2020, at 12:00 p.m.
via virtual meeting.
Amanda Coneyworth and Ryan Eagle of KPMG were appointed as
administrators of Silver Heritage on May 18, 2020.
VALUE DENTAL: First Creditors' Meeting Set for May 28
-----------------------------------------------------
A first meeting of the creditors in the proceedings of Value Dental
Care Pty Ltd, trading as Quality Dental, will be held on May 28,
2020, at 10:00 a.m. via teleconference only.
Alan Walker and Andre Lakomy of Cor Cordis were appointed as
administrators of Value Dental on May 18, 2020.
XTENDED PLUMBING: Second Creditors' Meeting Set for May 25
----------------------------------------------------------
A second meeting of creditors in the proceedings of Xtended
Plumbing Services Pty Ltd has been set for May 25, 2020, at 11:00
a.m. via virtual meeting.
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 22, 2020, at 4:00 p.m.
Liam William Paul Bellamy of Chan & Naylor was appointed as
administrator of Xtended Plumbing on April 20, 2020.
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C H I N A
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CHINA: Mulls More Relief as Deadline Nears on $211BB in Bad Debt
----------------------------------------------------------------
Bloomberg News reports that in the battle to keep millions of
China's smaller businesses afloat, banks are counting on being
allowed another round of exceptions for borrowers falling behind on
payments.
The regulator and some lenders have discussed extending loan relief
beyond a June 30 deadline for corporates hurt by the pandemic, said
people familiar with the matter, asking not to be named as the
talks are private, Bloomberg relates. The guidance from Beijing is
to offer flexibility on principal and interest payments, the people
said. Banks would see a surge in bad loans in the second half
without such measures, weakening their ability to keep credit
flowing, according to bankers and analysts.
Bloomberg says China's $41 trillion banking system is at the
forefront of propping up companies hit early this year by the local
outbreak of coronavirus and the impact from its global spread.
Called on to rescue the economy, lenders led by Industrial &
Commercial Bank of China Ltd. more than doubled loans to businesses
in the first quarter, while deferring and rolling over CNY1.5
trillion ($211 billion) in repayments, according to Bloomberg.
With few signs of a swift economic recovery, a June end to the
government's bad-loan holiday would crystallize the damage to bank
balance sheets. Their plight is a window into the stresses emerging
around the world as the economic cost of the pandemic becomes
clearer, and an initial round of emergency lending and payment
deferrals falls short, Bloomberg says.
"This is a global issue," Bloomberg quotes Harry Hu, a Hong
Kong-based analyst at S&P Global, as saying. Many international
authorities are calling for flexibility in the recognition of
non-performing loans, he said. "If all of them are marked as bad
loans, banks' provisions will soar and earnings will slump. Without
capital accumulation, how are banks supposed to support the
economy?"
Zhang Ming's is a case in point, Bloomberg says. A CNY1 million
loan taken at the peak of China's outbreak in February helped him
get his employees back and resume production at his Zhejiang-based
company, which makes and exports wooden frames and Christmas
ornaments. But as the virus became a pandemic, international
clients such as Walmart Inc. and Costco Wholesale Corp. canceled
orders, cutting business by 70%. Zhang now has another CNY3 million
of debt coming due this month, not covered by the crisis measures,
the report says.
"I wish the bank could give me another three months, orders may
pick up by then," he said, asking that his company not be
identified in a discussion on private financial matters, Bloomberg
relays. "If not, many small manufacturers like us will shut for
good this year."
Like Zhang, business owners around the country are finding that
even with the lifting of local lockdowns, customers are slow to
return, says Bloomberg. Chinese consumers aren't flocking back to
restaurants and malls amid concern about incomes, jobs, and the
virus itself. Other countries are struggling to strike a balance
between containment measures and reopening economies, clouding the
picture for exporters.
According to Bloomberg, Chinese authorities in March let lenders
delay recognizing bad loans from smaller businesses hit by the
virus and allowed some borrowers to delay payments after measures
to contain Covid-19 brought much of Asia's largest economy to a
standstill.
That allowed the banks to report only a 0.06 percentage point
increase in non-performing loan ratios to 2.04% at the end of
March, the report states.
S&P estimates that the non-performing asset ratio, a more stringent
measure of troubled advances that includes forborne loans, could
almost double to 10% from pre-outbreak levels this year. That's a
projected increase of CNY8 trillion, Bloomberg relays.
Should Covid-19 disruptions extend beyond 2021, the chances of
recouping delayed payments will diminish, S&P has warned.
ENVISION ENERGY: Fitch Affirms Then Withdraws BB+ LT IDR
--------------------------------------------------------
Fitch Ratings has revised the Outlook on Envision Energy
International Limited's Long-Term Issuer Default Rating to Stable
from Negative. The Long-Term IDR and senior unsecured rating are
affirmed at 'BB+'. At the same time, the ratings have been
withdrawn.
The Outlook revision reflects a sustained improvement in the
company's leverage profile. Envision Energy's leverage improved in
2019 thanks to solid operational performance, the divestment of
assets, working capital inflows and advance payments made by
customers.
The ratings were withdrawn with the following reason For Commercial
Purposes.
KEY RATING DRIVERS
Strong Operational Performance: Envision ended 2019 in a net cash
position and FFO leverage decreased to 2.3x from 3.5x. Envision
delivered 5.8GW of wind turbine generators in 2019 and Bloomberg
New Energy Finance says the company's market share in China reached
to 19%. EBITDA increased by 11% to CNY2.6 billion in 2019, within
Fitch expectations. Envision executed its divestment strategy while
capex and other investing outflows remained within expectations.
The company's net cash position benefited from net working capital
inflows.
Tender Offer Completed: Envision launched a tender offer on April
22, 2020 to purchase its offshore 7.5% senior note due in April
2021 in cash. The company had already purchased USD170.35 million
of the notes, which were issued by Envision Energy Overseas Capital
Co., Ltd., as of April 22. The tender was completed at the end of
April and the company has about USD20 million of the notes
outstanding.
ESG - Governance: Envision has an ESG Relevance Score of 5 for
Governance Structure. Envision's net related-party balances fell
CNY76 million to CNY1.35 billion by end-2019 from a year earlier.
These balances are a function of cash pooling arrangements with its
parent and other related parties. Fitch sees the arrangements as a
rating constraint because Envision is privately held and subject to
less regulatory oversight, and it has a concentrated shareholding
structure with no independent directors.
However, Envision has implemented and proposes measures that
introduce external oversights. A record of limited related-party
balances would be credit positive.
2020 WTG Demand Robust: The impact of the coronavirus pandemic on
Envision has been limited and demand for WTGs remains healthy as
developers rush to complete projects in China before end-2020. The
company's total backlog reached 17.1GW (including 13.8GW of
contracted backlog) by end-2019, and management expects WTG
shipments to increase by at least 50% in 2020, from 5.8GW in 2019.
The medium-term visibility for WTG demand is limited. It depends on
the competitiveness of subsidy-free wind power against conventional
fuel generation technologies. Fitch forecasts Envision's FFO net
leverage to remain below 1.5x in the medium term. Envision's
balance sheet is well-placed to weather a normalisation in the cash
conversion cycle and a fall in WTG demand in 2021.
RATING SENSITIVITIES
Rating sensitivities are no longer relevant as the ratings have
been withdrawn.
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.
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
Envision has an ESG Relevance Score of 5 for Governance Structure
as Envision is a privately held company, has a cash pooling
arrangement with its parent company, has a relatively concentrated
shareholding structure, and subject to less regulatory oversight
than publicly listed companies, reflecting corporate governance
risk.
Except for the matters discussed, the highest level of ESG credit
relevance, if present, is a score of 3 - ESG issues are credit
neutral or have only a minimal credit impact on the entity, either
due to their nature or the way in which they are being managed by
the entity.
LUCKIN COFFEE: Stock Faces Wipeout After Nasdaq Delisting Plan
--------------------------------------------------------------
Bloomberg News reports that Luckin Coffee Inc.'s battered stock
faces a renewed wave of selling on May 20, after Nasdaq Inc. said
it planned to delist the onetime market darling that shocked
investors with revelations of accounting fraud last month.
The Chinese coffee chain's shares, which have been suspended since
tumbling more than 80% in early April, will resume trading at 7:00
a.m. in New York. Bloomberg relates that Luckin announced Nasdaq's
intention to delist the company in a statement on May 19, saying
shares will remain on the exchange pending the outcome of an appeal
hearing.
According to Bloomberg, the prospect of delisting is likely to
trigger a rush for the exit by Luckin's remaining shareholders,
adding to a long list of challenges for the company as it tries to
recover from its disclosure that senior executives fabricated about
$310 million in sales. Banks including Credit Suisse Group AG,
Morgan Stanley and Goldman Sachs Group Inc. are among those with
money at stake, after the firms seized control of shares that
Luckin's chairman had pledged as collateral for loans, Bloomberg
states.
"I can't see what else investors would do other than dump the
stock," the report quotes Hou Anyang, a fund manager at Frontsea
Asset Management Co. in Shenzhen, as saying.
Luckin's dramatic fall from grace has made the company a poster
child for concerns about Chinese corporate governance, fueling a
debate in Washington over the extent to which American money and
capital markets should be intertwined with a growing geopolitical
rival, Bloomberg relates.
Bloomberg adds that President Donald Trump said last week he's
"looking at" Chinese companies that don't follow U.S. accounting
rules, while his administration moved to stop a federal retirement
savings fund from investing in the Asian nation's stocks. Nasdaq is
planning new rules that would make initial public offerings more
difficult for some Chinese companies, the report says.
According to the report, Luckin Chairman Lu Zhengyao said in a
statement that he's "deeply disappointed" Nasdaq is moving to
delist before the company releases final results of an internal
probe into its accounting.
"Luckin has reacted actively according to the initial results of
the investigation, including terminating some relevant management
and restructuring the board," Bloomberg quotes Mr. Lu as saying.
"My personal style may have been too aggressive and led the
companies to run too fast, which has triggered many problems," Mr.
Lu continued. "But I never lied to investors with the idea of
‘selling concepts.' I'm working hard to make the company bigger
and better to create value for society."
While Luckin's stores are still operating and the company is
opening new outlets, its offices in China were raided by
authorities last month as part of a multi-agency investigation into
its finances, Bloomberg recalls. Luckin fired its chief executive
officer and other senior leaders last week.
In its letter to Luckin on the delisting plan, Nasdaq cited "public
interest concerns as raised by the fabricated transactions
disclosed by the Company" and "past failure to publicly disclose
material information," Bloomberg relays.
Car Inc., the auto-rental company founded by Lu whose stock has
slumped in the wake of the Luckin scandal, dropped as much as 3.8%
in Hong Kong on May 20. Its dollar bonds were little changed, as
were Luckin's convertible notes, according to Bloomberg-compiled
prices.
The anticipated selloff in Luckin shares on May 20 may also spread
to other U.S.-listed Chinese companies, though some of those losses
could create buying opportunities, said Sun Jianbo, president of
Beijing-based China Vision Capital.
"As a Chinese firm which will cease to list on the U.S. market,
Luckin will be virtually worthless to American investors," the
report quotes Sun as saying. "It'd also be a sentiment shock to
other Chinese ADRs, but may create bottom-fishing opportunities for
some investors."
About Luckin Coffee
Based in China, Luckin Coffee Inc. (NASDAQ: LK) --
https://www.luckincoffee.com/ --- has pioneered a technology-driven
retail network to provide coffee and other products of high
quality, high affordability, and high convenience to customers.
Empowered by big data analytics, AI, and proprietary technologies,
the Company pursues its mission to be part of everyone's everyday
life, starting with coffee.
As reported in the Troubled Company Reporter-Asia Pacific on April
7, 2020, China Daily said that Luckin Coffee Inc, the so-called
rival to Starbucks in China, has exposed itself to the risks of
delisting and even bankruptcy due to severe fabrication of sales
data, experts said.
China Daily related that the Nasdaq-listed Chinese coffee chain saw
its share price crash more than 75 percent to $6.40 on April 2
after the company disclosed that its earnings results were
substantially inflated. It dropped nearly 15 percent more in the
first two hours of trading on April 3.
Liu Jian, chief operating officer and a director of the company,
and several employees reporting to him, had engaged in misconduct,
including fabricating transactions, a company statement said on
April 2.
The aggregate sales associated with fabricated transactions amount
to around CNY2.2 billion (US$310 million) during the April to
December period last year, according to Luckin's preliminary
internal investigation, the statement said.
MIE HOLDINGS: Defaults on US$248MM Bond After Value Assets Fall
---------------------------------------------------------------
Karen Yeung at South China Morning Post reports that the crash in
international crude prices has not only burnt small Chinese
investors who bought wealth management products from one of China's
largest banks but also a listed oil and gas firm that announced
last week that it would default on a US$248 million bond.
MIE Holdings, controlled by tycoon Zhang Ruilin, failed to make a
US$17 million interest payment on its bonds which was initially due
on April 12, it said in a statement to the Hong Kong stock
exchange, SCMP relates. It was still unable to make the payment
when the 30-day grace period expired on May 11, resulting in the
default.
According to SCMP, MIE said the bond default triggered
cross-defaults on other financial contracts and potentially
breaches the terms of additional loans and bonds totalling more
than US$287.3 million.
Zhang, who is MIE's chairman, blamed the bond default on a lack of
liquidity caused by the collapse of oil prices in the past two
months, according to the exchange filing cited by SCMP.
For example, Daqing crude oil prices fell from a high of US$69.06 a
barrel in January to a low of US$12.33 in late April, a drop of
more than 80 per cent.
"The company is experiencing increasing liquidity pressure due to
the significant decline in revenue and cash flow caused by recent
plunge in crude oil prices," the report quotes Zhang as saying.
According to SCMP, low oil prices are likely to be a key driver in
any further corporate bond defaults, which could extinguish the
chance for many struggling Chinese private companies to borrow in
US dollars and fund the recovery of their operations, ultimately
leading to their bankruptcy.
"Given concerns about plummeting oil prices and the liquidity of
property developers, the market risk appetite for energy and real
estate [products] has declined massively," the report quotes Alicia
Garcia Herrero, chief economist for Asia-Pacific at Natixis, as
saying. "Offshore default risks are clearly rising in both China
and Asia," she said.
The value of MIE's assets fell 65% to CNY2.93 billion last year,
with the company suffering an operating loss of CNY631 million,
SCMP discloses citing the company's unaudited annual results.
The company's cash and cash equivalents at the end of 2019 stood at
CNY13.71 million, a decrease of nearly 50% from 2018 and not enough
to cover the US$17 million bond interest payment, the report
notes.
On May 6, just days before the default, Fitch Ratings revoked MIE's
"C" long-term issuer credit rating, SCMP relays.
Trading in MIE stock in Hong Kong has been suspended, the report
says. Its last trading price was HK$0.065 on March 31, down from
HK$0.255 in April 2019, making it a "penny stock". It traded at a
peak of HK$4.13 in April 2011.
About MIE Holdings
MIE Holdings Corp. is an independent upstream oil company operating
onshore in China. The Company operates the Daan, Moliqing and Miao
oilfields in the Songliao Basin of China.
As reported in the Troubled Company Reporter-Asia Pacific on May 7,
2020, Fitch Ratings affirmed and has withdrawn MIE Holdings
Corporation's Long-Term Issuer Default Rating of 'C'. The rating on
MIE's USD248.4 million 13.75% senior notes due April 2022 has also
been affirmed at 'C' with a Recovery Rating of 'RR6' and
withdrawn.
The ratings were withdrawn for commercial purposes. The IDR was
affirmed at 'C' because MIE was unable to pay the semi-annual
coupon of USD17 million on its USD248.4 million 13.75% notes. The
coupon was due on April 12, 2020 and the company has a 30-day grace
period until May 11, 2020 to satisfy the payment obligation. The
affirmation of the rating on MIE's US dollar senior notes reflects
an unchanged Recovery Rating of 'RR6'.
REDCO PROPERTIES: Fitch Rates New USD Senior Notes 'B'
------------------------------------------------------
Fitch Ratings has assigned a 'B' rating to China-based property
developer Redco Properties Group Ltd's (B/Stable) proposed US
dollar senior notes. The Recovery Rating is 'RR4.' The notes are
rated at the same level as Redco's senior unsecured rating, as they
represent its direct, unconditional, unsecured and unsubordinated
obligations.
Redco demonstrated consistent growth in attributable contracted
sales of CNY14 billion in 2019, although its sales scale is still
small relative to that of higher-rated peers. Redco had saleable
resources for around 3.6 years of development and its leverage -
measured by net debt/adjusted inventory, including adjustments to
joint ventures and associates - fell to 23% in 2019, from 27% in
2018, and is better than that of 'B' rated peers.
Redco's leverage has reached its 40% positive trigger; Fitch will
consider positive rating action if the company can sustain its
scale expansion while maintaining a saleable land-bank life of at
least 2.5 years and leverage of below 40%.
KEY RATING DRIVERS
Small Scale Constrains Rating: Redco's rating is constrained by its
attributable sales scale of CNY14 billion in 2019, which is small
relative to peers in the higher 'B+' category, whose attributable
sales Fitch expects to increase to at least CNY17 billion-18
billion in 2020. Redco has transitioned to a fast-churn model,
which entails swifter sales turnover and faster sales growth; total
contracted sales, including joint ventures, rose by 25% to CNY27.4
billion in 2019 and by more than 65% in 2018. Attributable
contracted sales accounted for slightly over 50% of the total in
2019, similar to the 2018 level.
Redco maintained healthy sales efficiency in 2019, with
attributable sales/total debt, including joint-venture debt, at
1.6x and attributable sales/adjusted inventory at 1.4x.
Leverage Remains Manageable: Fitch expects Redco to continue to
increase contracted sales to develop a sustainable market presence.
This is likely to see Redco acquire land bank to sustain its rising
contracted sales. Fitch expects this to heighten leverage, but it
should remain below 40% - the level below which Fitch would
consider positive rating action - after falling to 21% in 2019
(2018: 27%) on increased financing through non-controlling
interests and joint ventures.
Land Bank Supports Growth: Fitch estimates Redco's land bank is
sufficient for around three and a half years of attributable sales.
However, Redco would need to continually secure low-cost land to
sustain a healthy land bank life if it were to reach its larger
contracted sales target. Redco boosted its land bank to around 14.6
million square metres (sq m) in 2019, from 10.0 million sq m in
2018 and 4.9 million sq m in 2017, with the cities of Tianjin,
Nanchang, Hefei and Jinan accounting for the majority of gross
floor area.
Healthy Profit Margin: Redco's EBITDA margin was 23% in 2019, down
slightly from 27% in 2018, due to higher average land-acquisition
costs of CNY2,263/sq m in 2019, against CNY1,114 in 2018. Redco
mainly acquires land bank through M&A, allowing it to keep the
average cost of unsold land bank at only CNY2,200/sq m. Its sales
are concentrated in non-prime locations in second-tier cities and
its product mix is targeted at first-time purchasers, insulating
the company from price-ceiling policies. This helps Redco maintain
healthy margins at a high churn rate.
DERIVATION SUMMARY
Redco's attributable contracted sales of CNY14 billion in 2019 were
lower than those of 'B' rated peers, such as Modern Land (China)
Co., Limited's (B/Stable) CNY19.5 billion. However, Redco's
leverage was lower than that of Modern Land and it has a longer
land bank life. Modern Land also has a lower margin than Redco.
Redco's high sales efficiency has made it easier for the company to
transform to a fast-churn business model while controlling
leverage.
Companies rated one notch above Redco, at 'B+', generally have
proven sustainable business models, with attributable sales of over
CNY20 billion, land bank of more than three years of development
and stable leverage of around 45%. Furthermore, 'B+' rated
homebuilders have a stronger nationwide presence, with better
regional project diversification. Redco's attributable sales are
lower than those of 'B+' peers and it requires a stronger record
outside of its core markets.
KEY ASSUMPTIONS
- Contracted sales, including joint ventures, reaching CNY31.5
billion in 2020 and CNY36.5 billion in 2021. Attributable sales at
53% of total.
- Gross profit margin from property development maintained at
between 30%-35% during 2020-2022.
- Land premium accounting for 45%-50% of annual sales receipts in
2020-2022 and average land acquisition cost increasing at 4%
annually from 2020.
- No increase in contracted sales average selling price in
2020-2022.
- Construction costs accounting for around 45% of annual sales
receipts in 2020-2022.
KEY RECOVERY RATING ASSUMPTIONS
- The recovery analysis assumes Redco would be liquidated in a
bankruptcy because it is an asset-trading company.
- Fitch assumes a 10% administrative claim.
- The liquidation estimate reflects Fitch's view of the value of
balance-sheet assets that can be realised in sale or liquidation
processes conducted during a bankruptcy or insolvency proceeding
and distributed to creditors.
- Advance rate of 60% applied to adjusted inventory, as Redco's
EBITDA is higher than 25%.
- Property, plant and equipment advance rate at 50%.
- Redco will be able to use all of its CNY2.5 billion in
restricted cash to repay debt.
- Advance rate of 100% applied to restricted cash, which mainly
consists of guarantees for bank borrowings and construction work.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A strong record outside core markets.
- Annual attributable contracted sales sustained above CNY20
billion, while maintaining available-for-sale land bank at 2.5
years of development.
- Net debt/adjusted inventory sustained below 40%.
- EBITDA margin sustained above 20%.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Net debt/adjusted inventory above 50% for a sustained period.
- EBITDA margin below 15% 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: Redco's liquidity remains healthy, with total
cash of CNY 15 billion (including restricted cash of CNY4.0
billion), compared with short-term debt of CNY12 billion at
end-2019.
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).
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.
=================
H O N G K O N G
=================
[*] HONG KONG: More Than 15K Shops May Close Without Rent Relief
----------------------------------------------------------------
Bloomberg News reports that from luxury boutiques to mom-and-pop
stores, Hong Kong's retailers are hurting. Unless landlords can
offer more relief, one in four could disappear by December if sales
don't improve, putting an end to the city's reputation as a
shopping mecca.
That's the gloomy prediction of Hong Kong Retail Management
Association Chairman Annie Yau Tse, who said the rent reductions
that came after public pressure on landlords in February aren't
sufficient, Bloomberg relates. Most are only willing to cut rents
by 10% to 20%, far from the retail industry's demand of 50% or
more. The association estimates there are around 62,400 retail
stores in the city.
"Not all landlords have provided a subsidy or rental reduction and
our drop in sales is larger than the extent of the relief,"
Bloomberg quotes Alain Lam, the finance director of Oriental Watch
Holdings Ltd., as saying. The high-end watch seller has 11 stores
in Hong Kong, seven of which are leased. "If the pandemic persists,
we may consider shutting down or moving stores."
It's a grim forecast being echoed across the Asian financial
center, the report says. Once regarded as one of the world's best
shopping destinations, Hong Kong retail is a shadow of its former
self.
Anti-government protests and now the coronavirus pandemic have kept
mainland Chinese, the city's biggest source of inbound tourists, at
home. Even locals are scared of going to shopping malls lest they
contract the virus, which after a hiatus has started spreading
again, Bloomberg notes.
Retail sales by value sank 42% in March after a record 44% plunge
in February, Bloomberg discloses. The city's economy contracted
8.9% in the first quarter from a year ago, the Census and
Statistics Department Hong Kong said on May 15, the worst reading
in four decades of data.
"We are barely surviving now," the report quotes Brian Hui, a sales
assistant at a small store selling men's apparel in Mong Kok's
T.O.P. center, as saying. The new mall, home to many South Korean
and Japanese brands, was almost empty on May 13, despite its
location on Nathan Road, one of the city's premier retail strips.
Hui estimated sales have fallen more than 50%.
Bloomberg says the store asked that some staff go on unpaid leave
and requested a rent cut from landlord Link Real Estate Investment
Trust. The developer gave a 20% discount, but Hui said it hasn't
helped much.
"It's better if we could get more of course, but it's quite hard to
negotiate," Hiu, as cited by Bloomberg, said.
=========
I N D I A
=========
ABRA MOTORS: Insolvency Resolution Process Case Summary
-------------------------------------------------------
Debtor: M/s. Abra Motors Private Limited
355 A, G.S.T Road
Alandur, Chennai 600016
Insolvency Commencement Date: May 8, 2020
Court: National Company Law Tribunal, Coimbatore Bench
Estimated date of closure of
insolvency resolution process: November 4, 2020
(180 days from commencement)
Insolvency professional: CA. S. Prabhu
Interim Resolution
Professional: CA. S. Prabhu
M/s SPP & Co
Chartered Accountants
No. 27/9, Nivedh Vikas
Pankaja Mill Road
Puliyakulam
Coimbatore 641045
E-mail: carpprabhu@gmail.com
Last date for
submission of claims: May 23, 2020
ACCORD LIFE: ICRA Keeps D INR50.0cr Debt Rating in Not Cooperating
------------------------------------------------------------------
ICRA said the ratings for the INR50.00 crore bank facilities of
Accord Life to remain under Issuer Not Cooperating category. The
ratings are denoted as [ICRA]D ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based- 50.0 [ICRA]D ISSUER NOT COOPERATING;
Term Loan Rating remain under 'Issuer Not
Cooperating' category
Rationale
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.
Accord Life was incorporated in 2014 with the aim of setting up a
manufacturing facility for oncology drugs from its facility built
over an area of 11 acres in SIPCOT, Chennai. The said manufacturing
facility would have a capacity to manufacture 4.5 crore tablets per
annum, 1.8 crore capsules, 37 lakh lyophilized vials and 18 lakh
liquid vials. The facility will also include a Research and
Development unit.
Apart from this company promoters have ownership interests in
liquor manufacturing through A.M.Breweries Private Limited
([ICRA]BB- (Stable) ISSUER NOT COOPERATING/[ICRA]A4 ISSUER NOT
COOPERATING); hotels through J Hotels Private Limited and Jam
Hotels and Resorts Private Limited. The promoters are also
management trustees in Sri Lakshmi Ammal Educational Trust which
runs engineering, medical and arts colleges in Tamil Nadu.
ALKAS SPINNING: Insolvency Resolution Process Case Summary
----------------------------------------------------------
Debtor: Alkas Spinning Mills Private Limited
No. 9, Amutham Apartment
Bharathi Nagar Karur
TN 639002
IN
Insolvency Commencement Date: May 5, 2020
Court: National Company Law Tribunal, Chennai Bench
Estimated date of closure of
insolvency resolution process: October 31, 2020
Insolvency professional: Kannan Sambasivam
Interim Resolution
Professional: Kannan Sambasivam
"Skyline Castle"
27, Abdul Razack Street
Saidapet, Chennai 600015
E-mail: charitarthkannan@gmail.com
Last date for
submission of claims: May 22, 2020
AMRITA DEVELOPERS: ICRA Cuts INR14.75cr Loan Rating to B, Not Coop.
-------------------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Amrita Developers (Indore) Pvt Ltd (ADPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term: 14.75 [ICRA]B (Stable); ISSUER NOT
Fund Based/ COOPERATING; Rating downgraded
Cash Credit from [ICRA]BB-(Stable) and
moved to the 'Issuer Not
Cooperating' category
Rationale
The long-term rating downgrade is because of lack of adequate
information ADPL'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 Amrita Developers (Indore) 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.
Amrita Developers (Indore) Pvt Ltd (ADPL) was incorporated in 2007
and is promoted by Mr. Ramesh Chand Jain and his son, Mr. Prayank
Jain. The company has a 56-room hotel, with a conference room,
three banquet halls and two-party lawns (convertible to one) on
1.91 hectares of land on MR-10 road in Indore (Madhya Pradesh). The
hotel-cum-party lawn is run under the brand name Nirvana Hotel &
Resort. The commercial operations in the party lawns commenced in
September 2012 while the hotel was commercially launched for public
in January 2014.
APPU HOTELS: Insolvency Resolution Process Case Summary
-------------------------------------------------------
Debtor: APPU Hotels Limited
PGP House, No. 57
Sterling Road
Nungambakkam
Chennai 600034
Insolvency Commencement Date: May 5, 2020
Court: National Company Law Tribunal, Chennai Bench
Estimated date of closure of
insolvency resolution process: November 1, 2020
Insolvency professional: Mukesh Kumar Gupta
Interim Resolution
Professional: Mukesh Kumar Gupta
171, Sitaram Apartments
102, IP Ext
New Delhi 110092
E-mail: guptam11@gmail.com
- and -
D-54, First floor
Defence Colony
New Delhi 110024
E-mail: cirp.appuhotelsltd@gmail.com
Last date for
submission of claims: May 21, 2020
ASHIANA DWELLINGS: ICRA Lowers Rating on INR40cr Loan to 'C'
------------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Ashiana Dwellings Private Limited (ADPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based– 40.00 [ICRA]C ISSUER NOT COOPERATING;
Term Loan revised from [ICRA]B-(Stable)
ISSUER NOT COOPERATING and
rating withdrawn
Non-fund 10.00 [ICRA]C ISSUER NOT COOPERATING;
based–BG revised from [ICRA]B-(Stable)
ISSUER NOT COOPERATING and
rating withdrawn
Optionally 64.81 [ICRA]C ISSUER NOT COOPERATING;
Convertible revised from [ICRA]B-(Stable)
Debenture ISSUER NOT COOPERATING;
Continues to remain under
non-cooperation
Rationale:
The rating revision is because of lack of adequate information
regarding Ashiana Dwellings Private Limited (ADPL) 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 ADPL, 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. ICRA is unable to validate whether ADPL has
been able to meet its debt servicing obligations in a timely
manner.
The ratings for bank lines i.e. term loan of INR40 crore and bank
guarantee of INR10 crore have been withdrawn in accordance with
ICRA's policy on withdrawal and suspension and at the request of
the company basis the no objection certificate provided by its
banker for term loan facility and closure of the rated BG facility.
The rating for Optionally Convertible Debenture of INR64.81 crore
continues to remain under non-cooperation.
ADPL is an SPV of Ashiana Homes Private Limited (AHPL),
incorporated in 2014 for the purpose of development of Ashiana
Mulberry project. AHPL, which holds majority stake in the company,
was incorporated in 1987, with presence mostly in north India, and
has developed more than 3.4 msf (million square feet) of area.
Ashiana Mulberry is a residential project located in Sector 2,
Sohna, Gurugram with total saleable area of 0.95 msf.
ASP COMPUTERS: Insolvency Resolution Process Case Summary
---------------------------------------------------------
Debtor: ASP Computers Private Limited
F-7, KAJ Plaza
1st Floor, No. 7
Narasingapuram Street
Mount Road
Chennai 600002
Insolvency Commencement Date: May 5, 2020
Court: National Company Law Tribunal, Chennai Bench
Estimated date of closure of
insolvency resolution process: November 1, 2020
Insolvency professional: Chandrasekhar Sagutoor
Interim Resolution
Professional: Chandrasekhar Sagutoor
No. 333/17, G5 & G6 Ground Floor
Salma Arcade Complex
Arcot Road, Trustpuram
Chennai 600024
E-mail: sagutoor@gmail.com
Last date for
submission of claims: May 22, 2020
BAJRANG BRONZE: ICRA Keeps B- Debt Ratings in Not Cooperating
-------------------------------------------------------------
ICRA has continued the ratings for the INR5.29 crore bank
facilities of Bajrang Bronze LLP. The rating is now denoted as
"[ICRA]B-(Stable); ISSUER NOT COOPERATING"; Rating continues to
remain under 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loan 2.29 [ICRA]B- (Stable) ISSUER NOT
COOPERATING; Rating continues
to remain under 'Issuer Not
Cooperating' category
Cash Credit 3.00 [ICRA]B- (Stable) ISSUER NOT
COOPERATING; Rating continues
to remain under 'Issuer Not
Cooperating' category
As part of its process and in accordance with its rating agreement
with Bajrang Bronze LLP, 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.
Bajrang Bronze LLP, was established in October 2015 with the object
to carry on the business of Manufacturing of Bronze Products,
Bushing, Brass Products, Aluminium Products and other Metal
Products. The manufacturing site is located at Sardar Industrial
Area, Padavala, Rajkot. The commercial production has commenced in
May 2016. The facility has installed capacity of 1200 MT out of
which 700 MT for Bronze Casting, 200 MT for Brass Casting and 300
MT for Aluminium Casting.
BETON CONCRETE: Insolvency Resolution Process Case Summary
----------------------------------------------------------
Debtor: Beton Concrete Products Private Limited
Pasayadan, 412
N-3, CIDCO
Aurangabad 431003
Insolvency Commencement Date: April 28, 2020
Court: National Company Law Tribunal, Pune Bench
Estimated date of closure of
insolvency resolution process: October 23, 2020
(180 days from commencement)
Insolvency professional: Anagha Anasingaraju
Interim Resolution
Professional: Anagha Anasingaraju
C/o Kanjmag & Co
Company Secretaries
1-2, Aishwarya Sankul
17 G.A. Kulkarni Path
Opp. Joshi's Railway Museum
Kothrud, Pune 411038
E-mail: rp.anagha@kanjcs.com
Last date for
submission of claims: May 22, 2020
CHOWDEL INDIA: Insolvency Resolution Process Case Summary
---------------------------------------------------------
Debtor: M/s Chowdel India Private Limited
129, Mannur Village
Valarpuram Post
Sriperumpudur Taluk
Kanchipuram District
Tamilnadu, Pin 602105
Insolvency Commencement Date: May 5, 2020
Court: National Company Law Tribunal, Madurai Bench
Estimated date of closure of
insolvency resolution process: November 1, 2020
(180 days from commencement)
Insolvency professional: Mr. Nithiyanantham Ramachandran
Interim Resolution
Professional: Mr. Nithiyanantham Ramachandran
Door No. 3/716, Avin Nagar
Surveyor Colony
Madurai 7, Tamilnadu
Pin 625007
E-mail: nithiyananthamramachandran@
gmail.com
Last date for
submission of claims: May 23, 2020
COSMOS JEWELLERS: ICRA Keeps D INR20cr Debt Rating in Not Coop.
---------------------------------------------------------------
ICRA said the ratings for the INR20.00 crore bank facilities of
Cosmos Jewellers Private 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
---------- ----------- -------
Long Term- 20.00 [ICRA]D; ISSUER NOT COOPERATING;
Fund Based/CC 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 2011, CJPL is a manufacturer, wholesaler and
retailer of gold and diamond jewellery. CJPL has presence largely
in gold jewellery, and its customers are primarily wholesalers and
retailers based in New Delhi. The company was acquired by the
promoters of Delhi based Shree Raj Mahal Group, which is engaged in
the manufacturing, wholesale and retail sales of gold and diamond
jewellery for more than two decades.
DHARAMRAJ CONTRACTS: ICRA Withdraws 'D' Rating on INR59cr Loan
--------------------------------------------------------------
ICRA has withdrawn the ratings on certain bank facilities of
Dharamraj Contracts India Private Limited (DCIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based 18.00 [ICRA]D ISSUER NOT COOPERATING;
Withdrawn
Non-fund 59.00 [ICRA]D ISSUER NOT COOPERATING;
based Withdrawn
Unallocated 13.00 [ICRA]D/[ICRA]D ISSUER NOT
COOPERATING; Withdrawn
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 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.
DINDAYAL JALAN: ICRA Lowers Rating on INR14cr Loan to 'B+'
----------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Dindayal Jalan Textiles Ltd (DJTL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 14.00 [ICRA]B+ (Stable); ISSUER NOT
Fund Based/CC COOPERATING Rating downgraded
from [ICRA]BB-(Stable) and
continues to remain under
'Issuer Not Cooperating'
Category
Rationale
The Long-Term rating downgrade is because of lack of adequate
information DJTL'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 Dindayal Jalan Textiles 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.
DJTL, incorporated in 1993, is wholesaler of textile products with
its operations centred in Varanasi, Uttar Pradesh. The company is a
part of the Dindayal Jalan group, which has been engaged in the
textile trading business for more than four decades. DJTL was a
wholesaler and retailer till FY2014, with trading of handloom,
fabric, readymade garments, hosiery etc accounting for a major
portion of its sales. The retail operations of the company were
discontinued from April, 2014 onwards, and were shifted to the
newly formed group company Dindayal Jalan Retails Pvt Ltd. The
company has 150,000 square feet space on the outskirts of Varanasi,
which serves as a warehouse and as a display centre. This store of
the company is well connected by National Highway with Varanasi and
other major cities of Uttar Pradesh and Bihar.
EASUN REYROLLE: Insolvency Resolution Process Case Summary
----------------------------------------------------------
Debtor: M/s Easun Reyrolle Limited
Temple Tower, 6th Floor
No. 672 (Old No. 476)
Anna Salai, Nandanam
Chennai 600035
TN
Insolvency Commencement Date: May 5, 2020
Court: National Company Law Tribunal, Bangalore Bench
Estimated date of closure of
insolvency resolution process: November 4, 2020
Insolvency professional: B Parameshwara Udpa
Interim Resolution
Professional: B Parameshwara Udpa
H.No. 827/7, 4th Block
BEL Layout
Vidyaranyapura
Bangalore 560097
E-mail: beepeeyou@gmail.com
Last date for
submission of claims: May 22, 2020
GEMTREE NATURAL: ICRA Lowers Rating on INR15cr Loans to B+
----------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Gemtree Natural Produce Private Limited (GNPPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 13.00 [ICRA]B+ (Stable); downgraded
From [ICRA]BB- (Stable)
Unallocated 2.00 [ICRA]B+ (Stable); downgraded
From [ICRA]BB- (Stable)
Rationale
The rating revision takes into account the GNPPL's
weaker-than-anticipated net profits, cash accruals and debt
coverage indicators in FY2019. Moreover, the operating income (OI)
has declined in FY2020. This might affect the company's
profitability and result in coverage indicators remaining at
subdued levels. The majority of GNPPL's sales take place between
February and June every year. Moreover, the ongoing pan-India
lockdown and lack of availability of labour and logistics could
weigh on its revenues and profitability in FY2021. Moreover, the
company's liquidity is stretched, as evident from high utilisation
of working capital limits. ICRA's rating also remains constrained
by GNPPL's exposure to adverse agro-climatic conditions.
However, ICRA's rating continues to favourably consider the
extensive experience of the promoters and the increase in the
company's customer base. GNPPL has also expanded its geographical
reach to other regions, which has resulted in a substantial
decrease in its dependence on North India. The rating continues to
derive comfort from the logistic advantage enjoyed by the company
due to its proximity to apple cultivators in Himachal Pradesh.
The Stable outlook on [ICRA]B+ rating reflects the benefits the
company is expected to derive from its experienced management and
relationship with its customers.
Key rating drivers and their description
Credit strengths
* Experienced management provides competitive edge: The promoters
and their families have been involved in the fruittrading business
for more than 40 years and have gained a thorough knowledge of the
market. Such a long presence in the industry has helped the company
in establishing relationships with suppliers and customers.
* Presence near apple producing area: The company procures apples
from farmers/agents in the domestic market. Given that its
production facility is in one of the villages of Himachal Pradesh,
it has access to a large number of farmers from the nearby areas
for procuring apples.
* Increase in import of graded apples: The company has started
importing apples from FY2017 onwards. This has substantially
reduced its working capital intensity as imported apples do not
need to be graded or sorted.
Credit challenges
* Expected decline in OI in FY2020: The company's OI of will
decline in FY2020 due to disruption in operation caused by
Covid-19.
* Modest financial risk profile with stretched liquidity position:
The company has a modest financial profile as reflected in low net
worth base, weak operating margins and elevated debt/OPBDITA
levels. Moreover, GNPPL's liquidity position is stretched, as
reflected by almost full utilisation of working capital limits.
* Seasonality of operations: The products that the company deals
in are highly seasonal and perishable in nature. The procurement
season is between August and October, and the production activities
are also carried out during that period.
* Agro-climatic risks: Apple being an agricultural commodity
remains exposed to the vagaries of monsoon and other agricultural
risks like outbreak of diseases, lower/higher-than-projected
production levels impacting the supply (and hence prices), damages
caused by poor storage capacities in the country, and
inconsistencies in quality, etc.
Liquidity position: Stretched
The working capital utilisation was high at 88% in FY2020. The
company's overall liquidity is expected to remain stretched in the
short term due to lower sales and profitability due to operation
disruption caused by Covid-19. However, given the past track
record, the promoters are expected to provide funding support for
any cash flow mismatch in the medium term
Rating sensitivities
Positive triggers: An upward movement in rating could happen if
there is sustained growth in revenues and profitability. TOL/TNW
below 3 times on a sustained basis could result in an upward rating
movement.
Negative triggers: Negative pressure on company's ratings could
arise if prolonged disruption in operations due to Covid-19 affects
liquidity as evidenced by lower cash accruals, there is further
deterioration in working capital cycle because of elongation of
debtor realisation, or if any major debt-funded capital expenditure
weakens liquidity
GNPPL was incorporated in 2011 as a private limited company under
the name of Fortuna Nature Produce Private Limited. The company's
name was subsequently changed to GNPPL in 2013. It is involved in
the business of grading and storing apples. The entity has its
registered office at 17, Indra Nagar, Dehradun, Uttarakhand. The
grading line and controlled atmosphere storage (CA storage) is a
leased premise located at Tarol Tikker, Shimla. The company has a
two CA storage, a grading line and a marketing office at present.
GMW PRIVATE: Ind-Ra Reassigns BB- LT Issuer Rating, Outlook Stable
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded GMW Private
Limited's (GMW) Long-Term Issuer Rating to 'IND D' from 'IND
BB+'/Stable. Simultaneously, Ind-Ra has reassigned GMW a Long-Term
Issuer Rating of 'IND BB-'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR50 mil. (reduced from INR155 mil.) Fund-based working
capital limits * downgraded and reassigned with IND BB-/
Stable rating; and
-- INR540 mil. (reduced from INR725 mil.) Non-fund-based working
capital limits# downgraded and reassigned with IND A4+
rating.
* Reassigned 'IND BB-'/Stable after being downgraded to 'IND D'
# Reassigned IND A4+' after being downgraded to 'IND D'
KEY RATING DRIVERS
The downgrade reflects the overdue of up to 31 days in the
repayment of the cash credit limit by GMW in July 2019 due to
delays in receiving payments from customers.
The reassignment of 'IND BB-' Long-Term Issuer Rating reflects
GMW's timely repayments of the cash credit limit for the nine
months ended April 2020, due to its improved liquidity position.
Liquidity Indicator – Poor: GMW's average use of fund-based
limits was 99.9% for the 12 months ended April 2020. Its working
capital cycle remained elongated at 258 days in FY19 (FY18: 230
days) due to high receivable days. In FY19, the debtor days were
high at 280 (FY17: 264). The cash flow from operations improved to
INR125 million in FY19 (FY18: INR1 million) on the back of
favorable working capital changes. At FYE19, the company had a cash
balance of INR7 million (FYE18: INR1 million).
The rating factor in GMW's continued small scale of operations with
revenue declining to INR527 million in FY19 (FY18: INR620 million)
due to the low execution of orders along with a shift in the
business model from thermal projects to hydro projects. During
9MFY20, the company recorded revenue of INR298.8 million.
The ratings also factor the company's modest EBITDA margins of
11.5% in FY19 (FY18: 14.6%) with a return on capital employed of 8%
(12%). Moreover, the company's credit metrics were moderate with
interest coverage (operating EBITDA/gross interest expense)
declining to 1.9x in FY19 (FY18: 2.2x) due to a proportionate fall
in absolute EBITDA at INR61 million (INR90 million) and net
leverage (adjusted net debt/operating EBITDAR) improving to 0.8x
(1.6x) due to a reduction in the total debt.
The ratings, however, continue to benefit from the company's long
track record and its fairly established position in the execution
of hydro-mechanical equipment for hydropower projects.
RATING SENSITIVITIES
Negative: Any stretch in the liquidity position, along with a
decline in the revenue or EBITDA margin, resulting in a sustained
deterioration in the credit metrics, could lead to negative rating
action.
Positive: An improvement in the liquidity position, along with
substantial growth in the revenue and EBITDA margin, leading to an
improvement in the interest coverage above 1.7x, could lead to
positive rating action.
COMPANY PROFILE
Incorporated in 2005, GMW installs hydro-mechanical equipment such
as hydel gates, stop log gates, piping work, and penstock piping
for various power projects. The company is promoted by Onkar Singh,
Nagindar Singh, Jasbir Singh, and their family.
INDIAN CONSTRUCTION: ICRA Keeps B+ INR2.5cr Debt Rating in Not Coop
-------------------------------------------------------------------
ICRA has continued the ratings for the INR5.75 crore bank
facilities of Indian Construction Company. The rating is now
denoted as "[ICRA]B+(Stable)/A4; ISSUER NOT COOPERATING"; Rating
continues to remain under 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Overdraft 2.50 [ICRA]B+ (Stable) ISSUER NOT
COOPERATING; Rating continues
to remain under 'Issuer Not
Cooperating' category
Bank Guarantee 3.25 [ICRA]A4 ISSUER NOT COOPERATING;
Rating continues to remain under
'Issuer Not Cooperating' category
As part of its process and in accordance with its rating agreement
with Indian Construction Company, 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.
Indian Construction Co. (ICC) was established as a partnership firm
in 1978. The firm is primarily involved in the execution of
government tenders for civil construction contracts of dams,
canals, roads, bridges, underpass and other construction works. ICC
is registered as an "AA" class contractor in the construction
segment with the State Government of Gujarat, which makes it
eligible to bid for most contracts floated by the government
entities in the state. ICC mainly outsources its awarded contracts
to other sub-contractors. The firm is managed by Mr. Bhagwanji
Patel, Mr. Paresh Vakeria, Mr. Bipin Vakeria, Mr. Rajesh Vakeria
and Mr. Kush Vakeria, who have a longstanding experience in the
civil construction business.
KADAM & KADAM: Ind-Ra Cuts LT Issuer Rating to 'D', Outlook Stable
------------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Kadam & Kadam
Jewellers Private Limited's (KKJPL) Long-Term Issuer Rating to 'IND
D' from 'IND BB-'. The Outlook was Stable. The agency has
simultaneously migrated the rating to the non-cooperating category.
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
the rating. The rating will now appear as 'IND D (ISSUER NOT
COOPERATING)' on the agency's website.
The instrument-wise rating actions are:
-- INR600 mil. Fund-based working capital limits (Long-
term/Short-term) downgraded and migrated to non-cooperating
category with IND D (ISSUER NOT COOPERATING) rating.
Note: ISSUER NOT COOPERATING: Issuer did not cooperate; based on
the best available information
KEY RATING DRIVERS
The downgrade reflects KKJPL's continuous over-utilization of
fund-based limits since March 2019.
RATING SENSITIVITIES
Positive: Timely replenishment of the fund-based limits for at
least three consecutive months could result in an upgrade.
COMPANY PROFILE
Founded in 2000, KKJPL supplies jewelry to retailers, wholesalers,
and traders across India. The company is situated in Zaveri Bazar
and is promoted by Mr. Nitin Kadam, one of the founder directors of
The All India Gems & Jewellery Trade Federation.
KAPSONS ENGINEERS: ICRA Keeps D INR20cr Debt Rating in Not Coop.
----------------------------------------------------------------
ICRA said the ratings for the INR20.00 crore bank facilities of
Kapsons Engineers Private 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
---------- ----------- -------
Long Term- 20.00 [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.
Incorporated in 2007, Kapsons Engineers Private Limited (KEPL) is
an authorised dealer for passenger vehicles of Honda Cars India
Ltd. The company is promoted by the Kapoor family, with Mr. Jawahar
Lal Kapoor and Mr. Atul Kapoor (son of Mr. Jawahar Lal Kapoor)
serving as the directors of the company. KEPL's customers are
majorly based of Gurgaon and Noida.
LAKSHMI SUBBAIAAH: Insolvency Resolution Process Case Summary
-------------------------------------------------------------
Debtor: M/s. Lakshmi Subbaiaah Tex Private Limited
9/7B, Dindigul Main Road
Vilangudi, Madurai
Tamil Nadu 625018
Insolvency Commencement Date: May 5, 2020
Court: National Company Law Tribunal, Coimbatore Bench
Estimated date of closure of
insolvency resolution process: November 1, 2020
(180 days from commencement)
Insolvency professional: CA. S. Prabhu
Interim Resolution
Professional: CA. S. Prabhu
M/s SPP & Co
Chartered Accountants
No. 27/9, Nivedh Vikas
Pankaja Mill Road
Puliyakulam
Coimbatore 641045
E-mail: carpprabhu@gmail.com
Last date for
submission of claims: May 23, 2020
MVP GROUP: ICRA Lowers Rating on INR641.60cr Loan to 'D', Not Coop.
-------------------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of MVP
Group International Inc, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based- 641.60 [ICRA]D ISSUER NOT COOPERATING;
Overdraft Rating downgraded from [ICRA]BB
facility
Rationale
The rating downgrade follows delays in debt servicing as confirmed
by the lender. Due to disruption of the company's operations and
supply chain because of Covid-19 pandemic, the term loan
instalments due on February 13, 2020, were repaid in April 2020.
ICRA has been trying to seek information from the entity so as to
monitor its performance. The current rating action has been taken
by ICRA basis best available information on the issuers'
performance.
Key rating drivers and their description
Credit challenges
* Irregularity in the debt servicing: There has been delays in
debt servicing as confirmed by the lender.
* Impact of Covid-19 on the company's operation: The Covid-19
pandemic has affected the company's operations is likely to
negatively impact the financial performance in FY2021.
Liquidity position: Poor
MVP's current liquidity profile is poor as reflected by
irregularities in debt servicing by entity.
Rating sensitivities
Positive triggers – Resumption and stabilization of the
operations along with regularization of debt servicing on a
sustained basis (more than three months).
MVP, incorporated in 1998, is involved in the manufacture, import
and distribution of scented candles in the US. The company
primarily sells its products to large, national retailers such as
Wal-Mart, Dollar General, and P&G. The company sells scented
candles under two broad categories – private label candles and
branded candles. MVP has two manufacturing facilities in the US,
one at Elkin (North Carolina) and the other at Tennessee.
MVP is a part of The Manipal Group, based in Manipal, Karnataka.
The Group has controlling stake in MVP through Primacy Industries
Ltd, India, and GP Global Ltd, Dubai.
NANDINI FITNESS: ICRA Keeps INR7cr Debt Rating in Not Cooperating
-----------------------------------------------------------------
ICRA said the ratings for the INR7.00 crore bank facilities of
Nandini Fitness Pvt. Ltd. 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
---------- ----------- -------
Long Term– 7.00 [ICRA]D ISSUER NOT COOPERATING;
Term Loan 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.
NFPL was promoted by Mr. Sumit Goel and Mr. Hemant Kumar Singh in
2009, to set up a health and fitness business in Lucknow, Uttar
Pradesh under a franchisee agreement with Gold's Gym.
NARULA SOLVEX: ICRA Keeps D INR12cr Debt Rating in Not Cooperating
------------------------------------------------------------------
ICRA said the ratings for the INR12.00 crore bank facilities of
Narula Solvex Pvt. Ltd. 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
---------- ----------- -------
Long Term- 12.00 [ICRA]D ISSUER NOT COOPERATING;
Fund Based/CC 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.
Established in 2003, NSPL is a private limited company, which
processes rice bran with a product mix, comprising crude rice bran
oil and de-oiled rice bran from its production unit located at Moga
(Punjab), with an installed capacity of 300 metric tonnes per day
(MTPD). The company extracts solvents and sells the crude oil to
the oil refiners and traders in the nearby regions. It procures
rice bran from millers in the nearby regions of Haryana and Punjab.
NSPL is promoted by the Narula family, with an experience of around
two decades in rice bran oil extraction.
NEELKANTH YARN: Ind-Ra Lowers Long Term Issuer Rating to 'BB-'
--------------------------------------------------------------
India Ratings and Research (Ind-Ra) has downgraded Neelkanth Yarn's
(NEEL) Long-Term Issuer Rating to 'IND BB-' from 'IND BB (ISSUER
NOT COOPERATING)'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR108 mil. (reduced from INR178 mil.) Fund-based working
capital limits Long-term rating downgraded; short-term rating
affirmed with IND BB-/Stable/ IND A4+ rating; and
-- INR130 mil. (increased from INR62 mil.) Non-fund-based working
capital limits affirmed with IND A4+ rating.
KEY RATING DRIVERS
The downgrade reflects NEEL's medium scale of operations as evident
from the 41.97% YoY decrease in its revenue to INR1,441.75 million
in FY19 due to a fall in the sales volume. The revenue is likely to
have declined further in FY20 as the firm achieved a top line of
only INR1,273.50 million till end-February 2020 due to a further
decline in the sales volumes. The revenue of 1QFY21 is also likely
to be affected by the impact of the nationwide lockdown implemented
to contain the COVID-19 outbreak.
The ratings also factor in the firm's continued weak credit
metrics, with interest coverage (operating EBITDA/gross interest
expense) of 1.34x in FY19 (FY18: 1.35x) and net leverage (adjusted
net debt/operating EBITDAR) of 7.72x (7.24x). The marginal
deterioration in the credit metrics in FY19 was because of an
increase in the debt due to the higher utilization of working
capital limits.
Liquidity Indicator – Stretched: NEEL used its fund-based working
capital limit almost fully during the 12 months ended April 2020.
The firm's cash flow from operations remained negative at INR67.40
million in FY19 (FY18: negative INR13.64 million) due to higher
working capital requirements during the period. Furthermore, the
net cash cycle deteriorated to 88 days in FY19 (FY18: 41 days) on
an increase in the average receivable days during the period.
Additionally, the firm had unencumbered cash of INR1.60 million at
FYE19 (FYE18: INR1.29 million). It also does not have any capital
market exposure and relies on banks and financial institutions to
meet its funding requirements. Moreover, Ind-Ra expects the
liquidity to have stretched further during FY20 and to continue to
do so in FY21 due to a reduction in the working capital limits.
The ratings continue to factor in the NEEL's weak operating margin
even though it rose to 2.31% in FY19 (FY18: 1.32%) due to a decline
in the cost of traded material. The return on capital employed
stood unchanged year-on-year at 10% in FY19. During 11MFY20, NEEL
booked an operating margin of 2.00%.
The ratings continue to be constrained by the partnership structure
of the organization.
However, the ratings continue to be supported by the promoters'
experience of around three decades in the textile business.
RATING SENSITIVITIES
Positive: An improvement in the scale of operation leading to an
improvement in the credit metrics with the interest coverage above
2.0x will be positive for the ratings.
Negative: A decline in the scale of operation leading to
deterioration in the credit metrics and/or deterioration in the
liquidity profile, will be negative for the ratings.
COMPANY PROFILE
NEEL was established in 2009 as a partnership firm by Anil Rungta
and Arun Aggarwal. The firm trades various varieties of yarns,
cotton, and polyester fiber.
PMR CONSTRUCTION: ICRA Keeps B+ INR5cr Debt Rating in Not Coop.
---------------------------------------------------------------
ICRA said the ratings for the INR20.00 crore bank facilities of PMR
Construction Company to remain under Issuer Not Cooperating
category. The long-term rating is denoted as [ICRA]B+ (Stable)
ISSUER NOT COOPERATING and short-term rating is denoted as [ICRA]A4
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 5.00 [ICRA]B+ (Stable); ISSUER NOT
Fund Based/CC COOPERATING; Rating continue to
remain under the 'Issuer Not
Cooperating' category
Short Term- 15.00 [ICRA]A4; ISSUER NOT
Non Fund Based COOPERATING; Rating continue 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.
PMR was incorporated as a partnership firm in 2002 by Mr. PM Alavi
Haiji and his sons. Mr. Haji is a Class 'A' (PWD) civil contractor
in Kerala, and has more than four decades of experience in the
contracting industry. The firm undertakes civil government
contracts involving construction of roads, bridges and buildings.
However, in the last few years the firm had been primarily involved
with construction and repair of roads in Kerala.
RAMKUMAR MILLS: ICRA Lowers Rating on INR19cr Loan to B+
--------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Ramkumar Mills Private Limited (RMPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 19.00 [ICRA]B+ (Stable) ISSUER NOT
Fund Based/CC COOPERATING; Rating downgraded
from [ICRA]BB (Stable) and
continues to remain under
'Issuer Not Cooperating'
Category
Long Term- 1.59 [ICRA]B+ (Stable) ISSUER NOT
Fund Based TL COOPERATING; Rating downgraded
from [ICRA]BB (Stable) and
continues to remain under
'Issuer Not Cooperating'
Category
Short Term- 4.00 [ICRA]A4 ISSUER NOT COOPERATING;
Non Fund Based Rating continues to remain under
'Issuer Not Cooperating'
Category
Long Term/ 0.80 [ICRA]B+ (Stable)/[ICRA]A4 ISSUER
Short Term- NOT COOPERATING; Long term rating
Unallocated downgraded from [ICRA]BB
(Stable); and ratings continues
to remain under 'Issuer Not
Cooperating' category
Rationale
The rating is downgraded because of lack of adequate information
regarding Ramkumar Mills Private Limited 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 Ramkumar Mills 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.
RMPL is a family-owned, closely managed company engaged in the
processing of cotton and various blended fabrics for the export as
well as the domestic segments. It also has ISO9001:2008
certification for its manufacturing process. The company,
incorporated in 1947 by late Mr. Y S Nanjaiah Setty and Mr. Y S
Adinarayana Setty, had begun a spinning mill and subsequently
started manufacturing and processing of textiles. Overall, the
promoting family has more than seven decades of experience in
cotton textile manufacturing business. Apart from the fabric
processing business, RMPL is also engaged in real estate
development through a joint venture with another affiliate firm –
M/s Sumangala Properties.
RANGANATHAN RAJESWARI: ICRA Keeps INR8.5cr Debt Rating in Not Coop.
-------------------------------------------------------------------
ICRA said the ratings for the INR8.50 crore bank facilities of
Ranganathan Rajeswari Charitable Trust to remain under Issuer Not
Cooperating category. The long-term rating is denoted as [ICRA]D
ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 8.50 [ICRA]D; ISSUER NOT COOPERATING;
Fund Based TL Rating continue 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.
Ranganathan Rajeswari Charitable Trust was established in 2006 to
impart professional education to students in Tamil Nadu. The trust
owns and manages 'Ranganathan Engineering College' ("REC"),
'Ranganathan Architecture College' ("RAC") and 'Ranganathan
Polytechnic College' ("RPC") situated in Coimbatore, Tamil Nadu.
The promoters of the trust are Dr. R. Murugesan, Dr. P. Tamilarasi
Murugesan, Mr. R. Karuna Boopathy, Mrs. K. Tamilarasi, Mr. R.
Subramanian, Mrs. B. Ezhilarasi and Mrs. M. Praveena. The promoters
have more than 30 years of experience in the education sector.
RANGE CERAMIC: ICRA Moves B+ Debt Ratings to Not Cooperating
------------------------------------------------------------
ICRA has migrated the rating for the bank facilities for INR28.18
crore of Range Ceramic Private Limited (RCPL) to 'Issuer Not
Cooperating' category. The rating is now denoted as "[ICRA]B+
(Stable)/A4; ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based– 11.78 [ICRA]B+ (Stable); ISSUER NOT
Term Loan COOPERATING; Rating moved to
'Issuer Not Cooperating' category
Fund-based– 14.00 [ICRA]B+ (Stable); ISSUER NOT
Cash Credit COOPERATING; Rating moved to
'Issuer Not Cooperating' category
Non-Fund-Based 2.40 [ICRA]A4; ISSUER NOT
Bank Guarantee COOPERATING; Rating moved to
'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.
Incorporated in 2013, RCPL manufactures digitally printed wall
tiles used in commercial and domestic buildings. The manufacturing
facility is located at Morbi, Gujarat with an installed capacity of
6,00,000 boxes per month for digitally printed ceramic glazed
tiles. At present, it manufactures wall tiles of five sizes:
12"X12", 12"X18", 12"X24", 12"X30" and 12"X36" with the current set
of machineries and production facilities.
In FY2018, the company reported a net profit of INR2.11 crore on an
operating income (OI) of INR86.88 crore, as compared to a net
profit of INR1.95 crore on an OI of INR52.92 crore in FY2017.
RIDDHI SIDDHI: ICRA Keeps 'B' Debt Ratings in Not Cooperating
-------------------------------------------------------------
ICRA said the ratings for the INR102.50 crore bank facilities of
Riddhi Siddhi Associates continue to remain under Issuer Not
Cooperating category. The long-term rating is denoted as [ICRA]B
ISSUER NOT COOPERATING with a Stable outlook and the short term
rating is denoted as [ICRA]A4 ISSUER NON-COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 32.50 [ICRA]B (Stable); ISSUER NOT
Fund Based/CC COOPERATING; Rating continues
to remain under the 'Issuer Not
Cooperating' category
Long-term Non 55.00 [ICRA]B (Stable); ISSUER NOT
Fund-based COOPERATING; Rating continues
to remain under the 'Issuer Not
Cooperating' category
Short-term 15.00 [ICRA]A4; ISSUER NOT
Fund based 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 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.
RSA, incorporated in 2009, is a royalty contractor for sand mining,
granite mining and toll collections. The firm has its office
located in Udaipur and it undertakes operations in the state of
Rajasthan. These contracts are generally obtained for duration of
2-5 years from Directorate of Mines and Geology, Government of
Rajasthan and RIDCOR (Road Infrastructure Development Company of
Rajasthan).
SCJ PLASTICS: ICRA Lowers Rating on INR5.50cr Loan to B+
--------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of SCJ
Plastics Limited (SCJPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based 5.50 [ICRA]B+ (Stable); ISSUER NOT
Limits COOPERATING Rating downgraded
from [ICRA]BB+(Stable) and
continues to remain under
'Issuer Not Cooperating' category
Non-fund 16.00 [ICRA]A4; ISSUER NOT COOPERATING
based limits Rating downgraded from [ICRA]A4+
and continues to remain under
'Issuer Not Cooperating' category
Unallocated 0.50 [ICRA]B+(Stable)/A4; ISSUER NOT
limits COOPERATING Rating downgraded
from [ICRA]BB+(Stable)/A4+ and
continues to remain under
'Issuer Not Cooperating' category
Rationale
The Long-Term and short term ratings downgrade is because of lack
of adequate information SCJPL'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 SCJ Plastics 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.
SCJPL was incorporated in 1981. It started business with a
manufacturing facility at Okhla Industrial Area in Delhi in 1982.
Subsequently, the company set up another manufacturing facility at
Najafgarh Road in Delhi in 2004.
The promoter, Mr. S. C. Jain, started trading commodity polymers in
the 1960s and moved on to manufacture master batches in 1969. In
1981, he set up SCJPL. The promoters have several other partnership
and proprietorship firms that manufacture similar products—SCJ
Plastics with its manufacturing facility at Baddi, SCJ Colorants
with its manufacturing facility at Daman, Kund Polymers with its
manufacturing facility at Delhi, SCJ Polybatch with its
manufacturing facility at Bangalore and SCJ Colorant with its
manufacturing facility at Baddi.
In 10M FY2017, on a provisional basis, the company reported a net
profit of INR2.99 crore on an operating income of INR55.02 crore,
as compared to a net profit of INR2.19 crore on an operating income
of INR59.67 crore in the previous year.
SHANKARANARAYAN JEWELLERS: ICRA Keeps D Debt Ratings in Not Coop.
-----------------------------------------------------------------
ICRA said the ratings for the INR12.00 crore bank facilities of
Shankaranarayan Jewellers to remain under Issuer Not Cooperating
category. The ratings are denoted as [ICRA]D ISSUER NOT
COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 0.75 [ICRA]D; ISSUER NOT COOPERATING;
Fund Based/CC Rating continue to remain under
the 'Issuer Not Cooperating'
category
Short Term- 5.50 [ICRA]D; ISSUER NOT COOPERATING;
Fund Based Rating continue to remain under
the 'Issuer Not Cooperating'
category
Short Term- 5.75 [ICRA]D; ISSUER NOT COOPERATING;
Non Fund Based Rating continue 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.
Shankaranarayan Jewellers was established in 2001 by Mr. P V Mahesh
as a partnership firm, for manufacturing and wholesale of gold
jewellery with operations based out of Bangalore. The firm also
operates in retail space through its outlet based in Basavanagudi,
Bangalore. The business operations are managed jointly by Mr. P V
Mahesh and his son, Mr. Tejas.
SINGHAL STRIPS: ICRA Keeps 'D' Debt Ratings in Not Cooperating
--------------------------------------------------------------
ICRA said the ratings for the INR57.00 crore bank facilities of
Singhal Strips Limited continue to remain under Issuer Not
Cooperating category. The long-term and short-term rating is
denoted as [ICRA]D/[ICRA]D ISSUER NOT COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based- 42.00 [ICRA]D ISSUER NOT COOPERATING;
Cash Credit Rating continues to remain under
the 'Issuer Not Cooperating'
category
Short Term– 15.00 [ICRA]D ISSUER NOT COOPERATING;
Letter of Rating continues to remain under
Credit 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.
SSL was incorporated as a private limited company in 1988 and then
subsequently converted into a public limited company in 1992. The
company manufactures cold-rolled stainless steel strips at its
factory in Rohtak, Haryana. With an installed capacity of 15,000
MT, SSL manufactures ultra-thin CR strips i.e. 0.5 mm to 1.50 mm. A
part of revenues is also derived from trading of CR sheet/strips.
The company is also involved in job work, which includes the
reduction of thickness of coils and strips.
SKM INDUSTRIES: ICRA Cuts Rating on INR9.0cr Loan to 'D'
--------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of SKM
Industries, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based- 0.50 [ICRA]D ISSUER NOT COOPERATING;
Term Loan Rating downgraded from
[ICRA]B+(Stable) ISSUER NOT
COOPERATING and continues to
remain under 'Issuer Not
Cooperating' category
Fund based- 1.25 [ICRA]D ISSUER NOT COOPERATING;
Cash credit Rating downgraded from
[ICRA]B+(Stable) ISSUER NOT
COOPERATING and continues to
remain under 'Issuer Not
Cooperating' category
Fund based 5.25 [ICRA]D ISSUER NOT COOPERATING;
Working Capital Rating downgraded from[ICRA]A4
Limits ISSUER NOT COOPERATING and
continues to remain under
Non-fund 9.00 [ICRA]D ISSUER NOT COOPERATING;
based limits Rating downgraded from[ICRA]A4
ISSUER NOT COOPERATING and
continues to remain under
Rationale
The rating downgrade reflects delays in Debt Servicing. The rating
is based on limited information on the entity's performance since
the time it was last rated in March 2020. 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 SKM Industries, 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.
Credit challenges
There have been delays in debt servicing as mentioned the account
been classified as 'Special Mention Account or SMA' during the past
one month. The reason was Delays in repayment of principal and/or
interest on any fund-based bank facility which has a clear mention
of due date like term loan/ working capital demand loan etc.
Liquidity position: Poor
SKM Industries' liquidity profile is poor as reflected by
irregularities in debt servicing by entity.
Rating sensitivities
Incorporated in the year 2007 by Kikani family, SKM Industries is a
partnership firm engaged in manufacturing and export of steel cable
drums. The firm also manufactures various railway products like
break beam, straps, bracket, body side panel etc. which find their
end application in manufacturing of Railway boogies. The firm has a
manufacturing facility in 2 Umbergaon, Gujarat.
SRI KRISHNA: ICRA Keeps 'D' Debt Ratings in Not Cooperating
-----------------------------------------------------------
ICRA said the ratings for the INR15.00 crore bank facilities of Sri
Krishna Shelters Private Limited to remain under Issuer Not
Cooperating category. The ratings are denoted as [ICRA]D ISSUER NOT
COOPERATING.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 10.00 [ICRA]D; ISSUER NOT COOPERATING;
Fund Based TL Rating continue to remain under
the 'Issuer Not Cooperating'
category
Short Term- 5.00 [ICRA]D; ISSUER NOT COOPERATING;
Non Fund Based Rating continue 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.
Sri Krishna Shelters Pvt. Ltd. (SKSPL) is a construction company,
based in Bangalore, promoted by Mr. Raghavendra. It was started as
a proprietorship concern named Sri Krishna Builders & Developers in
the year 1990. In 2003, it was converted to a partnership concern
with Mr. Raghavendra as Managing partner and Mrs. Sri Lakshmi as
partner in the name of Sri Krishna Builders and Develop. In 2007 it
was converted to a private limited company, Sri Krishna Shelters
Pvt. Ltd., with Mr. Raghavendra as Managing Director and Mrs. Sri
Lakshmi as Director. Over the last two decades, the Company has
undertaken and completed many projects of diverse nature and
concentrates on commercial projects, such as industrial buildings,
hospitals, IT buildings, buildings for government organizations and
for other major institutions.
SSV FAB INDUSTRIES: Ind-Ra Affirms 'BB+' Long Term Issuer Rating
----------------------------------------------------------------
India Ratings and Research (Ind-Ra) has affirmed S.S.V. Fab
Industries Private Limited's (SSV Fab) Long-Term Issuer Rating at
'IND BB+'. The Outlook is Stable.
The instrument-wise rating actions are:
-- INR60 mil. (reduced from INR100 mil.) Fund-based limit
affirmed with IND BB+/Stable/IND A4+ rating;
-- INR150 mil. Non-fund-based limit affirmed with IND A4+ rating;
-- INR50 mil. Proposed fund-based limit* assigned with
Provisional IND BB+/Stable/Provisional IND A4+ rating; and
-- INR11.57 mil. Term Loan due on September 2019 withdrawn (paid
in full).
* The ratings are provisional and shall be confirmed upon the
sanction and execution of loan documents for the above facilities
by SSV Fab to the satisfaction of Ind-Ra.
KEY RATING DRIVERS
The affirmation reflects SSV Fab's continued small scale of
operations, as indicated by revenue of INR920.1 million in FY19
(FY18: INR988 million). The revenue declined due to a fall in the
gross realizations. In 8MFY20, the company reported revenue of
INR400 million.
The ratings reflect the average EBITDA margins due to the intense
competition in the industry. The EBITDA margin declined to 4.6% in
FY19 (FY18: 6.1%), as the company could not pass on the rise in
input prices to its customers due to the absence of a
price-escalation clause. The return on capital employed stood at 7%
in FY19 (FY18: 13%).
The ratings are constrained by SSV Fab's moderate credit metrics
due to the average EBITDA margins. The metrics weakened in FY19 due
to a decline in the absolute EBITDA to INR41.9 million (FY18:
INR60.7 million) and a rise in interest expenses. The interest
coverage (operating EBITDA/gross interest expense) was 3.4x in FY19
(FY18: 6.3x) and the net leverage (total adjusted net
debt/operating EBITDA) was 2.5x (1.7x).
Liquidity Indicator - Stretched: SSV Fab's average utilization of
fund-based limits was 39.3% over the 12 months ended February 2020.
The cash flow from operations turned positive at INR10.0 million in
FY19 (FY18: negative INR32.2 million), mainly due to limited
capital expenditure. The net cash conversion cycle of the company
elongated to 89 days in FY19 (FY18: 80 days), due to an increase in
debtor days to 57 days (52 days), resulting from delays in securing
receivables from customers. Also, the inventory days increased to
49 days in FY19 (FY18: 29 days), as the company had procured more
key raw materials at end-March 2019. The company repaid its term
debt in September 2019 and does not have any major CAPEX plans in
FY21. The cash and cash equivalents amounted to INR3.0 million in
FY19 (FY18: INR2.7 million). The company has not availed the
Reserve Bank of India-prescribed moratorium.
The ratings are supported by the company's established customer
base and the securing of repeat orders from existing customers.
Moreover, the company's major customers belong to the fast-moving
consumer goods (FMCG) sector, which includes fertilizers,
chemicals, sugar, rice, spices, and food grains, which have not
been affected significantly by the lockdown as the products are
classified as essential goods by the government.
The ratings also benefit from the promoters' experience of more
than two decades in the manufacturing of polypropylene sacks and
woven fabrics
RATING SENSITIVITIES
Negative: A decline in the revenue and/or the EBITDA margin,
leading to deterioration in the credit metrics, all on a sustained
basis, could lead to negative rating action.
Positive: A substantial increase in the scale of operations as well
as operating profitability, leading to an improvement in the credit
metrics, on a sustained basis, could lead to positive rating
action.
COMPANY PROFILE
Incorporated in 2007, SSV Fab manufactures high-density
polyethylene/polypropylene sacks, woven fabrics, and liner
packaging bags for fertilizers, chemical sugar, rice, spices, food
grains, cement and salt at its 9,000-metric-ton-per-annum site in
Hyderabad, Telangana.
STEMCELL TRANSPLANTATION: Insolvency Resolution Case Summary
------------------------------------------------------------
Debtor: Stemcell Transplantation Assisted Reproduction
Research Private Limited
Arun Arcade, 75A First Cross
North East Extension Road
Thillainagar, Trichy
Tamil Nadu 620018
India
Insolvency Commencement Date: May 5, 2020
Court: National Company Law Tribunal, Chennai Bench
Estimated date of closure of
insolvency resolution process: November 1, 2020
Insolvency professional: Mrs. Ganesan Geetha
Interim Resolution
Professional: Mrs. Ganesan Geetha
12 I Cross Street
MES Road, East Tambaram
Chennai, Tamil Nadu
Pin 600059
E-mail: kumarsgeetha@gmail.com
Last date for
submission of claims: May 26, 2020
UTTARAYAN STEEL: ICRA Maintains B Debt Ratings in Not Cooperating
-----------------------------------------------------------------
ICRA said the ratings for the INR9.00 crore bank facilities of
Uttarayan Steel Private Limited continue to remain under Issuer Not
Cooperating category. The long-term rating is denoted as [ICRA]B
ISSUER NOT COOPERATING with a Stable outlook.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term- 8.50 [ICRA]B (Stable); ISSUER NOT
Fund Based/CC COOPERATING; Rating continues
to remain under the 'Issuer Not
Cooperating' category
Long-term 0.50 [ICRA]B (Stable); ISSUER NOT
Fund based- COOPERATING; Rating continues
Unallocated 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.
USPL manufactures mild steel ingots, which are subsequently rolled
into long steel products such as thermo mechanically treated (TMT)
bars, channels and angles. The company was acquired by members of
the Goel and the Singhal family in 2006. Its manufacturing facility
is located in Roorkee (Uttrakhand) and has an installed capacity of
22,000 Metric Tonnes Per Annum (MTPA).
VIJETA PROJECTS: ICRA Lowers Rating on INR80cr Loan to B-
---------------------------------------------------------
ICRA has downgraded the ratings on certain bank facilities of
Vijeta Projects & Infrastructures Ltd. (VPIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund Based- 80.00 [ICRA]B-(Stable) ISSUER NOT
Working COOPERATING; Rating downgraded
Capital From [ICRA]B+(Stable) and
Facilities continues in 'Issuer not
cooperating category'
Non-fund Based- 194.50 [ICRA]A4 ISSUER NOT
Working Capital COOPERATING; rating continues
Facilities in 'Issuer not cooperating
category'
Rationale
The rating downgrade is due to lack of adequate information
regarding the performance of VPIL and hence 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 Vijeta Projects & Infrastructures 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.
Established in 1990 by the Singh family, VPIL is a closely held
public limited company involved in executing infrastructure
projects across sectors like irrigation, roadways, railway
infrastructure, mining, etc. The company primarily works for
various government and semi-government bodies (Central Public Works
Department, Jharkhand State Mineral Development Corporation,
Department of Water Resources, National Buildings Construction
Corporation etc.) in Bihar and Jharkhand. In addition, VPIL works
for reputed private sector clients like L&T, Tata Power Ltd. etc.
In FY2019, the company reported a net profit of INR10.1 crore on an
operating income (OI) of INR322.0 crore compared with a net profit
of INR4.9 crore on an OI of INR203.9 crore in the previous year.
ZANDROS GRANITO: ICRA Migrates B+ Rating to Not Cooperating
-----------------------------------------------------------
ICRA has moved the ratings for the INR15.00 crore bank facilities
of Zandros Granito Llp. The rating is now denoted as
"[ICRA]B+(Stable)/A4; ISSUER NOT COOPERATING"; Ratings moved to
issuer not cooperating category."
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loan 9.00 [ICRA]B+(Stable) ISSUER NOT
COOPERATING; Rating moved to
'issuer not cooperating category'
Cash Credit 4.50 [ICRA]B+(Stable) ISSUER NOT
COOPERATING; Rating moved to
'issuer not cooperating category'
Bank Guarantee 1.50 [ICRA]A4 ISSUER NOT COOPERATING;
Rating moved to 'issuer not
cooperating category'
As part of its process and in accordance with its rating agreement
with Zandros Granito Llp, 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.
Established in May 2017, ZGL is promoted by Mr. Dilip Detroja along
with seven other partners. The firm commenced its commercial
operations from June 2018. It manufactures glazed vitrified tiles
and polished glazed vitrified tiles in size of 600mm x 600mm. The
firm's manufacturing facility is located at Morbi (Gujarat). ZGL
has an annual installed capacity of 40,500 MT of tiles per annum.
=================
I N D O N E S I A
=================
JAPFA COMFEED: Fitch Affirms 'BB-' LT IDR, Alters Outlook to Neg.
-----------------------------------------------------------------
Fitch Ratings has revised the Outlook on PT Japfa Comfeed Indonesia
Tbk's Long-Term Issuer Default Rating to Negative from Stable. The
Long-Term IDR is affirmed at 'BB-'. At the same time, Fitch Ratings
Indonesia has revised the Outlook on the poultry producer's
National Long-Term Rating to Negative from Stable and affirmed the
rating at 'A+(idn)'.
The Negative Outlook reflects interruptions to the general
operating environment for domestic poultry producers that stem from
the coronavirus pandemic. In particular, Fitch believes demand for
poultry will soften as the food and beverage industry has been
crippled by social distancing measures, while the economic downturn
will lead to a higher poverty rate and reduce consumers' purchasing
power. As a result, Fitch sees volume decline and margin
contraction for Japfa.
The pace of recovery is highly dependent upon the governments'
efforts to control the outbreak domestically. In the event of a
strong rebound in business and commercial activities starting in
2H20, Japfa would be well-positioned to restore its operating
performance in a relatively short time, paving the way for the
Outlook to be revised to Stable. However, a larger-than-expected
decline in operating earnings could drive a rating downgrade,
especially if business and consumer confidence fail to return to
the pre-outbreak levels for an extended period.
'A' National Ratings denote expectations of a low level of default
risk relative to other issuers or obligations in the same country
or monetary union.
KEY RATING DRIVERS
Weak Performance on COVID-19: Fitch expects the coronavirus
pandemic to reduce Japfa's 2020 sales given the temporary closures
of food establishments in major cities in Indonesia. Fitch's rating
case scenario assumes government-imposed restrictions on dine-in
services will start to be relaxed in 3Q20 with gradual
normalisation of business activities and re-opening of commercial
shopping centres from 4Q20.
Fitch forecasts Japfa's leverage to be around 3.0x in 2020, based
on an estimated 9% decline in net sales and a contraction in EBITDA
margin due to weak selling prices. Fitch expects earnings to
improve in 2021 as the coronavirus-related effects wane, demand for
food service increases and poultry prices recover, but EBITDA is
likely to remain below the 2019 level. Our current base case
scenario also assumes leverage is unlikely to return to below 2.5x
before 2022, which contributes to the Negative Outlook.
Risks Beyond 2020: Fitch believes numerous unknowns remain,
including the length of the outbreak, when and how quickly retail
locations can fully re-open, the economic conditions exiting the
pandemic, including unemployment and household income trends, the
impact of government support on business and consumers, and the
effect the crisis will have on consumer behaviour. Fitch believes
these significantly increase the risks to its forecasts.
Solid Market Position: The affirmation of Japfa's ratings reflects
its strong position in the domestic poultry-feed and
poultry-breeding industry, which is underpinned by the company's
vertically integrated operations, extensive nation-wide
distribution network and strong supplier relationships. Japfa's
scale, based on EBITDA, is smaller than that of other
internationally rated protein companies, but it is the
second-largest publicly listed company in Indonesia's poultry
market, where the top two players have about 50% market share.
More Resilient Sales and Profit: Fitch believes the company's
strong market position and the relatively inelastic demand for
poultry products in Indonesia will mean its sales will be less
affected than that of other industries and will recover faster
after the pandemic. Moreover, Fitch believes its vertically
integrated operations and its strong core feed business provide
some support to its overall profit margin while poultry prices are
low. These, and the company's comfortable liquidity position and
flexible capex and dividend schedule, also underpin the affirmation
of the company's rating.
Supportive Government Measures: The Indonesian government takes an
active role in regulating the country's chicken supply. It
typically directs the poultry industry to reduce the supply of
day-old chicks following declines in live birds' prices. Average
live bird prices in April 2020 fell sharply due to low demand, but
government directives pushed prices back up in early May. Fitch
believes the government will be proactive in maintaining the
demand-supply balance, as low poultry prices amid excess supply
hurt small-scale farmers.
Production Flexibility; Cost Pass-Through: Fitch believes Japfa's
exposure to raw material cost volatility is mitigated by its large
drying and storage facilities. In particular, Japfa is exposed to
the price of corn, which is a key ingredient in its animal feed.
The government restricts the import of corn, which forces Japfa to
rely on domestic sources. Corn harvesting in Indonesia normally
takes place only in the first and third quarters of the year,
creating price swings over the year. Fitch believes Japfa's corn
dryers allow it to store dried corn for up to six months, providing
production flexibility during non-harvest periods.
Japfa is also exposed to currency volatility as it imports soybean
meal, another key component of its animal feed. However, it is able
to mitigate the risk from rising costs by passing through cost
increases in its animal-feed segment. This is due to its strong
market position and ability to retain raw material inventory and
adjust output. PT Charoen Pokphand Indonesia Tbk and Japfa together
control about half of Indonesia's poultry-feed market and react
similarly to increases in raw-material costs by seeking to raise
prices.
Weak Parent-Subsidiary Linkage: Fitch believes Japfa's linkage with
its parent - Japfa Ltd (JL) - is weak, reflective of moderate
ring-fencing at Japfa under its US dollar bond documentation as
well as Indonesian stock exchange regulations that limit
related-party transactions. Therefore, Fitch continues to rate
Japfa on a standalone basis. However, Fitch may review its approach
should the company's dividend policy change or there is other
evidence of JL being able to extract cash.
DERIVATION SUMMARY
Japfa's IDR can be compared with that of Pilgrim's Pride
Corporation (PPC, BB/Stable), Marfrig Global Foods S.A.
(BB-/Stable), Minerva S.A. (BB-/Stable) and Agribusiness Holding
Miratorg LLC (B/Stable).
Fitch believes PPC - one of the largest global chicken producers,
with operations spanning the US, Mexico, Puerto Rico and Europe -
has a superior credit profile relative to Japfa due to its larger
operating scale, stronger global market position and better
geographic diversification. PPC's business and credit profile is
strong, but its rating is constrained by the weak corporate
governance of its ultimate indirect controlling parent company,
Brazil-based JBS S.A. (BB/Stable).
JBS is one of the largest protein producers globally and has a
significantly larger operating scale as well as better product and
geographical diversification compared to Japfa. However, its rating
is constrained by weak corporate governance due its shareholder's
structure, and uncertainty over the outcomes of several
investigations into JBS and its shareholders. These include
administrative procedures by the Securities and Exchange Commission
of Brazil and potential fines from the U.S. Department of Justice.
Fitch believes Japfa's strong financial profile relative to Marfrig
and Minerva makes up for its smaller operating EBITDA scale. Japfa
has shown a more conservative capital structure and financial
policy than Marfrig and Minerva, with significantly stronger
leverage and interest coverage over the past four years. The three
companies have similar EBITDA margin level of around 10%,
indicating largely comparable credit profiles. Nevertheless, Fitch
expects Japfa's financial profile to temporarily deteriorate in the
near term on account of the pandemic, as reflected in its Negative
Outlook.
Relative to Miratorg - Russia's largest pork producer with exposure
to poultry and cattle - Fitch believes Japfa's multiple-notch
higher rating is warranted due to Miratorg's significantly weaker
financial profile, weak free cash flow generation and corporate
governance issues, as evident from the company's complex group and
governance structure.
Japfa's National Rating is comparable with that of PT Sri Rejeki
Isman Tbk (Sritex, A+(idn)/Stable), PT Sumber Alfaria Trijaya Tbk
(Alfamart, AA-(idn)/Stable), PT Mayora Indah Tbk (AA(idn)/Stable)
and PT Pan Brothers Tbk (A-(idn)/Stable). Fitch believes the larger
operating EBITDA scale, lower commodity-price exposure and superior
financial profile of Alfamart - Indonesia's largest mini-market
operator - warrant a one-notch difference to Japfa's rating.
Similarly, Fitch believes the stronger financial profile, wider
profit margin, better free cash flow generation and better earning
stability of Mayora - a leading consumer goods producer in
Indonesia - warrant a multiple-notch rating difference to Japfa.
Sritex and Japfa have similar operating EBITDA scale, and Fitch
believes Japfa's stronger market position as Indonesia's
second-largest poultry company offsets its weaker geographical
diversification relative to Sritex. Fitch also believes Japfa's
lower profit margin is counterbalanced by the risks around the
lengthening of Sritex's working capital cycle on account of the
pandemic. Both companies also have the ability to largely pass
through cost changes to customers, warranting the same rating level
for both names. Compared to Pan Brothers, Fitch believes Japfa's
larger operating scale and lower leverage, coupled with Pan
Brothers' weak operating cash flow generation on account of its
heavy working capital requirement, justifies the multiple-notch
difference between the two companies.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within its Rating Case for the Issuer
- Net sales to decline by around 9% in 2020 and to recover by 8%
in 2021
- EBITDA margin of around 8% in 2020 and around 9.5% in 2021
- Capex of around IDR1.5 trillion in 2020, equivalent to around
5% of sales
- Dividends of around IDR450 billion in 2020, equivalent to
payout rate of around 25%
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The following may lead to a revision of the Outlook to Stable:
- Leverage, as measured by net debt/ EBITDA that proportionately
consolidates minority stakes in a number of subsidiaries, of below
2.5x by 2021
- No significant weakening of industry fundamentals or Japfa's
market position
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Leverage above 2.5x for a sustained period
- Significant reduction of the size of the animal-feed segment,
which would be demonstrated by its share of total revenue falling
below 30% (end- 2019: 37%)
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
Satisfactory Liquidity: Japfa had around IDR2.2 trillion of cash
and IDR1.5 trillion of unused committed debt facilities against
IDR2.3 trillion of debt maturing in the next 12 months as of March
2020. Of the debt maturing in the short term, about IDR2.1 trillion
are short-term revolving credit facilities that are typically
rolled over in the normal course of business. The remaining
maturities are relatively well spread out, with the next
significant maturity, consisting of a USD250 million bond and a
IDR1 trillion domestic bond, in 2022. Fitch believes Japfa's
short-term liquidity is also supported by its ability to defer
capex, its access to diverse funding sources and its extensive
banking and capital market access, both domestically and
internationally.
SUMMARY OF FINANCIAL ADJUSTMENTS
Fitch has proportionately consolidated the key financials of a
number of Japfa's subsidiaries - PT Bumiasri Lestari, PT Iroha
Sidat Indonesia, PT Indojaya Agrinusa and PT Sentra Satwatama
Indonesia - to reflect their significant minority interests.
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).
PT Japfa Comfeed Indonesia Tbk
- LT IDR BB-; Affirmed
- Natl LT A+(idn); Affirmed
- Senior unsecured; LT BB-; Affirmed
- Senior unsecured; Natl LT A+(idn); Affirmed
=====================
N E W Z E A L A N D
=====================
AIR NEW ZEALAND: To Slash More Than 1,300 Jobs, Union Says
----------------------------------------------------------
John Anthony and Esther Taunton at Stuff.co.nz report that Air New
Zealand staff are "absolutely devastated" by news the airline will
cut more than 1,300 jobs across all routes it operates, a union
said.
Due to the impact of Covid-19 on air travel Air New Zealand has
been cutting costs across its business which has included plans to
reduce its pre-pandemic workforce of 12,500 by 30 per cent, or
about 3750 staff, Stuff says.
In early April, the airline told staff it was planning to make up
to 1,460 cabin crew employees redundant, recalls Stuff.
On May 20, E tu union said in a media release that more than 1,300
crew across all routes would lose their jobs.
According to Stuff, there would be 950 redundancies across long and
mid-haul crews and 300 workers on from domestic crews would be made
redundant across Auckland, Wellington and Christchurch, the union
said.
There would also be 97 job losses from regional crews, the union
said.
In a statement, Air New Zealand said it had been forced to undergo
a significant programme of cost reductions as a result of the
financial damage caused by Covid-19, Stuff relays.
"In addition to cost savings right across our business, Air New
Zealand has taken the step of reducing our workforce by 3,500
roles.
"This process has not been rushed and consultation has been very
comprehensive and in good faith," it said.
"We started talking to staff and unions about these issues nine
weeks ago and have done everything possible since then to
collaborate and reduce the number of compulsory redundancies,
including calling for voluntary exits, leave without pay, applying
for the Government wage subsidy, and exploring redeployment and
part time options."
Stuff adds that the airline said it had also worked with staff to
establish a furlough scheme. Although that scheme was not
supported by E tu, Air New Zealand would continue to work on it as
an option for its staff, the statement said.
Based in Auckland, Air New Zealand Limited operates scheduled
passenger flights to 20 domestic and 32 international destinations
in 20 countries, primarily around and within the Pacific Rim.
CHRISTIAN SAVINGS: Fitch Affirms LT IDRs at 'BB', Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed New Zealand-based Christian Savings
Limited's Long-Term Foreign- and Local-Currency Issuer Default
Ratings at 'BB'. The Outlook is Stable. At the same time, CSL's
other ratings have been affirmed.
The affirmation reflects its view that CSL has solid buffers to
withstand the downturn in its base case scenario at its current
rating level. The Stable Outlook indicates that CSL enters the
recession with sufficient headroom in its key financial metrics to
remain broadly consistent with the Viability Rating of 'bb'.
KEY RATING DRIVERS
IDRS and VIABILITY RATING
CSL's Long-Term IDRs are driven by its Viability Rating, which
reflects its modest franchise. CSL's lending operations are focused
on a niche customer base and have limited pricing power relative to
the major banks. However, it operates a stable business model and
benefits from the relationship between its shareholders and target
market. CSL's core objectives have remained consistent under the
current management team, and Fitch believes franchise growth is
likely to be gradual and through organic means.
Fitch has revised the outlook on the 'a' operating environment
score for New Zealand banks to negative from stable to reflect the
significant risks posed by the measures undertaken to slow the
spread of the coronavirus pandemic. Fitch is likely to revise the
outlook to stable if a recovery takes place starting 2H20, meeting
its base-case expectations. However, an outcome that is
significantly weaker than its base case is likely to result in a
lowering of the score to 'a-'. Fitch does not expect CSL's asset
quality and earnings to be significantly affected over the next two
years, despite the deterioration in the operating environment, and
the scores for these factors remain on a stable outlook.
Fitch believes CSL's loan impairments and losses will remain lower
than that of peers through the current downturn, reflecting its
niche market focus, and steady underwriting and collateral
positions across its loan portfolio. However, CSL continues to have
high single-name concentration risk due to the small number of
lending customers and this is unlikely to change. Strong growth in
recent years has been driven mainly by expanding its target market
rather than through aggressive lending practices.
CSL's earnings and profitability are likely to remain consistent
with levels Fitch expects of a 'bb' score over the next two years.
Some compression in the net interest margin is possible due to
lower returns on its liquid asset holdings although loan margins
are likely to remain stable. CSL does not provide any transactional
banking products, which means the declines in the official cash
rate have had less of an impact.
CSL's lending activities are fully funded by a combination of
church and household deposits, and reinvestment rates continue to
be maintained at a high level. Fitch expects CSL's loan-to-deposit
ratio to remain stronger than most of its non-bank deposit taking
peers, but it similarly has limited access to contingent funding
sources.
Fitch expects CSL's capitalisation to be maintained between 11% and
12% over the next two years. Fitch estimates loan and risk-weighted
asset growth will be moderate, which will alleviate pressure on its
capitalisation ratios. CSL's ownership structure has allowed it to
raise new common equity when required to support growth, unlike
some of its non-bank deposit taking peers.
SUPPORT RATING AND SUPPORT RATING FLOOR
CSL's Support Rating and Support Rating Floor reflect its
assessment that while support from the New Zealand sovereign
(AA/Positive) is possible, it cannot be relied on. CSL is not under
the Open Bank Resolution Scheme, which allows for the imposition of
losses on depositors and senior debt holders to recapitalise failed
institutions. Fitch believes the existence of the OBR, in
conjunction with CSL's low systematic importance, makes sovereign
support unlikely.
RATING SENSITIVITIES
IDRS and VIABILITY RATING
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
A lowering of the operating environment score to 'a-' is unlikely
to be sufficient by itself to result in a downgrade of CSL's
ratings. The ratings are sensitive to a loss of support from its
target market as this would ultimately have a significant impact on
its future viability. Negative rating action may also be taken if
CSL's risk appetite weakens through a loosening in underwriting
standards, risk controls or aggressive growth as this is likely to
result in weaker core financial metrics, which could trigger a
downgrade if:
- stage 3 loans/gross loans increase above 5% on a consistent
basis;
- operating profit/risk-weighted assets falls to 0% on a
sustained basis; or
- the Fitch core capital ratio declines below 10.5% without a
credible plan to replenish regulatory capital buffers
CSL's financial profile has reasonable buffers at its current
rating level as the asset quality, earnings and profitability,
capitalisation, and funding and liquidity are all scored at or
above the current Viability Rating level. A downgrade in the
Viability Rating due to a weakening financial profile would require
a combination of the above factors.
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
An upgrade of the Viability Rating and Long-term IDRs is unlikely
in the short-term as it would require a significant growth in CSL's
franchise likely to be demonstrated through a larger borrower base
and lower single name concentration while maintaining risk appetite
and limiting deterioration in its financial profile.
SUPPORT RATING AND SUPPORT RATING FLOOR
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support. An increased
propensity to support would be required for an upgrade but appears
unlikely given the resolution framework in place.
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
The Support Rating and Support Rating Floor are already at the
lowest level on Fitch's rating scales and cannot be downgraded
further.
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).
CREDIT UNION: Fitch Affirms 'BB' LT IDR, Alters Outlook to Neg.
---------------------------------------------------------------
Fitch Ratings has revised the Outlook to Negative, from Stable, on
the Long-Term Issuer Default Rating of Credit Union Baywide and its
fully owned subsidiary, New Zealand Association of Credit Unions
(trading as Co-op Money NZ). At the same time, Fitch has affirmed
the ratings at 'BB' and 'BB-', respectively.
Fitch views the buffers in CUB's credit profile to be sufficient to
withstand its base case scenario. However, the Outlook revision
reflects significant downside risk to its base case expectations
for the downturn.
KEY RATING DRIVERS
IDRS and VIABILITY RATING
CUB's Long-Term IDRs are driven by its Viability Rating, which in
turn reflects its greater risk appetite relative to New Zealand
banks and building societies. The higher risk appetite is reflected
in a focus on riskier segments, such as higher loan/value mortgages
and consumer lending, though CUB's risk controls are adequate for
its size and consistent with similarly sized peers. This leaves
CUB's financial profile susceptible to weakening in a downturn,
such as the one that is emerging due to measures aimed at slowing
the spread of the coronavirus.
Fitch has revised the outlook on the 'a-' operating environment
score for New Zealand non-bank deposit takers to negative, from
stable, to reflect the significant downside risk posed by the
measures undertaken to slow the spread of the coronavirus pandemic.
Fitch is likely to revise this outlook to stable if its base case
of a recovery starting in 2H20 eventuates. However, an outcome that
is significantly weaker than its base case is likely to result in a
lowering of the score to 'bbb+'.
The factor outlooks for asset quality (score of 'bb') and earnings
(score of 'bb') have been revised to negative, from stable, to
reflect its expectation of weakening.
CUB's impaired loan ratio has large buffers at the current score,
but its higher risk appetite leaves its loan book susceptible to
weakening in an economic downturn, as highlighted by the negative
factor outlook. This reflects a higher exposure to non-mortgage
consumer lending and higher loan/value ratio mortgages than most
New Zealand bank and non-bank-deposit takers rated by Fitch. Large
deterioration in asset quality metrics are unlikely before late
2020 due to actions taken by the government and authorities to
support households, but Fitch expects it to take a number of years
for financial institutions to resolve their impaired loans once
they begin to emerge.
This in turn is likely to weigh on earnings for at least the next
two years. Fitch expects impairment charges to rise sharply to
address the asset-quality weakening, while low rates may pressure
the net interest margin and keep loan growth negligible. CUB's
earnings already faced headwinds prior to the pandemic due to costs
associated with a merger with three other credit unions in May 2019
and the acquisition of Co-op Money NZ in November 2019.
CUB's capitalisation remains a weakness for the rating, with the
factor score at 'bb-'. Fitch has revised the outlook on the factor
score to stable, from positive, to reflect its expectation of
further deterioration of capitalisation as a result of the downturn
due to weaker asset quality and earnings. Fitch had previously
expected CUB to restore capital buffers to better align with
management targets for capitalisation by mid-2021; this now appears
unlikely to occur over the next two years. However, Fitch believes
CUB has sufficient capital buffers at the current score to
withstand its base case scenario.
Customer deposits are likely to remain the main source of CUB's
funding and there is headroom in the 'bb+' factor score. However,
CUB, along with other New Zealand non-bank deposit takers, does not
have access to the central bank as a lender of last resort, which
leaves it susceptible to deposit outflows in a severe market
downturn.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating and Support Rating Floor reflect its view that,
while support from the New Zealand sovereign (AA/Positive) is
possible, it cannot be relied on. CUB is not part of the open bank
resolution scheme, which allows for the imposition of losses on
depositors and senior debt holders to recapitalise failed
institutions. However, Fitch believes the existence of the scheme,
in conjunction with CUB's low systemic importance, makes sovereign
support doubtful.
SUBSIDIARY
Co-op Money NZ's IDRs and Support Rating reflect a moderate
probability of extraordinary institutional support from its
shareholder, CUB. Fitch believes Co-op Money NZ is a strategically
important part of CUB because it provides critical banking and
transactional services on which CUB and other credit unions rely to
operate their business. The revision in the Outlook on Co-op Money
NZ reflects the same action taken on the Outlook of CUB.
Co-op Money NZ's Long-Term IDR is notched down once from that of
CUB to reflect its view that, while Co-op Money NZ is important to
CUB's operation, not all of its operations relate to the sale of
products and services to members. Co-op Money NZ's operations also
include sales to third parties, which are not integral to its
members. As per Fitch's criteria, the notching also reflects its
view that, while there are no plans to sell parts of Co-op Money
NZ, CUB's franchise would not be fundamentally altered should this
occur.
RATING SENSITIVITIES
IDRS and VIABILITY RATING
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
CUB's Long-Term IDR and Viability Rating could be downgraded if the
economic environment deteriorates significantly beyond its baseline
case scenario. Fitch would expect to lower the operating
environment score for New Zealand non-bank deposit takers to 'bbb+'
under this downside scenario, which would result in a lowering of
its assessment of many financial profile factors.
CUB's Long-Term IDRs and Viability Rating may also be downgraded
even if the operating environment score remains unchanged if,
individually or in combination:
- impaired loans/gross loans increase above 10% on a consistent
basis;
- operating profit/risk-weighted assets fall below 0.25% for a
sustained period; or
- the Fitch core capital ratio declines below 9.5% without a
credible plan to replenish regulatory capital buffers.
CUB's Short-Term IDR would only be downgraded if the Long-Term IDR
were downgraded to 'CCC+' or below.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Outlook on CUB's Long-Term IDRs may be revised to Stable if
economic variables perform broadly in line with its base case.
Under such a scenario, Fitch would expect weakening of the
financial profile to be sufficiently limited to ensure metrics
broadly align with the Viability Rating of 'bb'.
An upgrade of the Viability Rating and Long-Term IDRs is unlikely
in the short-term, as it would require a shallower downturn and
sharper recovery than its base case combined with an improved risk
appetite and capital buffers. An upgrade of the Short-Term IDR
would require an upgrade of the Long-Term IDR to at least 'BBB-'.
SUPPORT RATING AND SUPPORT RATING FLOOR
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support. An increased
propensity to support would be required for an upgrade, but appears
unlikely given the resolution framework in place.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
The Support Rating and Support Rating Floor are already at the
lowest level on Fitch's rating scales and cannot be downgraded
further.
SUBSIDIARY
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
Positive rating action (either an upgrade or Outlook revision) on
Co-op Money NZ's Long-Term IDR would occur if CUB's Long-Term IDR
is upgraded and the propensity to support is unchanged. An upgrade
of the Short-Term IDR and Support Rating would require CUB's
Long-Term IDR to be upgraded by at least three notches, which
appears unlikely.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
Co-op Money NZ's Long-Term IDR and Support Rating could be
downgraded if CUB's Long-Term IDR is downgraded. Co-op Money NZ's
Long-Term IDR could be downgraded by multiple notches if Fitch
believed there was a reduced propensity from CUB to provide ongoing
support to Co-op Money NZ.
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
Co-op Money NZ's ratings are linked to the ratings of its owner,
CUB.
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).
Credit Union Baywide
- LT IDR BB; Affirmed
- ST IDR B; Affirmed
- LC LT IDR BB; Affirmed
- LC ST IDR B; Affirmed
- Viability bb; Affirmed
- Support 5; Affirmed
- Support Floor NF; Affirmed
New Zealand Association of Credit Unions
- LT IDR BB-; Affirmed
- ST IDR B; Affirmed
- Support 3; Affirmed
FIRST CREDIT: Fitch Alters Outlook on 'BB' LT IDR to Negative
-------------------------------------------------------------
Fitch Ratings has revised the Outlook on First Credit Union's 'BB'
Long-Term Foreign- and Local-Currency Issuer Default Ratings to
Negative from Stable, and affirmed all of FCU's ratings.
The Outlook revision reflects significant downside risk to Fitch's
base case expectations for the downturn that has resulted from
government measures to slow the spread of the coronavirus. The
affirmation of the Long-Term IDRs reflects its expectation that FCU
will be able to withstand its base case scenario at the current
rating level.
KEY RATING DRIVERS
IDRS AND VIABILITY RATING
FCU's Long-Term IDRs are driven by its Viability Rating, which
reflects greater volatility in asset quality and earnings due to a
higher risk appetite relative to peers. An increased exposure to
personal loans relative to broader sector peers means FCU's asset
quality is likely to be more volatile through the cycle. Fitch
expects asset quality and earnings and profitability metrics to
deteriorate over the next two years, largely driven by higher
impairments and lower growth.
Fitch has revised the outlook on the 'a-' operating environment
score for New Zealand non-bank deposit takers to negative from
stable, to reflect the significant downside risk posed by the
measures undertaken to slow the spread of the coronavirus. Fitch is
likely to revise this outlook to stable if its base case of a
recovery starting in 2H20 eventuates. However, an outcome that is
significantly weaker than its base case is likely to result in a
lowering of the score to 'bbb+'.
The factor outlooks for asset quality (score of 'bb') and earnings
(score of 'bb') have both been revised to negative from stable to
reflect the pressures in the current environment and severe
downside risks. These factors are of higher influence on the VR due
to the lower socio-economic customer base compared with peers and
higher portion of non-mortgage lending.
FCU's asset quality is of higher risk than peers due to the high
portion of personal loans on its books, which may result in
increased volatility through the cycle. High unemployment could
increase the level of non-performing loans, although this may take
some time to emerge due to repayment holidays and other support
measures. Nonetheless, Fitch expects a portion of borrowers will
not be able to resume payments once these support measures finish,
which will lead to a high level of impaired loans that will take
time to remediate.
Earnings challenges are set to continue as record-low interest
rates and increased impairments are set to weigh on profitability
metrics over the next two years. FCU's core metric - measured by
operating profit/risk-weighted assets - sits in the middle of what
Fitch would expect for a 'bb' range, and Fitch believes there is
some headroom before Fitch would consider lowering the score.
Impairment charges are likely to rise significantly over the next
few years from financial year-end June 2019 levels, and low rates
may pressure the net interest margin and loan growth is likely to
be minimal or negative.
Capitalisation and funding remain credit strengths of FCU's
financial profile; both factors score at the top of its peer group
and have sizeable buffers at current ratings levels. Nonetheless,
Fitch takes into consideration FCU's small absolute size and the
nature of exposures on its balance sheet, which leave it more
susceptible to losses in a downturn than larger peers. The high
level of deposits to loans reflects FCU's mutual status and should
be more stable through the cycle than peers, which rely on
wholesale funding. However, FCU does not have access to the central
bank as a lender of last resort, which leaves it more susceptible
to deposit outflows in a severe market downturn.
RATING SENSITIVITIES
IDRs AND VIABILITY RATING
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
FCU's Long-Term IDR and Viability Rating could be downgraded if the
economic environment deteriorates significantly beyond its
base-case scenario. Fitch would expect to lower the operating
environment score for New Zealand non-bank deposit takers to 'bbb+'
under this downside scenario, which could result in a lowering of
its assessment of various financial profile factors.
FCU's Long-Term IDRs and Viability Rating may also be downgraded,
even if the operating environment score remains unchanged, if:
- stage 3/gross loans ratio increases above 10% on a consistent
basis;
- operating profit/risk-weighted assets falls below 0.25% on a
sustained basis; or
- the Fitch core capital ratio declines below 14% without a clear
path to return above this level.
The buffers at the current rating level means it is likely to take
a combination of the above occurring for the Viability Rating to be
downgraded.
A lowering of the operating environment score to 'a-' is unlikely
to be sufficient by itself to result in a downgrade of these
ratings.
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Outlook on FCU's Long-Term IDRs may be revised to Stable if the
economic outcome is broadly in line with Fitch's base case. Under
this scenario, Fitch would expect any deterioration in the
financial profile would be small enough to remain commensurate with
a 'bb' Viability Rating definition.
An upgrade of the Viability Rating and Long-Term IDRs appears
unlikely in the short-term as it would require a shallower downturn
and sharper recovery than its current base case, combined with an
improvement in risk appetite and earnings and profitability.
SUPPORT RATING AND SUPPORT RATING FLOOR
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support. An increased
propensity to support would be required for an upgrade but appears
unlikely given the resolution framework in place.
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
The Support Rating and Support Rating Floor are already at the
lowest level on Fitch's rating scales and cannot be downgraded
further.
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).
GOOD GROUP: Makes More Than 150 Workers Redundant Amid COVID-19
---------------------------------------------------------------
Kirsty Johnston at the New Zealand Herald reports that hospitality
chain the Good Group -- owners of upmarket Queenstown restaurants
such as Botswana Butchery and White & Wong's -- has made half of
its more than 300 staff redundant amid the Covid-19 crisis.
The Herald relates that the company's distraught former workers
said they feel let down by the decision, and that getting rid of
them part-way through the 12-week wage subsidy period was "cold".
But Good Group said the pandemic has decimated its business, and it
kept as many staffers as it could.
Most of the 150 affected staff -- based at 14 venues in Auckland
and Queenstown -- are migrant workers, and are now unable to get
new jobs because their visas are invalid. They do not qualify for
welfare, the report says.
"Although people are saying 'go home' we don't have that option. If
I want to get to Argentina right now I'll have to build a boat and
sail there," the Herald quotes Camila Rouco Oliva, 28, who was a
waitress at White & Wong's in Queenstown, as saying.
"And anyway, I've been here two years, this is my home now. Other
people have been here five years, they were applying for residency
and now that's totally stopped."
Eight former workers contacted the Herald with complaints about the
Good Group's process.
They said they were unable to give feedback on the redundancy
proposals given the short timeframe, and that decisions about why
certain people kept their jobs while others were cut were not
explained, the Herald relays.
They also raised concerns about their wage subsidy payments, the
report says. Documents show the group took the subsidy for 345
staff, at a total of NZD2.3 million, the report discloses.
NELSON BUILDING: Fitch Affirms LT IDR at 'BB+', Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Foreign- and
Local-Currency Issuer Default Ratings on Nelson Building Society's
at 'BB+'. The Outlook is Stable.
The affirmation reflects its view that NBS has solid buffers to
withstand its base case scenario at its current rating level. The
Stable Outlook indicates that the society enters the recession with
sufficient headroom in its key financial metrics to remain broadly
consistent with the Viability Rating of 'bb+'.
KEY RATING DRIVERS
IDRS AND VIABILITY RATING
The ratings on NBS are underpinned by its sound profitability and
asset quality, which benefit from the society's larger franchise
relative to its peers. Nonetheless, Fitch believes the coronavirus
pandemic will have significant impact on the New Zealand economy
and will lead to material weakening in its financial profile,
especially its profitability and asset quality over the next two
years.
As part of this rating action, Fitch has revised the outlook on the
'a-' operating environment score for New Zealand non-bank deposit
takers to negative from stable to reflect the significant downside
risks posed by the measures undertaken to slow the spread of the
coronavirus pandemic. Fitch is likely to revise this outlook to
stable if its base case of a recovery starting in 2H20 eventuates.
However, an outcome that is significantly weaker than its base case
is likely to result in a lowering of the score to 'bbb+'.
Fitch believes the significant economic downturn in New Zealand
could lead to a sharp increase in the unemployment rate in the next
two years. This will in turn lead to an increase in non-performing
assets and impairment charges for NBS. As a result, Fitch has
revised the factor outlook for asset quality (factor score of
'bbb-') and earnings and profitability (factor score of 'bbb-') to
negative from stable.
NBS has moderate exposure to business lending, including
agriculture, property investment and development. The society has
been focusing on good-quality borrowers with established track
records, which should help it to maintain its asset quality.
However, Fitch believes the non-performing loan ratio will rise
sharply in late 2020 or early 2021 once repayment holidays end as
there will be a portion of businesses and households that are
unlikely to be able to resume repayments despite the high level of
support from the government.
NBS's profitability has been stronger than that of other New
Zealand NBDTs, supported by its larger franchise and sound asset
quality. Nevertheless, Fitch believes low interest rates and a
material increase in impairment charges could weigh on NBS's
profitability over the next two years. Credit growth may also slow
in the short term due to weak consumer sentiment and declining
demand for credit. The factor scores of 'bbb-' is one notch above
NBS's VR and the negative outlook of the profitability factor score
reflects the downside risk that asset quality deterioration exceeds
its expectation.
Fitch believes NBS's capital ratios will remain satisfactory over
the next two years due to the society's sound internal capital
generation and ability to issue perpetual preference shares to
support capitalisation. Weakening in NBS's profitability should be
largely offset by the slowdown in credit growth. NBS's total
capital ratio has been gradually improving and Fitch expects it to
remain above 11% in the next two years. When assessing
capitalisation of the NBDTs, Fitch uses the Fitch Core Capital
(FCC) ratio as the starting point while the total capital ratio is
also an important measure as it is the only regulatory requirement
applied to these entities currently.
Fitch believes the coronavirus pandemic will have limited impact on
the NBS's funding profile. The society's liquidity position is
sound and may continue to strengthen as credit growth slows. Over
the medium term, Fitch expects NBS's deposit growth to be in line
with credit growth. Similar to other NBDTs, while NBS remains fully
deposit funded, it does not have access to the central bank as a
lender of last resort.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating and Support Rating Floor of NBS reflect its
assessment that while support from the New Zealand government is
possible, it cannot be relied on. The institution is not part of
the open bank resolution scheme, which allows for the imposition of
losses on depositors and senior debt holders to recapitalise failed
institutions. However, Fitch believes the existence of the OBR, in
conjunction with NBS' low systemic importance, will make sovereign
support unlikely.
RATING SENSITIVITIES
IDRS AND VIABILITY RATING
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
The IDRs and Viability Rating of NBS could be downgraded if the
economic environment deteriorates significantly beyond its base
case scenario. Fitch would expect to lower the operating
environment score for New Zealand non-bank deposit takers to 'bbb+'
under this downside scenario, which would result in a lowering of
its assessment of many financial profile factors.
NBS's IDRs and Viability Rating may also be downgraded even if the
operating environment score remains unchanged if the society
substantially increase its risk appetite, possibly to improve the
franchise, resulting in significant deterioration of its financial
profile during an economic downturn, including:
- stage 3 loans/gross loans increasing above 8% for a sustained
period;
- operating profit/risk-weighted assets falling below 0.5% for a
sustained period; or
- the total capital ratio declining below 9.5% without a credible
plan to replenish regulatory capital buffers.
The Short-Term IDRs would only be downgraded if the Long-Term IDRs
were downgraded to 'CCC+' or below.
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
Positive rating action is unlikely in the short term given the
challenges from the economic recession as a result of the
coronavirus. It would also require a substantial improvement in the
society's franchise and capitalisation with no compromise in risk
appetite and other key financial metrics.
The Short-Term IDRs would be upgraded if the Long-Term IDRs were to
be upgraded to at least 'BBB-'.
SUPPORT RATING AND SUPPORT RATING FLOOR
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
The Support Rating and Support Rating Floor are already at the
lowest level on Fitch's rating scales and cannot be downgraded
further.
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support. An increased
propensity to support would be required for an upgrade but appears
unlikely given the resolution framework in place.
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).
Nelson Building Society LT IDR BB+ Affirmed
- ST IDR B; Affirmed
- LC LT IDR BB+; Affirmed
- LC ST IDR B; Affirmed
- Viability bb+; Affirmed
- Support 5; Affirmed
- Support Floor NF; Affirmed
SOUTHLAND BUILDING: Fitch Cuts Subordinated Debt Rating to BB+
--------------------------------------------------------------
Fitch Ratings has revised the Outlook on New Zealand's Southland
Building Society's Long-Term Issuer Default Ratings to Negative,
from Stable, and has affirmed the ratings at 'BBB'. At the same,
Fitch has downgraded SBS's subordinated debt to 'BB+', from 'BBB-',
and removed it from Under Criteria Observation.
The Outlook revision reflects significant downside risk to its base
case expectation of a downturn caused by the actions to slow the
spread of the coronavirus pandemic. However, SBS has solid buffers
at its current rating and Fitch expects it to withstand its base
case scenario at the current rating level.
KEY RATING DRIVERS
IDRS and VIABILITY RATING
SBS's Long-Term IDRs are driven by its Viability Rating, which in
turn reflects a solid financial profile and modest risk appetite,
partly offset by a limited domestic franchise. However, measures
aimed at slowing the spread of the coronavirus have led to a sharp
deterioration in the operating environment, which Fitch expects to
result in a significant weakening of asset quality and earnings
over the next two years.
Fitch has revised the outlook on the 'a' operating environment
score for New Zealand banks to negative, from stable, to reflect
the significant downside risk posed by the measures undertaken to
slow the spread of the coronavirus pandemic. Fitch is likely to
revise this outlook to stable if its base case of a recovery
starting in 2H20 eventuates. However, an outcome that is
significantly weaker than its base case is likely to result in a
lowering of the score to 'a-'.
The factor outlooks for asset quality (score of 'a-') and earnings
(score of 'bbb') have been revised to negative, from stable, to
reflect its expectation of weakening. SBS's core metric of Stage 3
loans/gross loans is at the top-end of Fitch's range for an
asset-quality factor score in the 'a' range, suggesting sizeable
buffers at the current score. However, SBS has greater exposure to
non-mortgage consumer lending relative to many domestic peers and
is an area Fitch believes may be more affected than mortgages due
to the downturn. Asset quality metrics may take time to show
deterioration, given the actions taken by authorities and banks to
support customers through the shutdowns in the economy.
Nevertheless, Fitch expects that a portion of the customer base
will not be able to resume repayments once deferments have ended,
elevating impaired asset levels, which will take time to resolve.
Earnings were showing signs of improvement prior to the pandemic,
but are likely to be significantly affected by the economic
downturn. Low interest rates, subdued loan growth and a large
increase in impairment charges will weigh on earning into 2021.
SBS's core metric in the half year ended September 2019 was around
the middle of what Fitch would expect for a score in the 'bbb'
range, which, combined with the conservative approach to
risk-weighted asset calculation in New Zealand, leaves some buffer
before Fitch would consider lowering the score.
Capitalisation will also be affected by the weakening of asset
quality and earnings. However, Fitch expects SBS to maintain a
common equity Tier 1 ratio that is consistent with the current
score of 'bbb' under its base case and have retained a stable
outlook on this factor. Similarly, Fitch expects SBS's funding
profile to remain broadly stable through the pandemic and have
retained a stable outlook on the funding factor score. A solid
local franchise, subdued loan growth and actions by authorities are
likely to limit any short-term funding pressure.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating and Support Rating Floor reflect its view that,
while support from the New Zealand sovereign is possible, it cannot
be relied on. Fitch believes the existence of an open bank
resolution scheme lowers the propensity of the sovereign to support
its banks. The scheme allows for the imposition of losses on
depositors and senior debt holders to recapitalise a failed
institution.
SENIOR DEBT
SBS's customer deposits and commercial paper programme are rated
one notch above the bank's IDRs, at 'BBB+' and 'F2', respectively.
This is because New Zealand has an effective resolution framework
and there are significant buffers of junior ranking instruments in
the funding structure. SBS's redeemable shares and subordinated
debt combined accounted for more than 120% of its risk-weighted
assets at end-September 2019 and both classes rank below the
customer deposits and commercial paper programme.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
SBS's subordinated Tier 2 debt is rated two notches below its
anchor rating, the Viability Rating, which is consistent with the
base case in Fitch's Bank Rating Criteria, published February 28,
2020. The ratings on these instruments have been downgraded by one
notch to reflect the change in the base case to two notches below
the anchor rating for loss severity in Fitch's updated criteria,
from one notch in the previous version of the criteria. None of the
reasons for maintaining the notching at one below the anchor rating
are present. The ratings of these instruments have been removed
from Under Criteria Observation.
RATING SENSITIVITIES
IDRS and VIABILITY RATING
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
SBS's Long-Term IDRs and Viability Rating could be downgraded if
deterioration in the economic environment results in:
- Stage 3 loans/gross loans increasing above 4% on a consistent
basis;
- operating profit/risk-weighted assets falling below 1% for a
sustained period; or
- the common equity Tier 1 capital ratio declining below 10.5%
without a clear path to return above this level.
A lowering of the operating environment score to 'a-' is unlikely
to be sufficient by itself to result in a downgrade of these
ratings.
The Short-Term IDRs would only be downgraded if the Viability
Rating were to be lowered by at least two notches.
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Outlook on SBS's Long-Term IDRs may be revised to Stable if
economic variables perform broadly in line with its base case.
Under such a scenario, Fitch would expect weakening of the
financial profile to be sufficiently limited to ensure metrics
broadly align with a Viability Rating of 'bbb'.
An upgrade of the Viability Rating and Long-Term IDRs is unlikely
in the short-term as it would require a shallower downturn and
sharper recovery than its current base case, combined with a
substantial increase in capital while maintaining risk appetite and
the funding and liquidity profile.
The Short-term IDRs may be upgraded to 'F2' if Fitch revised its
funding factor score to 'bbb+', from 'bbb'. This would require that
SBS consistently maintain a loan/deposit ratio of less than 110%.
SUPPORT RATING AND SUPPORT RATING FLOOR
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support. An increased
propensity to support would be required for an upgrade, but appears
to be unlikely given the resolution framework in place.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
The Support Rating and Support Rating Floor are already at the
lowest level on Fitch's rating scales and cannot be downgraded
further.
SENIOR DEBT
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The ratings on SBS's customer deposits and commercial paper
programme are subject to broadly the same factors that influence
the IDRs. An upgrade of the Long-Term IDRs is likely to result in
similar action on the customer deposit rating. An upgrade of the
rating on the commercial paper programme would require either the
Long-Term IDRs to be upgraded by at least three notches to 'A' or
the funding factor score to be increased by at least three notches
to 'a' in conjunction with an upgrade of at least one notch of the
Long-Term IDRs; neither is probable in the short to medium term.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
A downgrade of SBS's IDRs would result in similar action on the
ratings of the customer deposits and commercial paper programme. In
addition, a downgrade in the ratings of these instruments could
result from a substantial reduction in the level of redeemable
shares and subordinated debt, such that combined, they accounted
for less than 10% of SBS's risk-weighted assets. However, this
appears to be unlikely to occur.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Factors that Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The subordinated debt ratings are sensitive to the same
considerations that might affect the Viability Rating. An upgrade
of the Viability Rating would result in a similar upgrade of the
subordinated debt ratings.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
A downgrade of SBS's Viability Rating would result in a similar
action on the subordinated debt ratings.
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).
Southland Building Society
- LT IDR BBB; Affirmed
- ST IDR F3; Affirmed
- LC LT IDR BBB; Affirmed
- LC ST IDR F3; Affirmed
- Viability bbb; Affirmed
- Support 5; Affirmed
- Support Floor NF; Affirmed
- Senior unsecured; LT BBB+; Affirmed
- Subordinated; LT BB+; Downgrade
- Senior unsecured; ST F2; Affirmed
WAIRARAPA BUILDING: Fitch Affirms 'BB+' LT IDR, Outlook Now Neg.
----------------------------------------------------------------
Fitch Ratings has revised the Outlook on the 'BB+' Long-Term Issuer
Default Ratings of Wairarapa Building Society to Negative from
Stable. WBS's ratings have been affirmed at the same time.
The Outlook revision reflects significant risks to its current base
case expectations for the downturn that has resulted from measures
by the New Zealand government to slow the spread of the coronavirus
pandemic. Nonetheless, Fitch expects WBS to withstand its base case
scenario at current rating levels, reflecting the buffers in its
key financial metrics. Details can be found in its report Fitch
Ratings Coronavirus Scenarios: Baseline and Downside Cases --
Update, published April 29, 2020.
KEY RATING DRIVERS
IDRS and VIABILITY RATING
WBS's Long-Term IDRs and Viability Rating reflect the society's
moderate franchise and solid capital buffers above regulatory
minimums. Fitch expects the sharp deterioration in the operating
environment to affect WBS's financial profile, especially its
earnings and asset quality over the next two years. Asset quality
will become increasingly important when Fitch assesses WBS's
ratings.
Fitch has revised the outlook on the 'a-' operating environment
score for New Zealand non-bank deposit takers to negative from
stable to reflect the significant risks to the New Zealand economy
due to the coronavirus pandemic. Fitch is likely to revise the
factor outlook to stable if the economy recovers starting 2H20,
meeting its base case expectations. However, an outcome that is
significantly weaker than its base case is likely to result in a
lowering of the score to 'bbb+'.
The factor outlooks for asset quality, with a factor score of
'bb+', and earnings and profitability, with a factor score of 'bb',
have both been revised to negative from stable to reflect its
expectation that these factors will weaken materially in the next
two years. Asset quality has a higher influence on the VR,
reflecting the society's relative strength in this factor, which
supports the current rating.
WBS's asset quality is sound, reflecting its underwriting
standards. Its latest stage 3 loans/gross loans ratio suggests the
society's asset quality score is in the mid 'a' range although the
current score of 'bb+' takes into consideration its investment
property exposures and single-name lending concentrations, which
may lead to higher volatility. The negative outlook reflects the
risk of the economy deteriorating beyond Fitch's base case and loan
impairments exceeding its expectations. Fitch believes the
weakening in asset quality may take some time to become evident due
to the government's support.
WBS's profitability could be pressured by a substantial increase in
impairment charges in the next two years as a result of the
economic downturn and sharp rise in the unemployment rate. The low
interest rate environment and increase in operating expenses could
also add to the profitability pressure. Although Fitch believes
there is still a reasonable buffer at the current score of 'bb' for
earnings and profitability, the factor outlook has been revised to
negative due to the significant risks.
WBS's capitalisation metrics compare favourably with that of peers
and Fitch expects its capital ratios to remain sound. Internal
capital generation may weaken in the short term but Fitch believes
the slowdown in credit growth could partly offset the impact from
the deterioration in profitability. WBS's funding profile should
also remain stable during the pandemic, supported by its sound
liquidity position. WBS remains fully deposit funded although, like
other NBDTs, it does not have access to the central bank as a
lender of last resort.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating and Support Rating Floor of WBS reflect its
assessment that while support from the New Zealand government is
possible, it cannot be relied on. The institution is not part of
the open bank resolution scheme, which allows for the imposition of
losses on depositors and senior debt holders to recapitalise failed
institutions. Fitch believes the existence of the OBR, in
conjunction with WBS' low systemic importance, will make sovereign
support unlikely.
RATING SENSITIVITIES
IDRS and VIABILITY RATING
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
WBS's IDRs and VR could be downgraded if the economic environment
deteriorates significantly beyond its base case scenario. Fitch
would expect to lower the operating environment score for New
Zealand NBDTs to 'bbb+' under this downside scenario, which would
result in a lowering of its assessment of many financial-profile
factors.
WBS's IDRs and VR may also be downgraded even if the operating
environment score remains unchanged if, individually or in
combination:
- stage 3/gross loans increase above 8.5% on a sustained basis
- operating profit/risk-weighted assets falls below 0.25% on a
sustained basis; or
- the Fitch core capital ratio declines below 11.5% without a
credible plan to replenish regulatory capital buffers.
The Short-Term IDRs would only be downgraded if the Long-Term IDR
were downgraded to 'CCC+' or below.
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
Positive rating action is unlikely in the short term in light of
the Negative Outlook. It would require the economic downturn to be
shallower and the recovery swifter than its base case.
The Outlook may be revised to Stable if economic variables perform
broadly in line with its base case. Under such a scenario, Fitch
would expect the weakening of the financial profile to be
sufficiently limited to ensure metrics broadly align with the VR of
'bb+'.
The Short-Term IDRs would be upgraded if the Long-Term IDR were to
be upgraded to at least 'BBB-'.
SUPPORT RATING and SUPPORT RATING FLOOR
Factors That Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade:
The Support Rating and Support Rating Floor are already at the
lowest level on Fitch's rating scale and cannot be downgraded
further.
Factors That Could, Individually or Collectively, Lead to Positive
Rating Action/Upgrade:
The Support Rating and Support Rating Floor are sensitive to any
change in assumptions around the propensity or ability of the New
Zealand government to provide timely support. An increased
propensity to support would be required for an upgrade but appears
unlikely in light of the resolution framework in place.
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 I N G A P O R E
=================
SINGAPORE PRESS: Two Subsidiaries Seek Judicial Management
----------------------------------------------------------
Claudia Tan at The Business Times reports that Singapore Press
Holdings (SPH) announced in a regulatory filing on May 19 that two
of its subsidiaries have each applied to be placed under judicial
management.
BT says the subsidiaries are info-tech firms StreetSine Technology
Group and StreetSine Singapore, which have also applied for interim
judicial managers to be appointed pending the determination of
their applications. A pre-trial conference has been fixed for June
4; the hearing date has yet to be fixed.
SPH's wholly-owned subsidiary, SPH Interactive, holds 60 per cent
of the shares of StreetSine Technology; the remaining shares are
held by Samuel Cranage Baker and Jeremy Lee Chuen Yang, who each
hold 20 per cent, BT discloses.
StreetSine Singapore is wholly owned by StreetSine Technology. It
is in the business of integrating big data sets with mobile
applications to provide property information and transaction tools
to the real estate market.
On April 7, the board announced the legal proceedings commenced by
Mr. Baker and Mr. Lee against SPH Interactive and SPH in relation
to StreetSine Technology, according to the report.
But SPH said that the combined net tangible liabilities and the
combined revenue and pre-tax losses of the two subsidiaries
compared to SPH Group's net tangible assets and consolidated
revenue and pre-tax profits respectively, are in each case less
than 1 per cent. This is based on the audited consolidated
financial statements of the SPH Group for the financial year ended
Aug. 31, 2019, BT relates.
SPH said StreetSine Technology and StreetSine Singapore are
therefore not significant subsidiaries of SPH and the judicial
management applications will not have a material impact on the
Company's operations for the current financial year ending Aug 31,
2020, adds BT.
Singapore Press Holdings Limited -- https://www.sph.com.sg/ --
publishes, prints, and distributes newspapers and magazines. The
Company also invests in properties, provides multimedia,
broadcasting, and telecommunications services, manages shopping
centers and other commercial properties, and operates Internet
portal site.
===============
T H A I L A N D
===============
THAI AIRWAYS: Government OKs Plan for Court-Led Restructuring
-------------------------------------------------------------
Reuters reports that Thailand's cabinet approved a plan to
restructure troubled Thai Airways International Pcl's finances
through a bankruptcy court, the Southeast Asian country's prime
minister said on May 19.
Reuters relates that the plan for a court-led restructuring of the
national carrier replaces a previous proposal of a
government-backed rescue package that was heavily criticised in the
country.
The airline's troubles are the latest example of how the
coronavirus pandemic is crippling the global airline industry, the
report says.
Colombia's Avianca Holdings SA and Virgin Australia Holdings Ltd
have filed for bankruptcy protection since the pandemic broke out.
Thai Airways, though, had been in trouble even before the outbreak
of the coronavirus due to stiff competition from budget airlines
and bloated costs, Reuters relates.
It posted losses every year after 2012, except in 2016. In 2019, it
reported losses of THB12.04 billion ($377.3 million), Reuters
discloses.
"We have decided to petition for restructuring and not let Thai
Airways go bankrupt. The airline will continue to operate," Prime
Minister Prayuth Chan-ocha told reporters at a news briefing,
Reuters relays.
If the request is accepted by the bankruptcy court, Thai Airways
would be given an automatic stay restricting legal action from
creditors.
"The Cabinet also agreed the government will reduce its holding in
Thai Airways to under 50%, ending the airline's status as a
state-enterprise," Transport Minister Saksayam Chidchob told
reporters.
According to Reuters, Thai Airways said the plan will be
implemented through the Central Bankruptcy Court and it would
operate as usual as the restructuring took place.
"Thai Airways will not be dissolved or go into liquidation or be
declared bankrupt," Reuters quotes Thai Airways Acting President
Chakkrit Parapuntakul as saying in a statement.
Operations including passenger and cargo transportation will
continue in parallel with the plan, he said.
Thai Airways International PCL (BAK:THAI) --
http://www.thaiairways.co.th/-- is the national carrier of
Thailand. The company provides air transportation, freight and
mail services on domestic and international routes including Asia,
Europe, North America, Africa and South West Pacific. The Company
is a state enterprise which is controlled by the government and
partly owned by the public.
*********
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.
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