/raid1/www/Hosts/bankrupt/TCRAP_Public/200716.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, July 16, 2020, Vol. 23, No. 142
Headlines
A U S T R A L I A
ADANI ABBOT: S&P Alters Outlook to Stable & Affirms 'BB+' ICR
HEATH STREET: Second Creditors' Meeting Set for July 22
HERCULES NORTHSHORE: Second Creditors' Meeting Set for July 23
MCWILLIAM'S WINES: Second Creditors' Meeting Set for July 24
PACIFIC TRAVEL: Second Creditors' Meeting Set for July 21
STELLER SHORT: Second Creditors' Meeting Set for July 22
T.M. LEWIN: Owes AUD10 Million as Unsolicited Suitors Line Up
C H I N A
CHINA: Industrial Firms in Refinancing Fix as Debt Wall Looms
LIANGSHA DEVELOPMENT: Fitch Affirms BB LT IDRs, Outlook Stable
LUCKIN COFFEE: Replaces Chairman Charles Lu, Names New CEO
ZIJIN MINING: S&P Lowers ICR to 'BB+' on Elevated Leverage
H O N G K O N G
SWATCH GROUP: Accelerates Plans to Wind-down Stores in Hong Kong
I N D I A
ACTIVE TOOLS: CRISIL Hikes Ratings on INR17cr Loans to B+
ADMIN VITRIFIED: ICRA Withdraws B+ Rating on INR20cr Term Loan
BALAJI PLASTIC: ICRA Assigns B+ Ratings to INR1.35cr Loans
DCR INFRA: ICRA Withdraws D Rating on INR6.50cr Term Loan
DILIGENT MEDIA: ICRA Lowers Rating on INR250cr Debentures to D
GOLDEN AMOON: CRISIL Assigns B Rating to INR25cr Long Term Loan
HOUSING DEVELOPMENT: NCLAT Upholds NCLT Order for Insolvency
JAWAHAR SHETKARI: CRISIL Raises Rating on INR40cr Loan to B-
KUMAR RICE: CRISIL Reaffirms B+ Rating on INR1cr Cash Loan
MANN MEDICITI: CRISIL Migrates B Debt Rating From Not Cooperating
MENOKA TEA: ICRA Assigns B Rating to INR4.98cr Fund-based Loan
MULA SAHAKARI: ICRA Reaffirms B+/A4 Ratings on INR100cr Loan
ORANGE OVERSEAS: CRISIL Migrates B+ Rating From Not Cooperating
P.PRAFUL AND COMPANY: Insolvency Resolution Process Case Summary
POONAM GRAH: ICRA Reaffirms B- Rating on INR12cr Cash Loan
RAJASTHAN TUBE: ICRA Lowers Rating on INR20cr Cash Loan to C
RAMI REDDY: CRISIL Migrates B Debt Ratings From Not Cooperating
TEEAM SCORE: CRISIL Reaffirms B Rating on INR2cr LongTerm Loan
TEESTAVALLEY POWER: ICRA Reaffirms D Rating on INR1,014.55cr Loan
THAMES STEELS: CRISIL Raises Rating on INR26.15cr Loan to B-
THRIVE THERAPEUTIC: Insolvency Resolution Process Case Summary
VARIETY LUMBERS: ICRA Reaffirms B- Rating on INR2cr Cash Loan
VENKATA SAI: ICRA Assigns B+ Rating to INR10cr Fund Based Loan
VISURA (INDIA): ICRA Reaffirms B+ Rating on INR26cr LT Loan
J A P A N
J. FRONT RETAILING: Egan-Jones Lowers Unsecured Ratings to BB
NISSAN MOTOR: Egan-Jones Lowers Senior Unsecured Ratings to BB-
S I N G A P O R E
KOON HOLDINGS: Sells Stake in Australian Firm as Part of Scheme
KOON HOLDINGS: To Voluntary Wind Up Precast Division
MULHACEN PTE: S&P Lowers ICRs to 'CCC+/C', Outlook Negative
ZENROCK COMMODITIES: Judicial Manager Flags Questionable Deals
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A U S T R A L I A
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ADANI ABBOT: S&P Alters Outlook to Stable & Affirms 'BB+' ICR
-------------------------------------------------------------
S&P Global Ratings, on July 14, 2020, revised the outlook to stable
from negative on Adani Abbot Point Terminal Pty Ltd. 's (AAPT)
senior secured debt. At the same time, affirmed the 'BB+' issue
credit rating.
Abbot Point Coal Terminal (APCT), located 25km northwest of Bowen
in the Australian State of Queensland, is Australia's northernmost
coal port. The multi-user port has a design capacity of 50 million
tons per annum (mtpa) that is substantially contracted under
medium-to-long term take-or-pay agreements. The port is held under
a 99-year lease acquired by the Adani Group from the Queensland
government early in 2011.
Strengths
-- Relatively stable revenue under take-or-pay contracts and
socialization arrangement
-- Good contracted capacity pipeline from multiple shippers
Risks
-- Exposure to refinancing risk and dependence on cash sweeps
-- Periodic exposure to contract renewals
-- Revision of tariffs at next reset in June 2022
S&P said, "We affirmed the rating and revised the outlook to stable
to reflect AAPT's reduced liquidity risk following the project's
drawdown of the remaining A$170 million shareholder loans to repay
debt due in November 2020.
"Consequently, we consider AAPT's liquidity as adequate over the
next 12 months. The project is likely to generate cash flows of
about A$140 million-A$145 million (excluding income from short-term
contracts), with interest payment of about A$80 million over the
next 12 months. In addition, the next debt maturity comprises
US$140 million due in September 2021, which is more than 12 months
away. Timely refinancing of future debt maturities, typically 12
months in advance, will be critical for stability of the rating and
outlook on AAPT."
At this time, AAPT's plan for its long-term capital structure is
under development. As the company continues to look for refinancing
opportunities in the market, it is likely that shareholder loans
may not remain a permanent part of its capital structure. In
addition, the company is considering an amortization structure for
its senior debt. For now, S&P continues to rate AAPT based on the
original level of senior debt and assume the shareholder funding as
debt-like.
Preliminary stand-alone credit profile
The operations phase stand-alone credit profile (SACP) on AAPT
continues to be 'bb+'. This is partly because we believe the
minimum debt service coverage ratio (DSCR) may fall below 1.80x in
June 2021. S&P calculates its minimum DSCR prior to June 2022,
taking into account only contracted revenue that can be socialized,
and so, exclude some short-term contracted revenue.
Another factor for the SACP are key risks that AAPT may face over
the next two to three years. These include the cost of debt on
future refinancing and the tariff revenue beyond June 2022 as the
"building blocks" for tariff resets are considered, particularly
amid the current low interest rate environment. Other
considerations include the timely commencement of the Carmichael
mine in Queensland, and socialization of capacity to other shippers
at the start of the reset in July 2022.
Liquidity: Adequate
-- AAPT had put in place a subordinated shareholder loan of up to
A$270 million to help cover maturities due in 2020, which it has
fully drawn down now.
-- Consequently, AAPT's available liquidity to refinance the A$170
million debt maturity due in November 2020 is now adequate with
100% coverage (remaining A$100 million was already used to pay the
May 2020 maturity).
-- The US$140 million September 2021 maturity will also become a
liquidity consideration later this year.
-- For an investment-grade credit, we would expect maturities to
be repaid or available liquidity of 1x to cover maturities within
nine to 12 months of debt falling due.
Given the bullet nature of maturities, refinancing risk remains for
AAPT from time-to-time and S&P will continue to monitor this
closely.
S&P said, "The stable rating outlook on AAPT's senior-secured debt
reflects our view of the relative stability and predictability of
the project's cash flows and our expectations that AAPT will manage
its refinancing exposure and refinance its maturing debt well ahead
of time. In addition, we expect the terminal's DSCR to remain
slightly below 1.8x while no debt amortization occurs."
S&P could lower the rating if:
-- AAPT failed to manage its future refinancing requirements in a
timely manner.
-- S&P could also lower the rating if AAPT's DSCR were to drop
below 1.6x. This could happen if AAPT were to receive an adverse
outcome on its terminal infrastructure charge (TIC) for its next
reset.
-- A downgrade could also occur if contracted capacity were to
reduce materially, leading to pressure on remaining users to
socialize lost revenues.
Given the port's current contract profile and the fact that
throughput is below contract levels, it would likely take
significant new contracted throughput within the next 18 months or
permanent deleveraging of the business to warrant an upgrade. A
precursor to the upgrade would be a minimum DSCR above 1.8x.
HEATH STREET: Second Creditors' Meeting Set for July 22
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A second meeting of creditors in the proceedings of Heath Street
Sh1 Pty. Ltd has been set for July 22, 2020, at 3:00 p.m. via
teleconference facility.
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 July 21, 2020, at 4:00 p.m.
Domenico Alessandro Calabretta and Thyge Trafford-Jones of Mackay
Goodwin were appointed as administrators of Heath Street on June
25, 2020.
HERCULES NORTHSHORE: Second Creditors' Meeting Set for July 23
--------------------------------------------------------------
A second meeting of creditors in the proceedings of Hercules
Northshore Pty Ltd has been set for July 23, 2020, at 10:00 a.m.
via virtual meeting only.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by July 22, 2020, at 12:00 p.m.
Joanne Dunn and John Park of FTI Consulting (Australia) Pty Ltd
were appointed as administrators of Hercules Northshore on June 18,
2020.
MCWILLIAM'S WINES: Second Creditors' Meeting Set for July 24
------------------------------------------------------------
A second meeting of creditors in the proceedings of McWilliam's
Wines Group Ltd and Mount Pleasant Wines Pty Ltd has been set for
July 24, 2020, at 11:00 a.m. via teleconference facilities.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by July 23, 2020, at 1:00 p.m.
Gayle Dickerson, Tim Mableson and Ryan Eagle of KPMG were appointed
as administrators of McWilliam's Wines on Jan. 8, 2020.
PACIFIC TRAVEL: Second Creditors' Meeting Set for July 21
---------------------------------------------------------
A second meeting of creditors in the proceedings of Pacific Travel
Retail Partners New Zealand Pty Ltd has been set for July 21, 2020,
at 9:30 a.m. at the offices of HLB Mann Judd, Level 19, 207 Kent
Street, in Sydney, NSW.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by July 20, 2020, at 5:00 p.m.
Todd Andrew Gammel and Barry Anthony Taylor of HLB Mann Judd were
appointed as administrators of Pacific Travel June 16, 2020.
STELLER SHORT: Second Creditors' Meeting Set for July 22
--------------------------------------------------------
A second meeting of creditors in the proceedings of Steller Short
Stays Pty Ltd has been set for July 22, 2020, at 11:00 a.m. via
telephone conference facilities.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by July 21, 2020, at 5:00 p.m.
Timothy James Brace, Michael Carrafa and Peter Gountzos of SV
Partners were appointed as administrators of Steller Short on Sept.
20, 2019.
T.M. LEWIN: Owes AUD10 Million as Unsolicited Suitors Line Up
-------------------------------------------------------------
Matthew Elmas at SmartCompany reports that administrators for
collapsed retailer T.M. Lewin Australia are considering re-opening
stores in Brisbane and Sydney as potential buyers circle the
business.
SmartCompany relates that the formal wear chain, which appointed
administrators from Ernest & Young earlier this month, owes about
70 creditors approximately AUD10 million - 86% of which is tied to
its UK-based parent, owned by private equity firm Torque brands.
T.M. Lewin Australia's five stores have been closed since March due
to the COVID-19 pandemic, but the company's 40 workers remain
employed and are receiving JobKeeper payments, administrators
said.
A first meeting of creditors confirmed EY's Colby O'Brien, Stewart
McCallum and Adam Nikitins as administrators on July 13, amid plans
to potentially re-open stores in Brisbane and Sydney to clear
stock.
A "number of unsolicited approaches" have already been made ahead
of a formal sale process, but administrators declined to clarify
the number or type of those approaches, according to SmartCompany.
What drove T.M. Lewin to the retail ICU? A mix of factors,
administrators said, including declining CBD foot traffic due to
the coronavirus crisis locally, and the collapse of T.M. Lewin in
the UK several months ago, SmartCompany relates.
"Different parts of the retail sector are performing differently
during COVID, and have been impacted differently by COVID,"
SmartCompany quotes EY partner Stewart McCallum as saying in a
statement.
"In T.M. Lewin Australia's case, the reduction in foot traffic in
the CBD - as a result of significantly increased working from home
- had a material negative impact on the business."
According to SmartCompany, the company's UK parent closed its 66
stores in March and later laid off 600 workers in a pre-pack
administration deal in late June.
That deal saw Torque brands buy back the business through its
London-based subsidiary SCP, after originally purchasing the
company from Bain Capital in May.
Administrators for T.M. Lewin Australia did not say whether Torque
Brands is interested in purchasing the local business, says
SmartCompany.
T.M. Lewin Australia is just the latest retail business to fall on
tough times amid the coronavirus outbreak, with the likes of
Seafolly, G-Star Raw, Tigerlily and ASX-listed PAS Group also
restructuring in recent months, SmartCompany notes.
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C H I N A
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CHINA: Industrial Firms in Refinancing Fix as Debt Wall Looms
-------------------------------------------------------------
Bloomberg News reports that refinancing pressure is mounting at
China's industrial firms following unprecedented pandemic-induced
shocks to the sector and a dearth of bond issuance in the past
three months.
Offshore bond sales from high-yield energy and other industrial
companies hit a two-year low in the first half of 2020, with no
sales from April to June, according to Bloomberg-compiled data. It
couldn't have come at a worse time for them as $3.1 billion of
bonds, or more than a quarter of their debt, need to be repaid or
refinanced over the next 12 months, the data showed.
According to Bloomberg, signs of stress are coursing through the
industrial sector in the wake of a historic crash in the oil market
and a March rout in global credit markets that's left borrowers in
a funding crunch. Potential downgrades will keep investors away
from these issuers, which means liquidity may become a problem when
the time comes to repay maturing bonds, according to Hong Kong
Asset Management Ltd.
"With the global real economy still struggling due to the effects
of COVID-19 and the volatility in commodity prices, some issuers in
the affected high-yield industrial sectors such as energy services
and airlines will continue to struggle," Bloomberg quotes Abhishek
Rawat, portfolio manager at Hong Kong Asset Management, who is
cautious on high-yield industrials from China, as saying.
Hilong Holding Ltd. became the latest dollar bond defaulter from
the oil sector in June, after an oil refiner from the eastern
Shandong province missed a principal installment of a $1 billion
loan earlier that month, according to Bloomberg. Hong Kong-listed
oil explorer MIE Holdings Corp. defaulted on a dollar note in May.
While yields on China's junk rated companies have come off
multiyear highs, issuance of such debt outside of property has been
slow to return in the offshore primary market. Even though oil has
recovered and is back at levels last seen in early March, the
rebound in fuel consumption has been patchy at best, Bloomberg
states.
While high-yield industrial firms globally are under pressure,
firms in Europe and the U.S have not faced the same slowdown in
debt sales seen among their Chinese peers, with a 17% and 25%
year-on-year pickup in issuance respectively in the first half, the
data, as cited by Bloomberg, showed.
Bloomberg says investors remain cautious about Chinese firms from
the sector, even as UBS Asset Management Hong Kong Ltd. sees
yield-starved investors moving into Asia's junk bond market.
There were seven rating downgrades and negative outlook changes
made during the first half of this year, the highest number of
negative actions for this period since 2016, Bloomberg discloses
citing data from S&P Global Ratings on the Chinese commodities
firms they rate.
LIANGSHA DEVELOPMENT: Fitch Affirms BB LT IDRs, Outlook Stable
--------------------------------------------------------------
Fitch Ratings has affirmed China-based Liangshan Development Group
Co., Ltd.'s Long-Term Foreign- and Local-Currency Issuer Default
Ratings of 'BB'. The Outlook is Stable. At the same time, Fitch has
affirmed the senior unsecure rating of 'BB' on LSID's USD300
million 7% senior unsecured notes due 2022.
LSID ratings are assessed under Fitch's Government-Related Entities
Rating Criteria. This reflects Liangshan prefecture's control and
ownership of the entity, the government's support record, and the
socio-political and financial impact on the government from a
default by LSID.
LSID is the prefecture's key investment and financing platform for
the government, which aims to improve the economy and social
wellbeing of Liangshan prefecture. LSID manages state-owned assets,
such as mineral-product and hydroelectricity operations. LSID also
shoulders the government's public welfare projects, including
construction of roads and infrastructure, educational institutes,
medical and healthcare facilities as well as shanty town
redevelopment and underprivileged household relocation.
KEY RATING DRIVERS
'Very Strong' Status, Ownership and Control: The Liangshan
State-owned Assets Supervision and Administration Commission owned
65% of LSID as of June 2020 with the rest held by 14 county-level
SASACs or treasuries within the prefecture. The Liangshan SASAC
approves LSID's operational and financing plans, appoints and
supervises its board members, and audits and monitors the company's
performance under its current legal status. The company's major
decisions, such as M&A, spin-offs, bankruptcy and liquidation,
would require verification and approval from the government. The
local government also sets the course of LSID's strategic
development and appoints most of the senior management. The
government also monitors closely the company's financing plans and
debt levels. LSID is also required to report its operational and
financial results to the government on a regular basis.
'Strong' Support Record and Expectations: The government has been
supporting LSID via financial subsidies and capital or resource
injections to ensure the company can sustain its operations.
Specific funds have been allocated to support LSID's
poverty-alleviation projects. In 2019, government subsidies
received by LSID increased six-fold. Liangshan SASAC also further
injected capital of CNY269.7 million, which increased LSID's
paid-in capital by 5% to reach CNY5,641.9 million. In addition,
LSID's share capital continued to increase in 2019 due mainly to
share and asset transfers of other GREs and utility facilities,
capital injections by the county's governments as well as project
compensation.
'Moderate' Socio-Political Implications of Default: LSID is likely
to be mandated to continue to operate its policy business even
after financial default, as its businesses are essential to social
welfare and a key political priority for the local government.
Therefore, Fitch expects substantial government support via
administrative or fiscal measures to ensure LSID's continued
operational viability. The government may also appoint other policy
GREs to provide substitute services, if necessary.
'Very Strong' Financial Implications of Default: LSID is the
largest GRE within Liangshan prefecture and has been tasked with
raising funds for public welfare projects and investment, which are
crucial for the government's goal of eliminating poverty. A default
by LSID would impair the government's credibility and have a
significant impact on the availability and cost of domestic and
foreign financing options.
Standalone Credit Profile of 'b': Fitch has assessed LSID's revenue
defensibility as 'Weaker' under the Public-Sector,
Revenue-Supported Entities Rating Criteria because the company has
a fairly diversified business profile with somewhat limited pricing
ability. Fitch considers the operating risk as 'Midrange' based on
its predictable cost structure. LSID has a 'Weaker' financial
profile, too.
Its financial profile is moderately leveraged, but Fitch sees
potentially high debt growth because of capital-intensive
public-work investments and weak cash generation. Fitch forecasts
net debt/Fitch-calculated EBITDA to be above 20x by 2024 under its
rating case scenario due to the capex plan. Fitch expects the low
debt coverage and asset growth to continue in the medium term due
to infrastructure development in the prefecture and LSID's policy
role to alleviate poverty. Fitch also forecasts cash flow from
operations/debt and interest coverage will remain below 1x in the
medium term. Nevertheless, LSID's stable contractual framework and
the local government's consistent financial support will mitigate
the risks.
DERIVATION SUMMARY
LSID's ratings are assessed under Fitch's GRE criteria. Fitch
believes the local government has a strong incentive to provide
extraordinary support to the company, if needed. Fitch has also
factored in the Liangshan prefectural government's control and
support, LSID's public-service functions, such as poverty
alleviation and infrastructure development, as well as the impact
of a default on the government.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- An upgrade of Fitch's credit view on Liangshan prefecture's
ability to provide subsidies, grants or other legitimate resources
allowed under China's policies and regulations.
- An increased incentive for Liangshan Prefecture to provide
support to LSID, including stronger socio-political or financial
implications of default or a stronger support record.
- Improvement of the SCP or the liquidity position of LSID.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A downgrade of Fitch's credit view on Liangshan prefecture's
ability to provide subsidies, grants or other legitimate resources
allowed under China's policies and regulations.
- Significant weakening in the socio-political and financial
implications of a default, a weaker record of support by the
government, or dilution of the government's stake.
- Deterioration of the SCP or the liquidity position of LSID.
Rating action on LSID would lead to similar action on the US dollar
notes.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Public Finance issuers have a
best-case rating upgrade scenario (defined as the 99th percentile
of rating transitions, measured in a positive direction) of three
notches over a three-year rating horizon; and a worst-case rating
downgrade scenario (defined as the 99th percentile of rating
transitions, measured in a negative direction) of three notches
over three years. The complete span of best- and worst-case
scenario credit ratings for all rating categories ranges from 'AAA'
to 'D'. Best- and worst-case scenario credit ratings are based on
historical performance.
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).
LUCKIN COFFEE: Replaces Chairman Charles Lu, Names New CEO
----------------------------------------------------------
Sherisse Pham at CNN Business reports that Luckin Coffee has ousted
its chairman and named a new chief executive, as the company tries
to draw a line under an accounting scandal that has rocked its
business.
CNN relates that the embattled Chinese coffee chain named Jinyi Guo
chairman and CEO, after shareholders voted to remove co-founder and
former chairman Charles Zhengyao Lu, Luckin said in a regulatory
filing on July 13.
Luckin went public last year and surged due to what appeared to be
strong sales growth. But then the company - which was once hailed
as China's homegrown rival to Starbucks (SBUX) - admitted in April
that a good portion of its 2019 revenues were fabricated, CNN
recalls. Its shares collapsed following the revelations.
Luckin stock is down nearly 93% for the year, and the Nasdaq has
decided to delist the company, the report says.
According to CNN, Guo has been the acting CEO since May, after
Luckin fired chief executive Jenny Zhiya Qian and chief operating
officer Jian Liu - the executive whom the company said was the
architect of the fraud. Earlier this month, the company said it
fired 12 other employees who, at the direction of Qian and Liu,
participated in or had knowledge of the fabricated transactions.
Before being tapped for the top job, Guo was Luckin's senior vice
president in charge of product and supply chain. He also previously
worked as assistant to the chairman for UCAR, a company founded by
Lu, the report discloses.
CNN relates that Lu has come under pressure, as the scandal sparked
a crackdown on Chinese companies listed in the United States. The
businessman apologized earlier this year, saying he was in "deep
pain and remorse" over the situation.
"I can't sleep at night," he said in a statement in May, which was
widely reported by multiple Chinese media outlets, including The
Paper and China Business Network - both owned by state-controlled
corporations. He also insisted that he "didn't play tricks" in
order to cheat investors.
It's not clear what's next for Luckin now it will no longer have
access to the stock market to raise new capital, CNN notes. As of
late last year the company had 3,680 stores.
About Luckin Coffee
Based in China, Luckin Coffee Inc., provides non-alcoholic
beverages. The Company offers various types of 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 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.
ZIJIN MINING: S&P Lowers ICR to 'BB+' on Elevated Leverage
----------------------------------------------------------
S&P Global Ratings lowered its long-term issuer credit rating on
Zijin Mining Group Co. Ltd. and its long-term issue rating on the
company's guaranteed senior unsecured notes to 'BB+' from 'BBB-'.
S&P removed the ratings from CreditWatch, where they were placed
with negative implications on June 11, 2020.
Zijin's adjusted leverage is likely to remain elevated after its
acquisition of Tibet Julong Copper Ltd. (Julong Copper). S&P said,
"We expect the company's debt-to-EBITDA ratio to temporarily rise
to 4.2x-4.5x in 2020 before declining to 3.3x-3.8x in 2021
following the acquisition of 50.1% in Julong Copper in July 2020.
We anticipate that Zijin's adjusted debt will increase to Chinese
renminbi (RMB) 70 billion-RMB75 billion in 2020 and 2021. This will
be driven by the acquisition consideration of RMB3.88 billion,
additional capex of RMB7.2 billion over the next 12-18 months,
Julong Copper's syndicated loan of RMB5.61 billion, and Zijin's
outstanding external guarantee of RMB2.7 billion that we treat as
debt. Julong Copper's Qulong mine will only commence production
from end-2021, and we expect it to contribute operating cash flows
from 2022."
Zijin's higher gold and copper outputs, and robust debt servicing
ability should help it to deleverage over the next two to three
years. S&P said, "We forecast the company's debt-to-EBITDA ratio
will drop below 3.0x from 2022. The ramp-up of its existing and
newly acquired mines will lift the output of mined gold and copper
by 30% and 80%, respectively, by 2022, from 41 tons and 369,857
tons in 2019. We expect Zijin's EBITDA to grow by 15%-25% annually
over the next two years, and robust operating cash flows will
support debt repayment."
S&P believes Zijin will continue to have access to low cost funding
from various channels because of its good relationship with banks
and strong capital market standing, particularly in the domestic
market. The company's EBITDA interest coverage will stay at
6.5x-7.5x, stronger than that of peers with similar financial
leverage. S&P therefore assigns a positive comparable rating
analysis to Zijin.
Project execution risk and Zijin's high appetite for mergers and
acquisitions (M&As) may delay deleveraging. The company's three
large copper projects--the Kamoa-Kakula mine, the Qulong copper
mine, and the upper zone of Timok mine--will start production in
2021, according to the management plan. However, project execution
risk related to the timing, volume, and cost of production could
slow Zijin's cash flow generation. The company has also shown a
high appetite for growth through M&As in the past two to three
years. Since late 2018, Zijin spent RMB33 billion on acquisitions,
excluding the proposed RMB1.7 billion deal for Guyana Goldfield
Inc. Any further large debt-funded acquisitions could lift its
leverage again.
Zijin's reduced cash and high short-term maturities have strained
its liquidity. The company's cash balance is likely to have decline
from RMB7.9 billion as of March 31, 2020, after meeting acquisition
costs and construction capex for Julong Copper. Zijin also had
short-term debt maturities of RMB27.1 billion. S&P therefore
believes the refinancing pressure has risen.
S&P said, "The stable outlook reflects our view that Zijin's higher
gold and copper production volume and cost reduction will help it
meet its high capex needs over the next 12-24 months. We anticipate
the company's debt-to-EBITDA ratio will stay at 3.0x-4.0x over the
period, assuming no large-scale debt-funded acquisitions.
S&P may lower the rating if Zijin's deleveraging trend reverses and
the debt-to-EBITDA ratio approaches 4.0x. This may happen if:
-- The company makes further large debt-funded acquisitions;
-- The ramp-up of production in the company's key projects,
including the Kamoa-Kakula copper mine and Qulong copper mine, are
significantly delayed; or
-- Its cost reduction in gold and copper mining is less than our
expectation.
S&P could raise the rating if Zijin's debt-to-EBITDA ratio falls
below 3.0x for a sustained period and maintains adequate liquidity,
helped by a controlled investment appetite. This could be due to:
-- Higher metal prices than S&P expects;
-- Faster ramp-up of production than we anticipate in the
company's key projects.
S&Pe could also upgrade Zijin if it sees lower risks in its
business operations. A smooth ramp-up of the Kamoa copper mine to a
world class asset, with scale and production costs in line with the
pre-feasibility study, would indicate such improvement.
=================
H O N G K O N G
=================
SWATCH GROUP: Accelerates Plans to Wind-down Stores in Hong Kong
----------------------------------------------------------------
The Standard reports that Swatch Group on July 14 said it has
accelerated plans to shut stores definitively in Hong Kong as well
as shops that sell its colorful namesake brand and Calvin Klein, as
Chow Tai Fook Jewellery (1929) reported a 73 percent year-on-year
plunge in same-store sales in the quarter ending in June.
The Standard relates that the world's biggest watchmaker - which
owns brands across all price levels, from Breguet, Blancpain,
Tissot, Omega and Longines to Swatch and CK timepieces - announced
it has cut a record 2,400 jobs and closed 260 stores since
December.
It currently operates around 1,800 stores globally.
According to The Standard, the news came after Swatch reported a
net operating loss of CHF327 million (HKD2.7 billion) during the
first half of this year, with sales over the past six months
plunging 43 percent from a year ago.
Chief executive Nick Hayek said that many of the closures were
related to the decision to end a 22-year contract to sell Calvin
Klein watches, The Standard relays.
He said that while the group had maintained operating profits in
June, there was nearly no sales in Hong Kong currently.
The Standard meanwhile reports that Chow Tai Fook said its retail
sales value during the quarter ended June shrank by 20.2 percent
from a year ago, with that from Hong Kong, Macau and other markets,
which accounted for 11.4 percent of the total, plunging 69 percent
year-on-year.
Retail sales value from the mainland China market went up by only
0.1 percent from a year ago, said the company, the report relays.
The same-store sales decline in the mainland narrowed to 11.2
percent year-on-year last month as business resumed. The jeweler
recorded a net closure of three stores in Hong Kong during the
quarter, The Standard adds.
Switzerland-based The Swatch Group Ltd manufactures watches and
jewellery.
=========
I N D I A
=========
ACTIVE TOOLS: CRISIL Hikes Ratings on INR17cr Loans to B+
---------------------------------------------------------
CRISIL has upgraded its rating on the long term bank facilities of
Active Tools Pvt Ltd (ATPL) to 'CRISIL B+/Stable' from 'CRISIL D'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 1 CRISIL B+/Stable (Upgraded
from 'CRISIL D')
Export Packing 11 CRISIL B+/Stable (Upgraded
Credit from 'CRISIL D')
Long Term Loan 5 CRISIL B+/Stable (Upgraded
from 'CRISIL D')
Upgrade in rating reflects the track record of timely payment of
all debt obligations in last three months. This was on account of
adequate cash flows and timely receipt of customer payments leading
to improved liquidity. Further, operations have started in May 2020
with revenue of around INR8 crores booked till June 2020, with
timely receipt of debtor realization which will further aid
liquidity profile.
Further, CRISIL has revised its analytical approach for arriving at
the rating of ATPL from consolidation with Active Packaging and
Advance tools and forgings to standalone. This is because of
management posture of looking at the three companies at individual
levels. Henceforth, no financial support from one company to
another will be there.
The rating continues reflect the extensive experience of promoters
of ATPL and their funding support. This strength is partially
offset by moderate financial risk profile and Working
capital-intensive operations.
Analytical Approach
CRISIL has treated the unsecured loan of INR7.61 crores as on March
31, 2019, extended by promoters, as neither debt nor equity as they
are subordinated to bank debt and are expected to be maintained in
the business.
Key Rating Drivers & Detailed Description
Weaknesses:
* Working capital-intensive operations: The GCAs were 235 days as
on March 31, 2019 due to inventory of 95 days and receivables of 99
days resulting into high dependence on bank lines and credit from
suppliers reflecting in creditors at 119 days. Effective working
capital management will remain a rating sensitivity factor over the
medium term.
* Moderate financial risk profile: The gearing is high at 4.56
times as on March 31, 2019, because of high dependence on working
capital debt and debt funded capex undertaken in Fiscal 2018. Ratio
is expected to remain at similar level owing to moderate accretion
to reserve and moderate working capital debt. Debt protection
metrics is average with interest coverage and net cash accrual to
adjusted debt ratios of 2.13 times and 0.09 time, respectively in
Fiscal 2019.
Strength:
* Extensive experience of promoters and established relationship
with customers and their funding support: Presence of over 12
years in the tool manufacturing industry has enabled the promoters
to establish a large clientele and supplier base, and strong
position in the global market (90-95% of total revenue in Fiscal
2018). Further group also benefits from funding support from the
promoters in the form of unsecured loan i.e. INR7.61 crores as on
31st March 2019.
Liquidity Stretched
Liquidity is stretched marked by average bank limit utilization of
around 89% for last three past ending May 2020. Further, net cash
accruals are expected to be around INR74 lakhs against repayments
of INR72 lakhs in FY21. Liquidity profile is supported by unsecured
loans of INR7.61 crores as on 31st March 2019, up from INR5.80
crores as on 31st March 2018.
Outlook: Stable
CRISIL believes ATPL will continue to benefit over the medium term
from the extensive experience of its promoters and established
customer base.
Rating Sensitivity factors
Upward factor
* Sustained increase in accretions resulting in improvement
in financial risk profile marked by gearing of less than
3 times.
* Improvement in working capital cycle
Downward factor
* Stretch in working capital cycle marked by Gross current
asset of more than 300 days leading to stretch in liquidity
profile
* Deterioration in financial risk profile.
ATPL, incorporated in 2004 in Jalandhar and promoted by Mr. Pritam
Singh and his sons, Mr. Narinder Singh, Mr. Rajinder Singh, and Mr.
Gurnam Singh, is engaged into manufacturing of hand tools such as
L-handles, hammers, hacksaws, and vices; and carpentry tools.
ADMIN VITRIFIED: ICRA Withdraws B+ Rating on INR20cr Term Loan
--------------------------------------------------------------
ICRA has withdrawn the ratings on certain bank facilities of Admin
Vitrified Pvt. Ltd. (AVPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based-
Term Loan 20.00 [ICRA]B+ (Stable); Withdrawn
Fund-based-
Cash Credit 8.00 [ICRA]B+ (Stable); Withdrawn
Non-fund Based–
Bank Guarantee 2.00 [ICRA]A4; Withdrawn
Rationale
The long-term and short-term ratings assigned to AVPL have been
withdrawn at the request of the company, based on the no-objection
certificate provided by its banker. ICRA is withdrawing the rating
and that it does not have information to suggest that the credit
risk has changed since the time the rating was last reviewed. ICRA
has withdrawn the Stable outlook on the long-term rating.
Key rating drivers and their description
Key rating drivers have not been captured as the ratings are
being withdrawn.
Liquidity position
Not captured as the ratings are being withdrawn.
Rating sensitivities
Rating sensitivities have not been captured as the ratings are
being withdrawn.
AVPL was established as a private limited company in 2017 to
manufacture digital glazed vitrified tiles and soluble salt
vitrified tiles with nano polishing. The manufacturing unit,
located in Morbi, has an installed capacity to produce 7,800 boxes
of vitrified tiles per annum in size - 600mmX600mm. It is managed
by Mr. Jayantilal Vansjaliya, Mr. Prayag Vansjaliya, Mr. Arvind
Kankasaniya, Mr. Rajnikant Panchotiya, Mr. Bhavesh Kankasaniya and
Mr. Durlabhji Panchotiya.
BALAJI PLASTIC: ICRA Assigns B+ Ratings to INR1.35cr Loans
----------------------------------------------------------
ICRA has assigned rating to the bank facilities of Shree Balaji
Plastic, as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based
Term Loan 0.05 [ICRA]B+ (Stable); assigned
Fund-based
Working Capital
Facilities 1.30 [ICRA]B+ (Stable); assigned
Rationale
The assigned ratings take into account the firm's relatively
small-scale operations and its average financial risk profile,
which is characterised by modest profit margins, stretched capital
structure, average coverage indicators and high working capital
intensity of operations. Furthermore, the ratings factor in the
highly fragmented industry structure, which results in intense
competition. The ratings are also constrained by the exposure of
Shree Balaji Plastic's profitability to volatility in key input
prices.
The ratings, however, favorably factor in the moderate experience
of the promoters and the established track record of the firm in
the polymer processing industry.
The Stable outlook on the [ICRA]B+ rating reflects ICRA's opinion
that Shree Balaji Plastic will continue to benefit from the
experience of its promoters.
Key rating drivers and their description
Credit strengths
* Moderate experience of management and established track record of
firm: The promoters have moderate experience and the firm has an
established track record of more than a decade in the polymer
processing industry.
Credit challenges
* Average financial risk profile: The firm's scale of operation is
small and has remained stagnant in the range of INR9.00-10.50 crore
in the past three fiscals. The overall financial risk profile
remains average, as evident from the small net worth base of
INR1.18 crore and a gearing of 2.17 times as on March 31, 2020. The
debt coverage indicators also remain average owing to low
profitability (Total Debt/OPBDITA at 4.48 times and NCA/Debt at
18%). The working capital intensity remained high, with NWC/OI at
30% as on FY2020-end, due to stretched receivables and high
inventory holding.
* Profitability susceptible to input price fluctuations: The
profitability of the firm remains susceptible to input price
fluctuations as its major raw material, polypropylene waste, is a
derivate of crude oil and thus volatile in nature. Thus, the
ability of the firm to pass on any adverse fluctuation in raw
material prices to its customers remains critical.
* Intense competition from established players and unorganised
sector: The business environment remains competitive, given the
fragmented and unorganised industry structure of the polymer
processing industry. A large portion of the industry remains
unorganised, with few major organised players, thereby
limiting/pressurising Shree Balaji Plastics's pricing flexibility.
Liquidity position: Stretched
The liquidity position of the firm is stretched, given the negative
free cash flows reported in FY2020, coupled with the limited
cushion available in the form of unutilised cash credit limits and
free cash and liquid investments. The average working capital limit
utilisation remained high, at 97% of its sanctioned limits, for the
period April-2019 to May-2020.
Rating sensitivities
Positive triggers
* Significant scaling up of operations with increase in
profitability
* Improvement in working capital cycle
Negative triggers
* Substantial decline in scale of operations or erosion in
operating margins
* Any large debt-funded capex or stretch in working capital
cycle
Established in 2009 as a proprietorship concern of Ms. Rachna
Gupta, Shree Balaji Plastic is involved in the processing of
polypropylene waste to form recycled/repurposed granules. The
firm's manufacturing unit is located at Surat, and is equipped to
process ~150 metric tonnes (MT) of waste per month. The promoters
have moderate experience of close to a decade in the polymer
processing industry. The associate concern of the firm, Shree
Balaji Plastic was established in 2016 and is equipped to process
~100 MT of PP waste per month to form granules. The granules are
supplied to compounders, who further process them to manufacture
non-woven fabric, non-woven bags, crop covers, medical gowns/masks,
drapes etc. for the firm on a job work basis.
DCR INFRA: ICRA Withdraws D Rating on INR6.50cr Term Loan
---------------------------------------------------------
ICRA has withdrawn the ratings on certain bank facilities of DCR
Infra (DI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund based- 6.50 [ICRA]D ISSUER NOT COOPERATING;
Term Loan Withdrawn
Rationale
The long-term Ratings assigned to DI have been withdrawn at the
request of the company, based on the No Due certificate provided by
its banker. ICRA is withdrawing the rating and that it does not
have information to suggest that the credit risk has changed since
the time the rating was last reviewed.
Key rating drivers and their description
Key rating drivers have not been captured as the rating is being
withdrawn.
Liquidity position
Not captured as the rating is being withdrawn.
Rating sensitivities
Not captured as the rating is being withdrawn.
Established in January 2014, DCR Infra (DI) is a partnership firm
to build, construct and sell- commercial complex 'Gokul Solitaire'
at Vesu in Surat. Mr. Dharmesh Patel, Mr. Chetan Mania and Mr.
Ronak Patel are the partners of the firm, who have more than one
and half decade of experience in the real estate sector. The
project is located on a plot admeasuring 2419 sq. mtr, and has 125
shops with a total saleable area of 85,698 sq. ft.
DILIGENT MEDIA: ICRA Lowers Rating on INR250cr Debentures to D
--------------------------------------------------------------
ICRA has revised the ratings on certain bank facilities of Diligent
Media Corporation Limited (DMCL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Non-convertible 250.0 [ICRA]D ISSUER NOT COOPERATING,
Debenture (NCD) Rating continues to remain
Programme under Issuer Not cooperating
category; revised from [ICRA]C
ISSUER NOT COOPERATING
Rationale
The rating downgrade reflects the default by DMCL in servicing the
NCD repayment of INR438.9 crore (including redemption premium) due
on June 30, 2020. As informed by the debenture trustee to ICRA,
DMCL has not made the requisite payment on the due date.
Furthermore, since the NCD was backed by the corporate guarantee of
Zee Media Corporation Limited (ZMCL), the same was also invoked;
however, no payments were received from ZMCL.
The rating for INR250-crore NCD of DMCL continues to remain under
'Issuer Not Cooperating' category. The rating is denoted as
"[ICRA]D ISSUER NOT COOPERATING". As part of its process and in
accordance with its rating agreement with DMCL, 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 ICRA's policy in respect of
non-cooperation by a rated entity (available at www.icra.in), a
rating view has been taken on the entity based on the best
available information. 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.
Until October 9, 2019, DMCL published DNA, an English daily
newspaper, which was circulated in Mumbai and Ahmedabad. As per a
scheme of arrangement and amalgamation among ZMCL, DMCL, Mediavest
India Private Limited and Pri-Media Services Private Limited,
ZMCL's demerged print media undertaking has been vested with DMCL,
while Mediavest India Private Limited and Pri-Media Services
Private Limited have been amalgamated with DMCL with effect from
April 1, 2017. Further, DMCL was listed on the stock exchange in
December 2017, with a mirror shareholding of ZMCL. As on March 31,
2020, the promoters held a 62.17% stake in DMCL.
With effect from October 10, 2019, the company has ceased the print
publication of all editions of DNA. It shall, however, continue to
concentrate on publication through its digital platform -
dnaindia.com.
GOLDEN AMOON: CRISIL Assigns B Rating to INR25cr Long Term Loan
---------------------------------------------------------------
CRISIL has assigned its 'CRISIL B/Stable' rating to the long term
bank facility of Golden Amoon Retreats (GAR).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 25 CRISIL B/Stable (Assigned)
The rating reflects average financial risk profile and modest scale
of operations with exposure to cyclical nature of hospitality
industry. These weaknesses are partially offset by extensive
experience of promoters and their funding support.
CRISIL has also taken into cognizance, moratorium being granted by
the bankers in debt servicing, as permitted by the Reserve Bank of
India (RBI), which should contain the risk of default.
Analytical Approach
Unsecured loans from promoters (INR1.47 crores as on March 31,
2020) is treated as Neither Debt Nor Equity (NDNE) as these loans
are expected to stay in the business and has track record of
non-withdrawal.
Key Rating Drivers & Detailed Description
Weakness:
* Average Financial Risk Profile Financial risk profile is average
with networth estimated at INR1.77 crore and total outside
liabilities to tangible networth estimated (TOLTNW) of over 12
times as on March 31, 2020.
* Modest scale of operations with exposure to cyclical nature of
hospitality industry: Firm's scale of operations is modest
indicated by revenue of INR7.22 Cr in fiscal 2020. The hotel
industry is vulnerable to changes in the domestic and international
economies. Additionally, costs remain high for premium properties
even during downward shifts in demand; cash flows from these
properties are therefore more susceptible to downturns.
Strengths:
* Extensive experience of the promoters and funding support: The
promoter, Mr. Lion Ramesh Babu is involved in diverse business from
electronics, real estate development and hotel & resorts. Further
promoters have infused unsecured loans and capital to support the
liquidity during fiscal 2019 and fiscal 2020. Backed by promoters
experience and strategic location firm has also established brand
name regionally.
Liquidity Poor
The firm has poor liquidity, driven by expected annual cash accrual
inadequate to meet repayment obligations. Firm's reliance on
funding support from promoters to continue over the medium term.
Cash and bank balance is estimated at INR0.16 crore
March 31, 2020. Firm has debt funded capex plans of around INR3-4
crore in fiscal 2021 and 2022.
Outlook: Stable
CRISIL believes that firm will continue to benefit from promoters
funding support and state of art facility.
Rating Sensitivity factors
Upward factor
* Strengthening of business risk profile, driven by sustained
revenue growth by over 20% while maintaining operating
profits resulting in higher accruals
* Improvement in financial risk profile backed by repayment of
term loans or significant capital infusion
Downward factor
* Fall in operating margin or revenues resulting in PAT losses
above INR2 crore
* Larger than expected debt funded capital expenditure or
investments in group companies impacting the financial risk
profile particularly liquidity
Established in June 2017 by Mr. Lion Ramesh Babu, GAR is a luxury
resort located on the Bangalore-Kolar NH4 Highway. The resort
spread over an area of 5 acres has a total occupancy of 75 rooms
with varying specifications.
HOUSING DEVELOPMENT: NCLAT Upholds NCLT Order for Insolvency
------------------------------------------------------------
The Economic Times reports that the National Company Law Appellate
Tribunal (NCLAT) has upheld the National Company Law Tribunal
(NCLT) order to initiate insolvency proceedings against Housing
Development & Infrastructure Ltd (HDIL), and rejected the plea of
its promoter Rakesh Wadhwan.
A three-member bench of the appellate tribunal observed that the
NCLT had given ample opportunity to HDIL to settle the matter
amicably with its lenders, but it has failed to make the payment or
arrive at a settlement, ET relates.
Earlier on Aug. 20, 2019, the Mumbai bench of National Company Law
Tribunal (NCLT) had directed to initiate insolvency proceedings
against HDIL, after allowing the insolvency plea filed by Bank of
India, claiming default of a loan of INR522 crore by the realty
firm, ET recalls.
"In view of our finding as aforesaid, no interference is called for
against the impugned Order dated August 20, 2019. Therefore, Appeal
fails," said the NCLAT bench headed by Acting Chairperson Justice B
L Bhat, ET relays.
According to ET, the NCLAT also rejected the contentions of Mr.
Wadhwan that order was passed by the NCLT without granting any
opportunity to the company to file a reply and was a violation of
the principle of Natural Justice.
Terming it "erroneous", the NCLAT said HDIL was granted ample
opportunity to file reply but chose not to do so.
"On perusal of record from the paper book, it is apparent that
again and again time was granted to the Corporate Debtor (HDIL)
from February 1, 2019 to March 28, 2019, in view of the possibility
of the settlement," the appellate tribunal, as cited by ET, said.
Despite taking several opportunities from the NCLT for settlement
with the financial creditor, HDIL defaulted in making the payment.
"Therefore, the contention of the Appellant that Order has been
passed without affording an opportunity for filing Reply, in
violation of the principle of natural justice is without any
basis," the NCLAT said.
ET says the appellate tribunal also observed that this was the
second time the lenders had to approach the NCLT for the default of
the same debt.
Earlier, Bank of India had moved a plea to initiate insolvency
against HDIL in 2018, however, it was not pressed as the company
had offered a one-time settlement.
"Based on that offer, the Adjudicating Authority (NCLT) permitted
the withdrawal of the earlier Petition by its Order dated September
25, 2018," the appellate forum said.
Following this HDIL, then in compliance of one-time settlement
issued post-dated cheques which were returned, dishonored and Bank
of India was constrained to file fresh proceeding under Section 7
of the Code, the NCLAT observed, ET relays.
"In the second Petition again, the Adjudicating Authority provided
several opportunities to the Corporate Debtor considering the scope
of the settlement. However, after the failure of any hope of
settlement, the Order of admission was passed against the corporate
debtor," it noted.
Earlier, on July 10, a Mumbai-based court had refused bail to
Rakesh Wadhawan and Sarang Wadhawan, ET reports.
According to ET, HDIL promoters Rakesh Wadhawan and his son Sarang
are accused, besides several others, in the Rs 4,355-crore Punjab &
Maharashtra Cooperative (PMC) Bank scam, which surfaced in
September last year.
The case is being probed by Enforcement Directorate, along with
Economic Offences Wing of Mumbai police.
The case stems from massive loans given by PMC Bank to HDIL, ET
notes.
About HDIL
Housing Development & Infrastructure Limited (HDIL) is real estate
development company. The Company's services include residential,
commercial, and retail real estate development.
The National Company Law Tribunal (NCLT) on Aug. 20, 2019, admitted
an application filed by Bank of India to initiate insolvency
proceedings against the company.
JAWAHAR SHETKARI: CRISIL Raises Rating on INR40cr Loan to B-
------------------------------------------------------------
CRISIL has upgraded its ratings on the bank facilities of Jawahar
Shetkari Sahakari Soot Girni Ltd (JSSSGL) to 'CRISIL
B-/Stable/CRISIL A4' from 'CRISIL D/CRISIL D'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 6.03 CRISIL A4 (Upgraded from
'CRISIL D')
Cash Credit 40 CRISIL B-/Stable (Upgraded
from 'CRISIL D')
Letter of Credit 8 CRISIL A4 (Upgraded from
'CRISIL D')
Proposed Long Term 14.17 CRISIL B-/Stable (Upgraded
Bank Loan Facility from 'CRISIL D')
Upgrade in ratings reflect the track record of timely payment of
all debt obligations in at least last three months. This was on
account of adequate cash flow generation in fiscal 2020, owing to
improvement in operating profitability.
The ratings continue to reflect JSSSGL's weak debt protection
metrics, large working capital requirement and susceptibility to
intense competition and volatility in cotton prices. These
weaknesses are partially offset by established market position in
the cotton yarn business and comfortable capital structure.
Key Rating Drivers & Detailed Description
Weaknesses:
* Weak financial risk profile: Debt protection metrics were weak
reflected in interest coverage and net cash accruals to adjusted
debt (NCATD) of 1.36 time and 0.05 time, respectively in fiscal
2020. This was mainly on account of losses recorded in the past,
leading to lower accruals.
* Large working capital requirement: Operations are working capital
intensive, reflected in gross current assets (GCAs) of 580 days,
which was mainly on account of the seasonal availability of cotton
and hence the requirement to hold high inventory of 2-3 months. The
society gets limited credit on procurement and funds the inventory
largely by bank debt. Receivables' cycle has also been elongated
reflected in debtor days of 176 days as on March 31, 2020 due to
delays in payments. Thus, CRISIL believes the overall working
capital requirement to remain at similar levels over the medium
term.
* Susceptibility to intense competition and volatility in cotton
prices: Intense competition may continue to restrict scalability of
operations, and limit the pricing power with suppliers and
customers, thereby constraining profitability. Prices of cotton are
volatile as its availability depends on the extent of rainfall.
Cotton prices are also affected by change in international demand.
Moreover, with the breakout of Covid-19 pandemic, and subsequent
lockdown, which has led to the slowdown in the demand, the business
risk profile of the society is expected to remain constrained over
near term.
Strengths:
* Established market position in the cotton yarn business: The
society is one of the leading cotton spinning mills in
Maharashtra's co-operative sector with a track record of 38 years.
It has developed long-standing relationship with customers and
suppliers, which should continue to support the business.
* Comfortable financial risk profile: The society's capital
structure has improved as on Mar 31, 2020, reflected in networth of
INR108.16 crore, gearing of 1.01 time and total outside liabilities
to adjusted networth of (TOLANW) of 1.13 time (1.65 time and 2.21
times, respectively). The improvement in financial risk profile was
backed by increased profitability and infusion of funds by National
Cooperative Development Corporation in the form of capital subsidy.
Thus, the financial risk profile is likely to remain at similar
level over the near term on account of no major debt funded capex
and moderate networth.
Liquidity Poor
Expected annual cash accrual of INR3-6 crore in fiscals 2021 and
2022 will be tightly matched against repayment obligations of
INR7.0 crore in fiscal 2022. The fund-based bank limits of INR40
crore have been highly utilised at 95-100 per cent for the 12
months through May 2020. Cash and equivalent was INR1.28 crore as
on March 31, 2020. Since the society has availed for the moratorium
on interest payments and principle repayments of term debt till
August, 2020 as a part of RBI's Covid-19 fund relief measures,
which has provided comfort in the liquidity. CRISIL believes that
an improvement in cash accruals and enhancement in bank lines to
meet the repayment obligations and manage the working capital cycle
shall remain key monitorable factor for the credit over the near
term.
Outlook: Stable
CRISIL believes JSSSGL will continue to benefit from the extensive
experience of its trustees, and established relationships with
clients.
Rating Sensitivity factors
Upward factors
* Increase in revenue and sustenance of profitability, leading
to cash accrual of more than INR8 crore
* Improvement in working capital cycle, with gross current
assets of less than 200 days leading to lower utilisation of
working capital limit
Downward factors
* Decline in revenue and profitability, leading to cash accrual
of less than INR2 crore
* Stretch in working capital cycle weakens the financial risk
profile, especially liquidity
JSSSGL was set up in 1981 as a co-operative society by Mr. Rohidas
Patil and other members. The society manufactures cotton yarn of
24s to 42s counts, in Dhule, Maharashtra.
KUMAR RICE: CRISIL Reaffirms B+ Rating on INR1cr Cash Loan
----------------------------------------------------------
CRISIL has reaffirmed its ratings on the bank facilities of Kumar
Rice Industries (KRI) at 'CRISIL B+/Stable/CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 7 CRISIL A4 (Reaffirmed)
Cash Credit 1 CRISIL B+/Stable (Reaffirmed)
Long Term Loan 1 CRISIL B+/Stable (Reaffirmed)
Proposed Cash
Credit Limit 1 CRISIL B+/Stable (Reaffirmed)
The ratings continue to reflect KRI's modest scale of operations in
the intensely competitive rice milling industry, and exposure to
volatility in raw material prices. These weaknesses are partially
offset by the extensive experience of its partners.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations: With revenue of INR4.55 crore in
fiscal 2020, scale remains small in the competitive rice processing
industry. This limits KRI's bargaining power with customers and
restricts benefits arising from economies of scale that large
players enjoy. Scale of operations is expected to remain subdued
over the medium term.
* Exposure to volatility in raw material prices: Profitability is
expected to be 10.1% in fiscal 2021 and will remain exposed to
fluctuations in raw material prices. This is compounded by the
firm's inability to pass on the entire increase in input prices to
customers because of intense competition in, and commoditized,
industry.
Strength
* Extensive experience of the partners: Benefits from the partners'
decade-long experience, their in-depth understanding of market
dynamics, and established relationships with clients and suppliers
should support the business.
Liquidity Stretched
Cash and cash equivalents were marginal at INR40 lakh as on March
31, 2020. Term debt obligation is expected to be INR8 lakh per
annum in fiscals 2021 and 2022 against accrual of INR25-30 lakh per
annum. Fund-based limit of INR1 crore was utilized at 80% over the
six months through May 2020.
Outlook: Stable
CRISIL believes KRI will continue to benefit from the extensive
experience of its partners.
Rating sensitivity factors
Upward factors
* Significant revenue growth while maintaining operating margin
above 10%
* Better working capital cycle
Downward factors
* Decline in operating margin below 8% leading to accrual of
less
than INR10 lakh
* Further stretch in working capital cycle adversely affecting
liquidity
Set up in 2011 as a partnership firm by Mr. D Ajay Kumar, Mr. D V S
Naidu, Ms D T Chandramukhi and Mr. D V S A Narsimha Rao, KRI mills
and processes paddy into rice at its unit in West Godavari, Andhra
Pradesh.
MANN MEDICITI: CRISIL Migrates B Debt Rating From Not Cooperating
-----------------------------------------------------------------
Due to inadequate information and in line with Securities and
Exchange Board of India guidelines, CRISIL had migrated its rating
on the long-term bank facilities of Mann Mediciti Wellness Centre
Private Limited (MMWC) to 'CRISIL D/issuer not cooperating'.
However, MMWC has subsequently shared the requisite information for
review of the rating. Consequently, CRISIL is migrating its rating
of MMWC's long-term bank facilities to 'CRISIL B/Stable' from
'CRISIL D/issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5.8 CRISIL B/Stable (Migrated
from 'CRISIL D ISSUER NOT
COOPERATING')
Proposed Working 0.2 CRISIL B/Stable (Migrated
Capital Facility from 'CRISIL D ISSUER NOT
COOPERATING')
The rating action factors in improvement in working capital cycle
of the company, leading to moderation in the bank lines (as there
were no overdrawal in the bank lines in past few months) and hence
improving the liquidity of the company.
The rating also reflects the modest scale of MMWC's operations and
large working capital requirement. These weaknesses are partially
offset by the extensive experience of the promoter in the medical
industry.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations: In light of the current capacity,
scale is likely to remain small over the medium term. Revenue is
estimated at a minimal INR7.24 crore in fiscal 2020.
* Large working capital requirement: The working capital cycle may
remain stretched over the medium term and hence will be closely
monitored. Gross current assets (GCAs) have been 280-360 days
during the four fiscals ended March 31, 2020; GCAs are estimated at
around 300 days as on March 31, 2020, driven by stretched
receivables of around 250 days (that include third-party
administrators such as Ex-servicemen Contributory Health Scheme
(ECHS) and Central Government Health Scheme). CRISIL believes that,
MMWC's operations will remain working capital intensive over the
medium term.
Strength
* Extensive experience of the promoter: The promoter's expertise of
over 28 years, his strong understanding of local market dynamics,
and healthy relationships with suppliers and customers should
continue to support the business.
Liquidity Stretched
Liquidity of the company is likely to remain stretched reflected in
high bank limit utilization (as bank lines are utilized at around
92% for 12 months ended 92%, with multiple instances of full
utilization). However liquidity is comforted by net cash accruals
which are expected to remain moderate in the range of INR2-2.5
crore over the medium term against no repayment obligation.
Outlook: Stable
MMWC should continue to benefit from the extensive experience of
the promoter.
Rating sensitivity factors
Upward factors
* Substantial and sustainable increase in revenue, profitability
and cash accrual
* Significant improvement in the working capital cycle, with
GCAs below 200 days
Downward factors
* Steep decline in revenue and profitability, leading to cash
accrual of less than INR1.5 crore
* Further stretch in the working capital cycle with stretch in
debtors
MMWC, incorporated in 2009 by Dr Jasbir Singh Mann, operates a
multi-specialty hospital in Jalandar, Punjab. The hospital is
empanelled with ECHS, Employee State Insurance Scheme and Food
Corporation of India.
MENOKA TEA: ICRA Assigns B Rating to INR4.98cr Fund-based Loan
--------------------------------------------------------------
ICRA has assigned rating to the bank facilities of Menoka Tea
Estate Private Limited (MTEPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based 4.98 [ICRA]B (Stable); Assigned
Limits–Working
capital
Fund-based 1.60 [ICRA]B (Stable); Assigned
Limits–
Overdraft
Limit
Untied Limits 5.63 [ICRA]B (Stable)/[ICRA]A4;
Assigned
Rationale
The assigned ratings consider the small scale of current operations
of MTEPL and weak financial profile, characterised by losses
incurred at the net level over the past few years and weak coverage
indicators. The ratings are also impacted by the risks associated
with tea for being an agricultural commodity, which depends on
agro-climatic conditions. The company would also remain exposed to
the inherent cyclicality of the fixed-cost intensive tea industry
that leads to variability in profitability and cash flows of bulk
tea producers such as MTEPL. The presence of a single garden in
Assam exposes the company to geographical concentration risk and
accentuates the business risk profile of the company. Moreover,
domestic tea prices are impacted by the demand-supply situation and
prices in the international market, which would continue to have a
bearing on the profitability of Indian players, including METPL.
The ratings, however, favorably consider the long experience of the
management in the tea industry and MTEPL's superior quality of tea,
commanding a premium over the industry average. Going forward, the
company's ability to increase productivity of the tea estate along
with its ability to pass on the higher labour costs would be
important determinants of its credit risk profile.
The Stable outlook on the [ICRA]B rating reflects ICRA's opinion
that MTEPL will continue to benefit from the long experience of the
management in the tea industry and its quality of produce.
Key rating drivers and their description
Credit strengths
* Long experience of the management in the tea industry: The
company has a long track record of operations and is currently led
by Mr. Roy and his family. The company was promoted by Late Mr.
Pulin Krishna Roy in 1958. The family has been associated with the
tea industry for over five decades.
* Good quality of tea evident from significant premium commanded by
its produce compared to industry averages: The average realisation
of the company's tea increased to INR192 per kg in FY2020
(provisional) from INR183 per kg in FY2019. Good quality helps
MTEPL's tea command a premium over the North Indian auction average
prices.
Credit challenges
* Small scale of current operations: The company's scale of
operations remained at a small level, with an operating income of
INR10.82 crore in FY2019 compared to INR8.51 crore in FY2018.
* Weak financial profile characterised by net losses and weak
coverage indicators: The company reported losses at the net level
in the last two years due to which the coverage indicators have
remained weak, as reflected by NCA/total debt of 7.6% and
TD/OPBDITA of 7.44 in FY2019. ICRA expects the coverage indicators
to deteriorate further with losses expected in FY2020. Also, the
Covid-19 pandemic would not only result in production loss but
would also have a bearing on the quality and negatively impact the
business profiles of all the tea growers in Q1
FY2021 at least.
* Risks associated with tea for being an agricultural commodity:
The profitability and cash flows of bulk tea producers remain
volatile owing to the risks associated with tea for being an
agricultural commodity, as the production volume and quality of tea
depend on agro-climatic conditions as well as the inherent
cyclicality of the fixed-cost intensive industry.
* High geographical concentration due to presence of a single
garden – The presence of a single garden in Assam exposes the
company to geographical concentration risk and accentuates the
business risk profile of the company.
* Prices of Indian tea, in spite of its better quality, remain
vulnerable to price fluctuation in the international market: Prices
of domestic tea, despite its better quality, are impacted by
international prices to some extent. Hence, the demand-supply
situation in the global tea market, in ICRA's opinion, would
continue to have a bearing on the profitability of Indian players,
including METPL.
Liquidity position: Poor
The company's liquidity profile is expected to remain poor on
account of continuing losses. However, ICRA notes that MTEPL does
not have any long-term debt service obligations and the same is
likely to provide some cushion to its cash flows.
Rating sensitivities
Positive triggers - ICRA may upgrade MTEPL's ratings if the company
is able to increase its scale of operations substantially while
improving profitability, capital structure and coverage indicators
on a sustained basis. The ratings may also be upgraded in case of a
substantial increase in its net worth level.
Negative triggers - Pressure on MTEPL's rating may arise if there
is a decline in revenues and margins and/or a further stretch in
the liquidity position.
Incorporated in 1958, Menoka Tea Estate (MTEPL) has a long track
record of operations in tea business and is currently led by Mr.
Roy and his family members. The company has one garden, Menoka tea
estate, located in Baksa district in Assam with a processing
capacity of 0.60 million kg of tea. MTEPL primarily produces
orthodox variety of tea.
MULA SAHAKARI: ICRA Reaffirms B+/A4 Ratings on INR100cr Loan
------------------------------------------------------------
ICRA has reaffirmed the ratings on certain bank facilities of MULA
Sahakari Sakhar Karkhana Limited (MSSKL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term/ 100.00 [ICRA]B+ (Stable)/[ICRA]A4;
Short Term- reaffirmed; removed from
Fund Based Issuer Not-co-operating
category
Rationale
The rating reaffirmation continues to factor in the company's
fluctuating operating income owing to the volatile sugar revenues.
Further, in FY2020, a considerable decline in cane crushed and,
hence, power sales mainly on low bagasse availability as well as
decrease in sugar revenues are likely to impact its revenues and
profitability metrics.
The ratings also remain constrained by the company's high working
capital intensity of operations resulting in large reliance on
working capital borrowings and the consequent stretched capital
structure and low coverage indicators. ICRA notes the intense
competition in the business from a number of sugar mills in the
vicinity.
The rating also remains constrained by the company's vulnerability
to sugar realisations as well as cane procurement cost movement,
which were impacted by external factors like agro-climatic
conditions and regulations with respect to cane pricing and
exports.
The rating reaffirmation, however, continues to factor in the long
operational track record of MSSKL in the sugar industry and its
forward integration into distillery and power cogeneration
operations, whose revenues provide some cushion against the
cyclical sugar revenues. The ratings also continue to factor the
favorable location of the company's catchment area in the sugar
belt of Maharashtra and its established relationship with numerous
growers in the region culminating in assured cane supply on a
year-on-year basis.
The Stable outlook on the long-term rating reflects ICRA's opinion
that MSSKL will continue to benefit from the extensive experience
of its promoters in the domestic sugar industry.
Key rating drivers and their description
Credit strengths
* Long operational track record in the sugar belt of Maharashtra:
MSSKL, based out of Ahmednagar, Maharashtra, has an operational
track record of close to 50 years. Its long existence has
facilitated healthy relationship with close to 17,000 cane farmers
in its catchment area, mainly Rahuri taluka and adjacent villages
rendering assured cane supply over the years.
* Forward integration into distillery and power cogeneration
provides cushion against cyclicality in sugar business: The
company's sugar operations are integrated with 30 Mega Watt (MW)
power operations and 30 kilo litres per day (KLPD) of distillery
operations, which provide the necessary cushion against volatile
sugar revenues. In FY2019, MSSKL garnered close to INR285.80 crore
from sugar operations, while INR40.12 crore and INR35.43 crore was
obtained from power and distillery operations, respectively.
However, the revenues in FY2020 are expected to be muted, mainly
because of the drop in sugar and power revenues.
* Government support to the sugar industry with soft loans and
interest subvention, among others: The company benefits from the
Government's support to the sugar industry in the form of low cost
soft loans and export subsidy schemes, among others, which
materially impact the profitability of sugar mills. Timely receipt
of these fiscal benefits also remains crucial with regard to their
profitability.
Credit challenges
* Pressure on sales revenue and profitability in FY2020: The
revenue profile of the company remains dominated by sugar revenues,
followed by distillery and power revenues. Sugar revenues have
demonstrated a fluctuating trend in the past mainly due to low
volumes sold or non-remunerative realisations. Drop in sugar and
power revenues in FY2020 is expected to result in overall decline
in revenues over the last fiscal. While sugar revenues are expected
to drop due to low volumes sold over the previous fiscal, the
decline in power revenues is attributed to low bagasse availability
from the sugar unit as well as a sharp revision in the power
purchase rates on expiry of the power purchase agreement (PPA) with
the state DISCOM1 on March 31, 2019. Revenues will continue to
remain contingent on sugar sales. The Covid-19 pandemic had,
however, minimal impact on the company's revenues and operations
during the April–May 2020 period. The operating margins improved
to 12.08% in FY2019 from 9.52% in FY2018, while net profit margins
remained thin at around 0.1% in both the fiscals on high
depreciation and interest charges. Profitability margins are likely
to remain subdued in FY2020 mainly because of decline in revenues
amid high fixed costs.
* Leveraged capital structure and stretched coverage indicators:
The debt profile of the company has historically been dominated by
working capital loans, followed by term loans and fixed deposits.
Gearing remained at 7.08 times in FY2019, while interest coverage
and TD/OPBIDTA remained at 9.07 times and 1.69 times, respectively.
Significant working capital debt along with a soft term loan
undertaken in FY2020 is likely to maintain the pressure on the
credit metrics. Improvement in the same will remain a key rating
sensitivity, going forward.
* High working capital intensity mainly on sugar inventory build-up
on GoI stipulated, controlled sugar sales mechanism: The working
capital has remained high over the past fiscals, mainly because of
significant year-end sugar stocks. Working capital intensity in
FY2018 and FY2019 remained at 98%. Inventory days remained at 224
days in FY2018, while the same remained at 427 days in FY2019.
Inventory days increased in FY2019 on account of the controlled
monthly sugar release mechanism adopted by the Government,
restricting sugar sales.
* Exposure to agro-climatic risks, regulatory changes and cyclical
trends in sugar business: Cane production remains a function of
agro-climatic conditions, which ultimately impacts the volumes and
realisations of sugar and its by-products. Though the cane crushing
volumes remained almost stable in SY2019 over SY2018, they remained
impacted in SY2020 mainly because of the drought in the catchment
area last year. Moreover, the sugar business remains vulnerable to
any unfavourable changes in Government policies related to the
commodity's trade.
* Vulnerability of profitability to volatility in sugar
realisations and cane procurement costs: Typically, the
profitability of sugar entities are driven by sugar realisations
and cane procurement costs. While sugar realisations remain market
driven, the state governments fix the minimum support price (MSP)
for cane. Any adverse movements in the same impact the contribution
margins and, hence, the profitability of sugar mills.
Liquidity position: Stretched
MSSKL's liquidity remains stretched as evidenced by the negative
fund flow from its operations in FY2019. As any other typical sugar
mill, the company holds substantial sugar inventory, and its
liquidation at remunerative pricing remains vital as far as
liquidity is concerned. The factory has sizeable term loan
repayments in the next few fiscals, which are expected to be met
partially through internal accruals and use of working capital bank
lines. The average working capital utilization for the 12-month
period ended April 30, 2020 remained at 63% while the undrawn
limits on April 30, 2020 remained at INR75.16 core. The working
capital utilisation as a percentage of drawing power as on March
31, 2020, remained at 83%, implying some liquidity headroom.
Rating sensitivities
Positive triggers - ICRA could upgrade MSSKL's rating if the
company demonstrates a healthy and sustained growth in its overall
scale of operations with significant growth in profitability and
coverage indicators.
Negative triggers - Negative pressure on the company's rating could
arise if any delay in liquidation of inventory impacts cash levels.
An increase in working capital intensity and working capital levels
leading to stretched coverage indicators may also trigger a
downward rating revision.
Incorporated in 1970, Mula Sahakari Sakhar Karkhana Limited (MSSKL)
is located in the Ahmednagar district of Maharashtra. The company
has a sugar mill with a crushing capacity of 5,000 tonne crushing
per day (TCD). The company has more than 17,000 cane producing
members. It has 87 villages under its command area. The sugar mill
is also forward integrated with a distillery of 30 KLPD capacity
and cogeneration unit of 30 MW capacity.
In FY2019, it reported a net profit of INR0.44 crore on an OI of
INR368.39 crore over a net profit of INR0.40 crore on an OI of
INR268.06 crore in the previous year. In FY2020, the company has
reported revenues of INR264.51 crore on a provisional basis.
ORANGE OVERSEAS: CRISIL Migrates B+ Rating From Not Cooperating
---------------------------------------------------------------
Due to inadequate information and in line with Securities and
Exchange Board of India guidelines, CRISIL had migrated its ratings
on the bank facilities of Orange Overseas Pvt Ltd (OOPL) to 'CRISIL
B+/Stable/CRISIL A4 Issuer Not Cooperating'. However, the
management has started sharing the information required for
carrying out a comprehensive review. Consequently, CRISIL is
migrating the ratings to 'CRISIL B+/Stable/CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 4 CRISIL B+/Stable (Migrated
from 'CRISIL B+/Stable ISSUER
NOT COOPERATING')
Letter of Credit 1 CRISIL A4 (Migrated from
'CRISIL A4 ISSUER NOT
COOPERATING')
The ratings continue to reflect the company's modest scale of
operations and large working capital requirement. These weaknesses
are partially offset by the extensive experience of the promoters
in the readymade garments trading industry and their funding
support.
Analytical Approach
Of the unsecured loans of INR8.44 crore provided by the promoters
as on March 31, 2020, 75% has been treated as equity and 25% as
debt, as the loans are subordinated to bank debt and are expected
to be retained in the business over the medium term. Moreover,
interest on the loans may be deferred in case of exigency.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations and volatility in profitability:
Despite compounded annual growth rate of 7% over the three fiscals
through 2019, driven by frequents order from current clients,
revenue was modest at an estimated INR12.99 crore in fiscal 2020.
* Large working capital requirement: Operations are working
capital-intensive, as reflected in gross current assets of 566 days
as on March 31, 2019, driven by sizeable inventory and receivables.
OOPL keeps a wide range of fabrics, leading to high inventory of
449 days as on March 31, 2019, expected to remain at a similar
level over the medium term.
Strengths
* Extensive experience of the promoters: The two-decade-long
experience of the promoters has helped the company navigate
business cycles and establish strong relationships with suppliers
and customers.
* Funding support from the promoters: The promoters continue to
provide funding support to the company through unsecured loans (Rs
8.44 crore as on March 31, 2019.
Liquidity Poor
Liquidity is likely to remain under pressure over the medium term,
driven by large working capital requirement. Bank limit utilisation
averaged 97% over the 12 months through April 2020. Cash accrual,
expected at a modest INR13.41 lakh in fiscal 2022, would be
insufficient against maturing debt of INR18 lakh. However, accrual
is supported by continuous infusion of unsecured loans by the
promoters. Current ratio stood at 1.05 times as on March 31, 2020.
Outlook: Stable
CRISIL believes OOPL will continue to benefit from the promoters'
extensive experience.
Rating Sensitivity factors
Upward factors
* Sustained increase in revenue and stable operating margin
leading to cash accrual of more than INR50 lakh
* Efficient working capital management
Downward factors
* Decline in revenue or profitability leading to cash accrual of
less than INR20 lakh
* Withdrawal of unsecured loans, decline in net cash accrual or
stretch in the working capital cycle weakening the financial
risk profile
Incorporated in 2002, OOPL trades in men's garments and fabrics. It
imports around 70% of its goods, and the remaining comprises
domestic purchase. Mr. Ravi Shankar Jindal and Mr. Achin Bindlish
are the promoters of the company.
P.PRAFUL AND COMPANY: Insolvency Resolution Process Case Summary
----------------------------------------------------------------
Debtor: P.Praful and Company Agency (India) Private Limited
Registered office:
508, Narayan Chamber
Near Patang Hotel
Ashram Road
Ahmedabad GJ 380009
IN
Insolvency Commencement Date: July 3, 2020
Court: National Company Law Tribunal, Ahmedabad Bench
Estimated date of closure of
insolvency resolution process: December 30, 2020
(180 days from commencement)
Insolvency professional: Mr. Navjit Singh
Interim Resolution
Professional: Mr. Navjit Singh
218-A, 1st Floor
Shop No. 4, Rama Market
Pitampura
Delhi 110034
E-mail: navjit92ca.ip@gmail.com
- and -
Resurgent Resolution Professionals LLP
(IPE)
905, 9th Floor, Tower C
Unitech Business Zone
Sector-50, Gurugram
Haryana 122018
E-mail: ppcaipl.cirp.cirp2020@gmail.com
Last date for
submission of claims: July 23, 2020
POONAM GRAH: ICRA Reaffirms B- Rating on INR12cr Cash Loan
----------------------------------------------------------
ICRA has reaffirmed ratings on certain bank facilities of Poonam
Grah Nirman (Pvt) Ltd. (PGNPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based 12.00 [ICRA]B- (Stable); Reaffirmed
Limits–
Cash Credit
Non-Fund based 4.70 [ICRA]B- (Stable)/[ICRA]A4;
Limits–Bank Reaffirmed
Guarantee
Untied Limits 0.30 [ICRA]B- (Stable)/[ICRA]A4;
Reaffirmed
Rationale
The reaffirmation of ratings takes into consideration the
relatively small scale of operations of PGNPL and its high working
capital intensity of operations, exerting pressure on the liquidity
position. The ratings are also constrained by the weak financial
profile of PGNPL, characterised by a leveraged capital structure
and weak coverage indicators. The ratings further consider PGNPL's
high geographical and customer concentration risks with most of the
contracts executed in Kerala. Two customers accounted for 100% of
its revenues in FY2020 (provisional). The ratings continue to be
impacted by the intensely competitive and fragmented nature of the
construction business, which limits its pricing flexibility,
exerting pressure on the margin.
The ratings, however, derive comfort from the long experience of
the promoter in the civil construction business.
The Stable outlook on the [ICRA]B- rating reflects ICRA's opinion
that PGNPL will continue to benefit from the long experience of the
promoter in the construction industry.
Key rating drivers and their description
Credit strengths
* Long experience of the promoter: The Promoter, Mr. R. Anantha
Narayanan, has over two decades of experience in the field of
construction and infrastructure related activities. He looks after
the day-to-day operations of the company and his vast experience
mitigates the operational risk to an extent.
Credit challenges
* Relatively small scale of current operations: PGNPL's scale of
operations is relatively small. The operating income of the company
increased to INR35.88 crore in FY2020 (provisional) from INR15.05
crore in FY2019. However, the same was lower than expected due to
cancellation of a high value order.
* Weak financial profile characterised by a leveraged capital
structure and weak coverage indicators: The capital structure has
remained leveraged with a gearing of 1.62 times as on March 31,
2020 (provisional) compared to 1.98 times as on March 31, 2019. Low
profits and cash accruals have kept the coverage indicators at a
weak level over the past few years.
* High working capital intensity of operations: PGNPL's working
capital intensity of operations has remained high in the past, as
reflected by the net working capital relative to operating income
(NWC/OI) of 48% in FY2020 (provisional) against 107% in FY2019.
This, in turn exerts pressure on the liquidity position,
restricting its financial flexibility to a large extent.
* High geographical and customer concentration risks: PGNPL is
primarily a Kerala-based player with the entire order book derived
from this state, exposing the company to high geographical
concentration risk. Moreover, PGNPL has derived 100% of its revenue
in FY2020 only from Tarmat Ltd and Cochin International Airport
Ltd, which exposes it to high client concentration risk as well.
* Fragmented and intensely competitive nature of the industry,
exerting pressure on margin: The construction business is highly
fragmented in nature and is characterised by intense competition
among many players. Moreover, small and medium-sized government
civil construction projects lead to low entry barriers and allow
many players to enter this sector, thus intensifying competition.
Liquidity position: Poor
ICRA notes that the high working capital intensive nature of
operations exerts pressure on the liquidity position of the
company, as reflected by the high working capital limit
utilisation. However, expected cash accruals from the business
would be sufficient for servicing the long-term debt obligations.
Rating sensitivities
Positive triggers - ICRA may upgrade PGNPL's ratings if the
company's top line improves substantially, aided by timely
execution of existing orders as well as an adequate inflow of fresh
orders. Moreover, an improvement in the liquidity position may also
lead to a rating upgrade.
Negative triggers - Pressure on PGNPL's rating may arise if there
is a decline in revenues or profit margins due to a
lower-than-expected inflow of fresh orders. An increase in working
capital intensity might also exert downward pressure on the
ratings.
Incorporated in 1998, Poonam Grah Nirman Pvt Ltd is involved in the
civil construction business, which includes construction of roads,
bridges, buildings etc. The company is promoted by Mr. R. Anantha
Narayanan.
RAJASTHAN TUBE: ICRA Lowers Rating on INR20cr Cash Loan to C
------------------------------------------------------------
ICRA has revised the ratings on certain bank facilities of
Rajasthan Tube Manufacturing Company Limited (RTMCL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Cash Credit 20.00 [ICRA]C; ISSUER NOT COOPERATING;
Revised from [ICRA]B (Stable);
ISSUER NOT COOPERATING; Rating
Continues to remain under the
'Issuer Not Cooperating'
Category
Non-fund 12.25 [ICRA] A4; ISSUER NOT COOPERATING;
Based Rating Continues to remain under
the 'Issuer Not Cooperating'
category
Material Event
RTMCL has published its Q4 FY2020 and full-year FY2020 standalone
financial performance on Bombay Stock Exchange (BSE) on June 29,
2020. There has been significant deterioration in the financial
performance of the company.
The ratings for the INR32.25 crore bank facilities of RTMCL
continue to remain under Issuer Not Cooperating category. The
long-term rating is now denoted as [ICRA]C ISSUER NOT COOPERATING.
The short-term rating is denoted as [ICRA]A4 ISSUER NOT
COOPERATING. 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. 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.
Impact of the Material Event and Rationale
ICRA cannot accurately assess the impact of the material event as
the entity remains non-cooperative. The current rating action has
been taken by ICRA basis its Q4 FY2020 and full-year FY2020
financials published on BSE on June 29, 2020.
RTL was incorporated in 1985 and became a public limited company in
1995. The main products of the company include ERW (Electric
resistance welding) steel pipes, with size ranging from 15 mm to
250 mm. The company's manufacturing facility is located at Jaipur
(Rajasthan) and has an annual capacity of 45,000 Metric Tonnes Per
Annum (MTPA). The pipes manufactured by the company have varied
applications in water, gas and sewage pipes, structural purposes,
idlers/conveyors, water wells (casing pipes) etc.
RAMI REDDY: CRISIL Migrates B Debt Ratings From Not Cooperating
---------------------------------------------------------------
Due to inadequate information and in line with Securities and
Exchange Board of India guidelines, CRISIL had migrated its ratings
on the bank facilities of Rami Reddy Constructions (RRC) to 'CRISIL
B/Stable Issuer Not Cooperating'. However, the company's management
has started sharing requisite information for carrying out a
comprehensive review of the rating. Consequently, CRISIL is
migrating its rating on the bank facilities of RCC to 'CRISIL
B/Stable' from 'CRISIL B/Stable Issuer Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Loan Against 1.2 CRISIL B/Stable (Migrated
Property from 'CRISIL B/Stable ISSUER
NOT COOPERATING')
Long Term Loan 18.8 CRISIL B/Stable (Migrated
from 'CRISIL B/Stable ISSUER
NOT COOPERATING')
The rating continues to reflect susceptibility to risks and
cyclicality inherent in the Indian real estate industry, revenue
concentration risks and its exposure to risks related to its
ongoing real estate projects in Hyderabad, Telangana. These rating
weaknesses are partially offset by the benefits derived from the
extensive experience of RRC's promoters in the real estate
development business and its moderate financial risk profile
supported by moderate funding policies.
Key Rating Drivers & Detailed Description
Weakness:
* High project risks related to its ongoing project in Hyderabad,
Telangana: RRC is currently executing a residential project in
Hyderabad which has high project risk due to high implementation
and funding risk. The firm is exposed to the risk related to the
timely completion of the project and saleability. Delayed bookings
or receipt of customer advances may impact the liquidity and hence
remain a key monitorable.
* Exposure to cyclicality in the Indian real estate industry and
regional concentration in revenue profile: RRC business risk
profile is susceptible to slowdown in the Indian real estate market
and regional concentration in revenue profile with presence in
Hyderabad, Telangana only. The real estate sector in India is
cyclical and is marked by volatile prices, opaque transactions, and
a highly fragmented market structure.
Strengths:
* RRC benefits from the promoters extensive experience in the real
estate business: The promoters have more than one decade of
experience in the construction industry and have implemented
several residential and commercial real estate projects in
Hyderabad, leading to established presence.
* Moderate financial risk profile: RRCs financial risk profile is
supported by the management's moderate funding policy for its
ongoing project with higher reliance on debt. This is expected to
result in a DSCR of over 1.5 times over the next 3 years.
Liquidity Stretched
RCC has stretched liquidity marked by early stages of construction
and dependence on customer advances for funding of the project.
Over 40% of the cost of the project has been funded out of external
debt and remaining is to be funded via customer advances. The same
is expected to be around INR5 crore in fiscal 2020. Promoters are
expected to infuse additional funds in case of mismatches arising
due to lower-than-expected sales velocity, delay in construction or
cost overrun may.
Outlook: Stable
CRISIL believes that RCC will continue to benefit from the
extensive industry experience of its promoters.
Rating Sensitivity Factors
Upward Factors
* At least 40% booking against 50 % construction progress
* Improvement in financial risk profile.
Downward Factors
* Less than 25 % construction progress in the next 12 months
* Lower than expected flow of customer advances.
Set up in 2006, RRC is a partnership firm, engaged in residential
real estate development in Hyderabad. The firm is promoted by Mr.
PSV Rami Reddy and family.
TEEAM SCORE: CRISIL Reaffirms B Rating on INR2cr LongTerm Loan
--------------------------------------------------------------
CRISIL has reaffirmed its ratings at 'CRISIL B/Stable/CRISIL A4' on
the bank facilities of Teeam Score (TS).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Foreign Bill
Purchase 1 CRISIL A4 (Reaffirmed)
Long Term Loan 2 CRISIL B/Stable (Reaffirmed)
Overdraft 2 CRISIL A4 (Reaffirmed)
The ratings continue to reflect TS's modest scale of operations in
the intensely competitive paper industry and its working capital
intensive operations. These weaknesses are partially offset by
extensive experience of partners in paper industry.
Key Rating Drivers & Detailed Description
Weakness:
* Modest scale of operations in intensively competitive paper
industry: The firm has modest scale of operations as indicated by
the estimated topline of INR9.2 crores in fiscal 2020. Further, the
revenue is expected to gradually improve over the medium term,
however, will remain modest considering the industry scenario.
* Working capital intensive operations: The operations of the firm
were working capital intensive in nature as indicated by the high
gross current asset days (GCA) of 148 days in fiscal 2019, mainly
on account of high inventory holding period. Going forward, the
operations are expected to be working capital intensive in nature.
Strength:
* Experience of partners: The partner of TS, Mr. R A Kamaraj has
an extensive experience of more than two decades in the home
furnishing industry. Over the years, the partners have established
relationship with their suppliers and customers. CRISIL believes,
TS will continue to benefit from the extensive experience of the
partners.
Liquidity Stretched
The bank limits were moderately utilized at around 80% in the last
12 months ending October 2019. The net cash accruals was adequate
against the repayment obligations in the medium term. The current
ratio stood at around 0.77 times in fiscal 2019.
Outlook: Stable
CRISIL believes TS will maintain its business risk profile over the
medium term supported by the extensive experience of its partners.
Rating Sensitivity factors
Upward Factor
* Improvement in the topline, and sustenance of EBITDA margin.
* Gross Current Asset Days of less than 110 days
Downward factor
* Decline in the topline, and EBITDA margin
* Gross Current Asset Days of more than 180 days
Set up in 2012, TS is into manufacturing of gift wrapping papers
and is a 100 percent export oriented unit. The firm is based out of
Karur (Tamil Nadu) and is promoted by Mr. R.A. Kamaraj and Mr. R.
Ramasamy.
TEESTAVALLEY POWER: ICRA Reaffirms D Rating on INR1,014.55cr Loan
-----------------------------------------------------------------
ICRA has reaffirmed ratings on certain bank facilities of
Teestavalley Power Transmission Ltd (TPTL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Term Loans 1,014.55 [ICRA]D reaffirmed
Rationale
The rating reaffirmation takes into account the weak credit profile
of TPTL, which has developed a 215 km long double circuit 400-kV
transmission line (t/l) project across Sikkim, West Bengal and
Bihar. Delays in debt and equity tie-ups, lapse of moratorium on
account of delayed commissioning of the project and delay in
finalization of tariff by Central Electricity Regulatory Commission
(CERC or the regulator) for the project have resulted in delays in
debt servicing. The project has faced multiple time and cost
overruns on account of delay in obtaining forest clearance, right
of way (RoW) issues, Gorkhaland movements (impacting project
execution), earthquake in Sikkim in September 2011, non-performance
by the transmission line contractor, changes in design/positioning
of certain components as well as significant increase in the
interest during construction on account of hardening of interest
rates as well as time overruns. The regulator has approved 83%
project cost (against the petitioned amount)1 for 36 km line (3
components) and has provisionally allowed 80% of tariff for the
balance 179 km long segment (2 components). Approval of tariff by
CERC for the entire project cost will be crucial for timely
servicing of debt and realising reasonable returns.
ICRA takes note of the transmission service agreement (TSA) and
revenue sharing agreement (RSA) signed with Power Grid Corporation
of India Limited (PGCIL) – acting as the Central Transmission
Utility (CTU) – which significantly reduces offtake and
counterparty credit risks for the company.
Key rating drivers and their description
Credit strengths: Not applicable
Credit challenges
* Persistent delays in debt servicing: Delays in debt servicing
continue on account of delay in finalization of the tariff by CERC,
delay in debt/equity tie up and lapse of moratorium led by delayed
commissioning of the project. Going forward, the timing and quantum
of approved project cost for the 179-km long double circuit
Rangpo-Kishanganj section will determine the adequacy of future
cash flows for debt servicing.
* Uncertainty regarding extent of approval of project cost by
regulator: The project has witnessed substantial cost and time
overruns, which have resulted in increase in project cost (more
than double the initial envisaged cost). This raises serious
concerns regarding the quantum of project cost to be eventually
approved by the regulator. Even though the tariff for TPTL is
cost-plus in nature, a lower approved project cost can hamper the
company's ability to service its debt adequately.
Liquidity position: Poor
TPTL's liquidity is poor. Although the project has been
commissioned, delays in debt servicing are ongoing. Quantum of
approved project costs for the balance 179-km section of the
transmission line (CERC order expected shortly) will be a key
determinant for the adequacy of project costs for debt servicing.
Rating sensitivities
Positive triggers - The rating may be upgraded if the company
repays the debt obligations in a timely manner on a sustained
basis.
Teestavalley Power Transmission Limited (TPTL) is a 69:31 joint
venture (JV) between Teesta Urja Limited (TUL) and PGCIL. It has
been incorporated for implementation of the transmission link from
the 1,200-MW Teesta III HEP to the substation of PGCIL at Barhmasia
village, Kishanganj district, Bihar on a build, own and operate
(BOO) basis. The total length of the transmission line is 215 km.
The estimated project cost is INR1,746.3 crore. The entire line was
commissioned in February 2019. Being an ISTS line, the tariff is on
cost plus basis (as per regulations) and the billing and collection
are done by PGCIL on behalf of the company. During FY2020, the
average line availability stood at 98.7%.
As per provisional results, in FY2020, the company reported a net
profit of INR43.4 crore on an operating income (OI) of INR268.7
crore against net loss of INR2.5 crore on an OI of INR81.5 crore in
FY2019.
THAMES STEELS: CRISIL Raises Rating on INR26.15cr Loan to B-
------------------------------------------------------------
Due to inadequate information, CRISIL, in line with the guidelines
of the Securities and Exchange Board of India (SEBI), had migrated
the rating of Thames Steels Private Limited (TSPL) to 'CRISIL
BB-/Stable/CRISILA4+ Issuer Not Cooperating'. However, the
management has subsequently started sharing requisite information
necessary for carrying out a comprehensive review of the rating.
Consequently, CRISIL revised the ratings on the bank facilities of
TSPL from 'CRISIL BB-/Stable/CRISIL A4+ Issuer Not Cooperating' to
'CRISIL D/CRISIL D' and simultaneously revised it to 'CRISIL
B-/Stable/CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 2 CRISIL A4 (Revised from
'CRISIL A4+ ISSUER NOT
COOPERATING' to 'CRISIL D'
and Simultaneously Revised
to 'CRISIL A4')
Cash Credit 6.4 CRISIL B-/Stable (Revised
from 'CRISIL BB-/Stable
ISSUER NOT COOPERATING'
to 'CRISIL D' and
Simultaneously Revised to
'CRISIL B-/Stable')
Long Term Loan 26.15 CRISIL B-/Stable (Revised
from 'CRISIL BB-/Stable
ISSUER NOT COOPERATING'
to 'CRISIL D' and
Simultaneously Revised to
'CRISIL B-/Stable')
The revision in ratings takes into account the company's delays in
payment of term loan obligation between October to February 2020,
on account of cash flow mismatches. However, the ratings have been
reassigned as the management has availed the moratorium offered by
banks in line with the Reserve Bank of India's (RBI's) guidelines
after March 2020, and there has been no instance of delay on the
term loans.
The ratings continue to reflect TSPL's modest scale of operations
and large working capital requirement. These weaknesses are
partially offset by the extensive experience of the promoters in
the fast-moving consumer goods (FMCG) and metal industries, and a
moderate leverage.
Analytical Approach
Unsecured loan (outstanding at INR17.73 crore as on March 31, 2019)
has been treated as 75% equity and 25% debt. This is because the
interest-free loan will be retained in the business over the medium
term.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations: Despite revenue increasing to
INR33.19 crore in fiscal 2020, against INR23.40 crore in fiscal
2019, on account of new client acquisitions and frequent orders
from the existing client, revenue remains at a modest level. It is
expected to improve over the medium term, as the management has
booked INR7.50 crore of revenue till June 2020 for fiscal 2021.
* Large working capital requirement: Operations are working capital
intensive, as reflected in gross current assets of 164 days as on
March 31, 2019, driven by sizeable inventory and receivables.
Inventory was 78 days and debtors at 82 days in fiscal 2019.
Strengths:
* Extensive experience of the promoters: Benefits from the
promoters' experience of about two decades, their strong
understanding of local market dynamics, and healthy relationships
with customers and suppliers should continue to support the
business.
* Moderate leverage: Total outside liabilities to adjusted networth
ratio was estimated at 1.61 times as on March 31, 2020 (against
1.91 times a year ago) being funded through debt and supported by
robust networth of INR26.71 crore. Furthermore, it is expected to
remain at around 2 times, over the medium term, in the absence of
any major, debt-funded capital expenditure (capex).
Liquidity Poor
Liquidity is likely to remain under pressure, over the medium term,
mainly because of large working capital requirement and net cash
accrual tightly matching debt obligation. Cash accrual is expected
to be at INR784 lakh in fiscal 2022, and it would be tightly
matched against term debt of INR650 lakh in the same year.
Furthermore, the bank limit was fully utilised in the last one
year. Current ratio stood at 0.83 time as on March 31, 2020, on
account of high current maturity of long-term debt.
Outlook: Stable
CRISIL believes TSPL will continue to benefit from the extensive
experience of the promoters.
Rating Sensitivity Factors
Upward factors
* Sustainable increase in revenue and stable operating margin,
leading to cash accrual of more than INR9.00 crore
* Efficient working capital management
Downward factors
* Decline in revenue or profitability, leading to lower net
cash accrual less than INR7 crore, over the medium term
* Weakening of the financial risk profile on account of
withdrawal of unsecured loans, decline in net cash accrual,
or stretch in the working capital cycle.
TSPL, incorporated in 2004, started commercial operations in 2017.
The company is based in Noida, Uttar Pradesh, and manufactures
aluminum aerosol cans. Mr. Rakesh Agarwal, Mr. Vijay Gupta, and Mr.
Pradeep Agarwal are the promoters.
THRIVE THERAPEUTIC: Insolvency Resolution Process Case Summary
--------------------------------------------------------------
Debtor: Thrive Therapeutic Private Limited
A-1, Gala No. 109
New Rajshree Industraial Estate
Chitalsar, Manpada
G.B. Road
Thane 400607
Insolvency Commencement Date: July 9, 2020
Court: National Company Law Tribunal, Mumbai Bench
Estimated date of closure of
insolvency resolution process: January 5, 2021
(180 days from commencement)
Insolvency professional: CS Sitansh Magia
Interim Resolution
Professional: CS Sitansh Magia
6A, Kamdar Chamber
Plot No. 251
Sion (East)
Mumbai 400022
E-mail: s.magia@yahoo.com
- and -
Flat No. 9, Bhaveshwar Sadan
Plot No. 207
Tamil Sangam Road
Sion East
Mumbai 400022
E-mail: ip.sitansh@gmail.com
Last date for
submission of claims: July 27, 2020
VARIETY LUMBERS: ICRA Reaffirms B- Rating on INR2cr Cash Loan
-------------------------------------------------------------
ICRA has reaffirmed ratings on certain bank facilities of Variety
Lumbers Private Limited's (VLPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based
Cash Credit 2.00 [ICRA]B- (Stable); Reaffirmed
Non-fund-based
Import Letter
of Credit cum
Buyers Credit 20.00 [ICRA]A4; Reaffirmed
Rationale
The revision in ratings remains constrained by the VLPL weak
financial risk profile, marked by a decline in the operating
income, a leveraged capital structure, weak coverage indicators,
high working capital intensity and tight liquidity position.
Further, the ratings factor in the stiff competition in the timber
industry and the vulnerability of VLPL's profitability to
volatility in timber prices and to foreign exchange fluctuation
because of its substantial imports. Moreover, the company is
susceptible to timber availability which depends on export
regulations in key supplying markets. The ratings, however,
continue to favorably factor in the extensive experience of Variety
Lumbers Private Limited's (VLPL) promoters in the timber industry
and the location-specific advantages due to its proximity to the
Kandla port in Gujarat. The Stable outlook on [ICRA]B- rating
reflects ICRA's opinion that VLPL will continue to benefit from the
extensive experience of its promoters in the timber industry.
Key rating drivers and their description
Credit strengths
* Extensive experience of promoters in timber industry:
Incorporated in 2002, VLPL's operations are managed by the members
of the Dubey family, who have more than two decades of experience
in the timber business.
* Location-specific advantage: VLPL's facility is located at
Gandhidham in Gujarat, which has been declared a timber zone by the
Government. Further, a major part of its procurement is through
imports and thus, proximity to the Kandla port in Gujarat provides
logistical advantage to the company.
Credit challenges
* Weak financial risk profile: The company's operating income
declined during the past two years to INR27.6 crore in FY2020
(provisional numbers) and INR37.8 crore in FY2019 from INR43.9
crore in FY2018, with the company prudently deciding to stop
business with customers demanding elongated credit terms. Further,
low-value addition in the timber sawing and trading business
results in low operating margin (6.5% in FY2020) and net margin
(1.2% in FY2020). VLPL's capital structure continues to be
leveraged, with a gearing of 2.4 times as on FY2020-end and 2.3
times as on FY2019-end. The debt coverage indicators remained weak,
with an interest coverage of 1.4 times, TD/OPBIDTA of 5.9 times,
DSCR of 1.4 times and NCA/TD of 4% as on FY2020-end as against an
interest coverage of 1.3 times, TD/OPBIDTA of 3.9 times, DSCR of
1.2 times and NCA/TD of 4% as on FY2019-end.
* Stretched liquidity position: The VLPL's working capital
intensity increased substantially, with NWC/OI at 46% in FY2020,
(compared to 32% as on FY2019-end) because the inventory holding
increased to 187 days in FY2020 from 98 days in FY2019. Further,
the creditor days were also stretched to 179 days as on FY2020-end
from 114 days as on FY2019-end to manage working capital
requirement and liquidity.
* Intense competition due to presence of numerous players: The
company's margins are low as timber sawing and trading is a low
value-added business. Additionally, stiff competition from numerous
players operating in the fragmented industry keeps the company's
margins under check.
* Exposure to government regulations of importing country;
volatility in timber prices: A significant share of VLPL's key raw
material requirement, i.e. timber, is imported from New Zealand.
This exposes the company to the risks associated with timber
availability and adverse changes/restrictions in timber export
policies by the Government of the timber-supplying countries.
* Vulnerability of profitability to adverse fluctuation in foreign
currency exchange rate: Import constitutes a major part of VLPL's
total purchase and the entity does not have any formal hedging
policy for its forex risk; hence, its import payables remain
exposed to adverse movements in forex rates.
Liquidity position: Poor
VLPL's liquidity profile remains poor, given the low cash accruals,
high working capital intensity due to high inventory holding, and
limited cushion available in working capital limits.
Rating sensitivities
Positive triggers - ICRA could upgrade VLPL's ratings if the
company demonstrates substantial growth in revenue and
profitability on a sustained basis. Moreover, an improvement in the
working capital cycle along with an increase in net worth that
enhances the liquidity profile could lead to a rating upgrade.
Negative triggers - Negative pressure on VLPL's ratings could
arise if a substantial decline in revenue and profitability leads
to lower-than-expected cash accruals or any if further stretch in
the working capital cycle results in a weak liquidity profile.
Incorporated in 2002, VLPL processes and trades timber logs and
manufactures wooden pallets. It deals in radiate pine logs, which
are mainly imported from New Zealand and Singapore. The plant is
located at Gandhidham in Gujarat, which is close to the Kandla
port. The company is promoted by the Dubey family, the key
promoters being Mr. Swami Nath Dubey and his son Mr. Jay Kumar
Dubey. The promoters have more than 25 years of experience in the
timber business.
In FY20219, the company reported a net profit of INR0.3 crore on an
operating income (OI) of INR37.8 crore compared to a net profit of
INR0.4 crore on an OI of INR43.9 crore in FY2018. Further, the
company achieved an OI of INR27.6 crore in FY2020, on a provisional
basis.
VENKATA SAI: ICRA Assigns B+ Rating to INR10cr Fund Based Loan
--------------------------------------------------------------
ICRA has assigned rating to the bank facilities of Venkata Sai Agro
Industries (VSAI), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Fund-based–CC 10.00 [ICRA]B+(Stable); assigned
Rationale
The assigned rating reflects the extensive experience of VSAI
partners in the rice milling industry and easy availability of
paddy because of its proximity to major paddy-cultivating regions
in northern Karnataka.
ICRA considers the favorable demand prospects of the rice industry
because of the country's growing population, with India remaining
one of the largest producers and consumers of rice.
However, the rating is constrained by the firm's moderate financial
profile, characterised by small scale of operations, thin margins,
low net worth, high gearing and moderate coverage indicators.
Further, in FY2020, with an increase in working capital intensity
and low cash accruals, VSAI's liquidity position has remained
stretched. The rating takes into account the stiff competition and
limited value-additive nature of the business, constraining the
pricing flexibility. The rating factors in the susceptibility of
VSAI's revenues and profitability to agro-climatic risks, as the
availability of paddy can be affected by adverse weather
conditions. The firm is also exposed to the inherent risks of
capital withdrawal associated with partnership entities.
The Stable outlook on the [ICRA]B+ rating reflects ICRA's opinion
that VSAI will continue to benefit from the extensive experience of
its partners in the rice milling business.
Key rating drivers and their description
Credit strengths
* Extensive experience of promoters in rice milling business:
Incorporated in 2007, VSAI is a partnership firm involved in the
processing of whole rice. The partners have been involved in the
rice milling business for over a decade. The partners are directly
involved in VSAI's day-to-day business.
* Proximity to rice-growing areas: The firm's plant is located at
Maanvi, which is surrounded by areas such as Raichur, Sindhnoor and
Gangavathi, where a major part of the paddy is cultivated. This
results in low transportation cost for the firm and easy
availability of paddy at a competitive rate. VSAI's paddy
requirements are met locally through direct purchases from
farmers.
* Favorable long-term demand outlook: The demand prospects of the
rice industry are expected to remain favorable, supported by
India's growing population with rice remaining a staple food grain
in the country. Moreover, India is the world's second largest
consumer of rice, apart from being a leading exporter, though more
in the Basmati rice segment.
Credit challenges
* Small scale of operations: VSAI reported a meagre CAGR of 1%
during the last four years and remained a small-scale player with
revenues of INR49.37 crore in FY2020, declining from INR60.26 crore
in FY2019 owing to lower sales realisation, coupled with de-growth
in sales volume. Small scale of operations and low net worth
restrict operational and financial flexibility to some extent.
* Leveraged capital structure and coverage indicators: The firm's
gearing remained high at 2.18 times as on March 31, 2020 and
TD/OPBITDA of 4.17 times in FY2020. Since most of its debt includes
working capital borrowings, with limited long-term repayments,
VSAI's interest coverage and DSCR stood moderate at 2.07 times and
1.68 times, respectively, in FY2020.
* Intense competition in industry: Owing to low entry barriers and
the presence of numerous unorganised and organized players, along
with readily available technology and proximity to rice-cultivating
belt, the firm faces intense competition for paddy procurement.
This affects volumes and pricing flexibility of rice millers like
VSAI.
* Inherent agro-climatic risks and vulnerability to changes in
Government policies: The rice milling industry is susceptible to
agro-climatic risks (which can affect the availability of paddy in
adverse weather conditions), epidemics in paddy crop or a shift of
farmers to other cash crops and cyclicality. Moreover, it is
exposed to Government policies such as minimum support price,
affecting the raw material cost, which in turn will impact the
margins.
* Inherent risks associated with partnership nature of business:
VSAI is exposed to risks associated with partnership firms
including limited ability to raise capital and capital withdrawal
by partners, which could adversely impact its capital structure.
Liquidity position: Stretched
VSAI's working capital intensity was high in FY2020 owing to high
inventory holding and elongated debtors. The firm is dependent on
its working capital limits as evident by almost full utilisation of
its limits between April 2019 and March 2020. It has an outstanding
vehicle loan of INR0.25 crore, which is scheduled to be fully
repaid in FY2021. It has availed moratorium with respect to
interest payment towards limits utilisation under the Reserve Bank
of India's (RBI) Covid-19 Scheme. In this backdrop, the liquidity
position is likely to remain stretched.
Rating sensitivities
Positive triggers - ICRA could upgrade VSAI's rating if the firm
demonstrates a sustained improvement in its revenues and profits,
leading to an improved liquidity. Specific credit metrics that may
lead to an upgrade of VSAI's rating include interest coverage above
2.5 times on a sustained basis.
Negative triggers - Negative pressure on VSAI's rating could arise
if there is a decline in revenue and margins leading to a further
stretch in liquidity. Moreover, a negative change in agro-climatic
condition, or a rise in debt-funded capex with weakening in
interest coverage to below 1.5 times, could exert negative pressure
on the firm's rating.
Incorporated in 2007, VSAI is a partnership firm involved in the
milling of paddy and produces rice. The firm has a milling unit at
Maanvi, Karnataka with an installed capacity of 8 metric tonnes per
hour (MTPH) of milling. Its major products include boiled rice, raw
rice, bran, broken rice and husk. The factory runs for the whole
year in two shifts per day. VSAI procures paddy from the local
farmers and it has a diversified customer base across Andhra
Pradesh, Telangana, Maharashtra and Karnataka.
In FY2020, on a provisional basis, the firm reported a net profit
of INR1.04 crore on an operating income (OI) of INR49.37 crore
compared to a net profit of INR1.07 crore on an OI of INR60.30
crore in FY2019.
VISURA (INDIA): ICRA Reaffirms B+ Rating on INR26cr LT Loan
-----------------------------------------------------------
ICRA has reaffirmed ratings on certain bank facilities of Visura
(India) Limited (VIL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long-term– 26.00 [ICRA]B+(Stable); Reaffirmed
Fund-based
Long-term/ 7.50 [ICRA]B+(Stable)/[ICRA]A4;
Short-term– Reaffirmed
Non-fund based
Long-term/ 7.00 [ICRA]B+(Stable)/[ICRA]A4;
Short-term– Reaffirmed
Unallocated
Rationale
The ratings reaffirmation is constrained by the modest scale of
operations of VIL in the polymer trading business with revenues of
INR3.97 crore in FY2020. Further, the ratings note its weak
financial risk profile with gearing of 6.46 times as on March 31,
2020 and interest coverage of 1.30 times in FY2020. The ratings
consider its exposure to default risk on payments from customers
with high total credit exposure/net worth at 490% as on March 31,
2020. The credit risk is transferred by the Gas Authority of India
Limited (GAIL) and Brahmaputra Cracker and Polymer Limited (BCPL)
to VIL, which serves as the del credere agent and consignment
stockiest (DCA/CS) agent.
The ratings, however, favorably factor in the extensive experience
of the promoters spanning over 30 years in the polymer trading
business and its diversified customer profile with top five
customers contributing to 28% of total sales in FY2020.
The Stable outlook reflects ICRA's belief that VIL will benefit
from the extensive experience of its promoters in the polymer
trading business.
Key rating drivers and their description
Credit strengths
* Extensive experience of promoters in polymer trading business:
VIL is involved in trading polymer products and is a DCA/CS of GAIL
and BCPL for Andhra Pradesh and Telangana. It supplies polymer raw
materials such as HDPE/LLDPE/PP. The promoters have more than 30
years of experience in the polymer trading business.
* Diversified customer profile: VIL's customer profile includes
plastic product manufacturers such as Jain Irrigation Systems Pvt.
Ltd, Nagarjuna Polymers, Star Plast Industries, etc. The customer
concentration risk has been low with top five clients contributing
to 28% of the total sales in FY2020.
Credit challenges
* Modest scale of operations in DCA/CS business: VIL acts as a
DCA/CS and is eligible for only commission on sales but the
responsibility for recovery of the entire sale proceeds falls on
the company. This exposes it to counterparty credit risk, which is
transferred by GAIL and BCPL to VIL, as it serves as the DCA/CS
agent. However, the company witnessed an decrease in total clean
credit exposure/net worth to 490% as on March 31, 2020 from 723% as
on March 31, 2019 on account of timely receipts of payments from
customers.
* Leveraged capital structure due to low net worth and high working
capital borrowings: The company's total debt remained high at
INR28.66 crore as on March 31, 2020 due to its high working capital
borrowings. Further, the gearing stood high at 6.46 times as on
March 31, 2020. The other debt coverage indicators remained weak
with interest coverage of 1.30 times, Total Debt/OPBDITA at 9.07
times and NCA/Total Debt at 1.88%.
* Intense competition in industry: VIL is involved in the
distribution and sales of the HDPE, LLDPE, PP manufactured by GAIL
and BCPL in Andhra Pradesh and Telangana region. It faces stiff
competition from DCA/CS agents of other principals such as Reliance
Industries Limited (RIL), Indian Oil Corporation Limited (IOCL),
Mangalore Refinery and Petrochemicals Limited (MRPL), Oil and
Natural Gas Corporation Limited (ONGC), etc.
Liquidity position: Stretched
The company's liquidity position is stretched with limited cushion
available in the working capital limits and low cash position. The
average working capital limit utilisation is high at 91% in the
past 15-months period ending in May 2020. Further, VIL does not
have any repayment obligations and capex plans in the near term,
which supports its liquidity position to an extent.
Rating sensitivities
Positive triggers - The rating could be upgraded if the company
demonstrates significant increase in sales volumes and reduction in
debtor days resulting in an improved liquidity position. Specific
credit metrics that could lead to an upgrade of VIL's rating
include interest cover more than 1.50 times on a sustained basis.
Negative triggers - Negative pressure on VIL's rating could arise
if lower-than-anticipated cash accruals, or if material delays in
debtor realisations, weakens its liquidity. Specific credit metrics
that could lead to a downgrade of VIL's rating include interest
cover less than 1.10 times on a sustained basis.
Incorporated in 1985, VIL is involved in trading of polymer
products. The company is a DCA/CS agent of GAIL (India) Limited for
Andhra Pradesh and Telangana for polymer raw materials such as
HDPE/LLDPE/PP from 1998-1999. It is managed by Mr. Suresh Kumar
Ramsisaria, who has experience of more than 30 years in the polymer
industry. From FY2017, it is dealing with HDPE/LLDPE/PP of BCPL,
which is a joint venture company of GAIL, Oil India Limited (OIL),
Numaligarh Refinery Limited (NRL) and the Government of Assam.
=========
J A P A N
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J. FRONT RETAILING: Egan-Jones Lowers Unsecured Ratings to BB
-------------------------------------------------------------
Egan-Jones Ratings Company, on July 6, 2020, downgraded the foreign
currency and local currency senior unsecured ratings on debt issued
by J. Front Retailing Co., Ltd. to BB from BBB-.
Headquartered in Tokyo, Japan, J. Front Retailing Co., Ltd. is a
holding company established through the merger of Daimaru and
Matsuzakaya.
NISSAN MOTOR: Egan-Jones Lowers Senior Unsecured Ratings to BB-
---------------------------------------------------------------
Egan-Jones Ratings Company, on July 6, 2020, downgraded the foreign
currency and local currency senior unsecured ratings on debt issued
by Nissan Motor Co., Ltd. to BB- from BB. EJR also downgraded the
rating on commercial paper issued by the Company to B from A3.
Nissan Motor Co., Ltd. manufactures and distributes automobiles and
related parts.
=================
S I N G A P O R E
=================
KOON HOLDINGS: Sells Stake in Australian Firm as Part of Scheme
---------------------------------------------------------------
Rachel Mui at The Business Times reports that Koon Holdings on July
14 said it completed the disposal of its 74.06 per cent stake in
Australian energy infrastructure company Tesla Holdings Pty Ltd for
about AUD8.9 million (SGD8.6 million). Tesla Holdings owns and
operates four diesel power generation plants in Western Australia.
The purchase price comprised AUD7.2 million in capital and
unfranked dividends of about AUD1.7 million.
The disposal was required under the terms of one of the two schemes
of arrangement, BT states. According to the scheme, Koon Holdings
must dispose of its interests in the Australian firm, so that it
can use the net proceeds to make a cash distribution to
participating creditors with Class A and Class B claims.
About Koon Holdings
Koon Holdings is an infrastructure and civil engineering service
provider specialising in reclamation and shore protection works.
Koon Construction & Transport (KCT) is the group's main operating
company.
Koon Holdings and KCT had proposed their respective schemes of
arrangement as part of the group's debt restructuring exercise, and
the Singapore High Court on June 23 approved both schemes. The
schemes subsequently commenced from June 26, according to BT.
Shares of Koon Holdings have been suspended since Aug. 30, 2019.
KOON HOLDINGS: To Voluntary Wind Up Precast Division
----------------------------------------------------
Rachel Mui at The Business Times reports that Koon Holdings on July
14 said it has decided to wind up its precast division, so as not
to jeopardise the group's ongoing restructuring.
BT relates that the precast division, which specialises in the
precasting of concrete structures, includes Econ Precast Pte Ltd,
Econ Precast Sdn Bhd, Contech Precast Pte Ltd, Bukit Intan Pte Ltd,
Sindo-Econ Pte Ltd and PT Sindomas Precas.
"Due to aggressive bidding amongst competitors and operating
challenges faced, some of these precast division companies have
been suffering losses," Koon Holdings said. This in turn
contributed to Koon Holdings' poor financial position, it added.
According to BT, some of the precast division companies are also
facing claims made by creditors, and have had to address legal
proceedings commenced against them by creditors. Given the
financial position of these companies, Koon Holdings studied the
viability of having them defend and/or settle the legal proceedings
in the Singapore courts.
However, after further consideration, Koon Holdings decided to
commence the voluntary winding-up proceedings for the division, BT
relays.
BT says Koon Holdings is proposing to appoint Lin Yueh Hung and Ng
Kian Kiat of RSM Corporate Advisory as joint and several
liquidators for the administration of the voluntary winding-up
proceedings for Econ Precast Pte Ltd, Bukit Intan Pte Ltd and
Sindo-Econ Pte Ltd.
Meanwhile, as Econ Precast Sdn Bhd is a subsidiary of Econ Precast
Pte Ltd, the Malaysian firm will be dealt with by the Singapore
firm's liquidators. PT Sindomas Precas in Indonesia is a subsidiary
of Sindo-Econ Pte Ltd, and thus will be dealt with by the latter's
liquidators.
BT relates that Koon Holdings also highlighted that Contech Precast
is the subject of a compulsory winding-up application initiated by
the CBE Group in the Singapore courts. Koon Holdings will provide
further updates about this matter in due course, if necessary.
About Koon Holdings
Koon Holdings is an infrastructure and civil engineering service
provider specialising in reclamation and shore protection works.
Koon Construction & Transport (KCT) is the group's main operating
company.
Koon Holdings and KCT had proposed their respective schemes of
arrangement as part of the group's debt restructuring exercise, and
the Singapore High Court on June 23 approved both schemes. The
schemes subsequently commenced from June 26, according to BT.
Shares of Koon Holdings have been suspended since Aug. 30, 2019.
MULHACEN PTE: S&P Lowers ICRs to 'CCC+/C', Outlook Negative
-----------------------------------------------------------
S&P Global Ratings lowered its long and short-term issuer credit
rating on Singapore-based nonoperating holding company Mulhacen
Pte. Ltd. (Mulhacen) to 'CCC+/C' from 'B-/B'. The outlook remains
negative.
S&P also lowered to 'CCC+' from 'B-' its issue rating on the
existing senior secured payment-in-kind (PIK) toggle notes due
2023.
The downgrade reflects its belief that Mulhacen's capacity to fully
service its debt is continuously eroding. Mulhacen's high double
leverage has increased significantly over the past year, and its
operating bank, WiZink, faces the current crisis from a position of
weakness. S&P anticipates that the bank will be loss-making this
year and next, therefore constraining its ability to upstream
dividends to Mulhacen.
WiZink has been facing increasing challenges in its day-to-day
business, the most notable being the rise in claims from Spanish
customers on alleged usury rates charged by the bank on its
revolving credit card business. In March 2020, Spain's Supreme
Court ruled that one of the bank's revolving credit card contracts
was null and void, because of the high interest rate of 27% charged
to the borrower. Following the Court's decision, WiZink decided to
lower the rates it charges to its customers. S&P said, "We
anticipate increasing legal claims against WiZink, from around
6,400 existing claims at end-March 2020. In its year-end 2019
results, the bank recognized EUR212 million provisions, which we
estimate to be sufficient to accommodate the cost of such new
claims over a two-year horizon."
Moreover, the harsh environment following the COVID-19 outbreak
will further pressure WiZink's diminishing profitability. As such,
we anticipate lower business volumes--with the bank's loan book
declining by at least 6% this year--pressured margins, and
substantially higher credit losses. S&P said, "We forecast that its
cost of risk will rise above 900 and 700 bps this year and next,
respectively, and its problem loans ratio above 15% by end-2020,
compared to 9.5% at end-2019. We now expect that WiZink will be
loss-making both in 2020 and 2021, compared to our previous
expectation of modest profits from 2021. In this context, we
anticipate that WiZink's risk-adjusted capital (RAC) will
decline--from an estimated 8.4% at end-2019--though remaining
within the 7%-10% threshold over our outlook horizon. A materially
weaker economic environment in Spain would have a negative pro
forma effect of about 90 bps on WiZink's RAC."
Positively, WiZink has an ample liquidity buffer. Its regulatory
liquidity coverage ratio exceeded 3,000% at end-March 2020, and it
could take up an additional EUR0.6 billion TLTRO III, on top of
EUR0.4 billion currently, if needed. Even if the bank's liquidity
metrics are solid, S&P believes they are necessary given its
smaller size and the high sensitivity of its retail
depositors--accounting for 79% of its funding base at end-March
2020--to the relatively high rates paid on its deposits.
S&P said, "Given the uncertain business and profitability prospects
ahead, we anticipate that WiZink will not upstream dividends to its
parent this year or next. This, in turn, will weigh on Mulhacen's
ability to service its outstanding debt--EUR500 million senior
secured PIK toggle notes due 2023. Our long-term rating on Mulhacen
now stands four notches lower than our 'bb-' group credit profile
(GCP) assessment, compared to three notches before. This reflects
the structural subordination of the noteholders, the possible
imposition of regulatory barriers on dividend payments by the
Spanish regulator, Mulhacen's significantly higher double leverage,
and our view of the increased likelihood that Mulhacen will not be
able to fully service its outstanding PIK toggle notes due 2023."
At end-2019, Mulhacen's double leverage--measured as its equity
investment in WiZink divided by its unconsolidated shareholders'
equity--stood at 183%, compared to 138% at end-2019 and 140% at the
launch in August 2018.
From 2019, Mulhacen committed to the Bank of Spain to retain some
of the dividends it will receive from WiZink over a five-year
period as a cash reserve, up to EUR250 million--or 50% of the PIK
toggle notes--by the end of 2023. S&P had considered that this
would partly offset the issuer's high double leverage. However,
after the buyback of EUR14.8 million of the outstanding notes in
January 2020 and the interest payment in March 2020, Mulhacen's
cash reserve was reduced to just EUR2.5 million as of end-March
2020. Absent any dividend upstreaming, S&P now considers it highly
unlikely that Mulhacen will be able to build such a cash reserve,
at least over the next 12 months.
S&P said, "In this context, we deem it highly likely that Mulhacen
will pay in kind the next coupons on its PIK toggle notes due in
September 2020 and March 2021, rather than in cash. However, we
would not consider this a breach of an imputed promise, and
therefore would not constitute a default, in our view.
"At this point, a potential downward revision of our GCP on the
WiZink group would not automatically lead to a downgrade of
Mulhacen, as we would need to reconsider whether it would affect
Mulhacen's debt-servicing capacity more than we contemplate for the
current rating level."
The negative outlook on Mulhacen reflects the possibility of a
downgrade over the next 12 months if:
-- S&P anticipates that Mulhacen will not be able to fully service
its debt, on the back of further constraints to dividend
upstreaming by WiZink or regulatory barriers to such payments;
-- Amid the sharp economic contraction we anticipate for 2020,
WiZink's earnings, credit losses, or legal claims are significantly
worse than those we expect, such that it fails to preserve its
capital at an adequate level and its RAC ratio falls below 7%. A
materially weaker economic environment in Spain could also hamper
the bank's performance and capitalization;
-- Given the consumer segment's particular vulnerability to the
current crisis, WiZink's asset quality metrics come under mounting
pressure beyond our current expectations; and
-- WiZink's funding profile weakens owing to diminishing
confidence of its depositors, or if it has to significantly
increase the rates paid on its deposits to retain them.
S&P could revise the outlook to stable if WiZink proves able to
preserve its business stability and funding and liquidity profiles,
or if it adequately tackles the significant challenges it faces and
risks in the environment abate.
ZENROCK COMMODITIES: Judicial Manager Flags Questionable Deals
--------------------------------------------------------------
Jessica Jaganathan at Reuters reports that ZenRock Commodities
Trading Pte Ltd is unlikely to continue its core oil trading
businesses in the long term, its court-appointed supervisor KPMG
Services said in a report that also raised concerns over
transactions by the Singapore-based trader.
ZenRock was placed under interim judicial management in May after
one of its creditors HSBC Holdings PLC (HSBA.L) alleged that it
engaged in a series of "highly dishonest transactions".
It is one of four commodity trading firms in Asia's oil trading hub
of Singapore which ran into financial trouble this year after the
oil price crash and as the coronavirus pandemic caused demand to
slump, Reuters notes.
ZenRock declined to comment, referring Reuters to its court
appointed judicial manager at KMPG.
KPMG, which was appointed as interim judicial manager of ZenRock,
submitted its report to Singapore's High Court on July 9, Reuters
says. KPMG was appointed judicial manager on July 13, a source
familiar with the matter said.
Judicial management is a type of debt restructuring where a court
appoints independent managers to run the affairs of a financially
distressed company in place of existing management. Such moves are
often seen favorably by creditors.
According to Reuters, KPMG said in its report that it had "serious
concerns over ZenRock's transactions" with Singapore-based firm
Huitongrong International (Singapore) Pte Ltd and Shenzhen Qianhai
Jin Rong Petrochemical Trading Co. Ltd.
Reuters relates that the KPMG report was based on documents and
interviews with ZenRock's employees in a two-month investigation
into its finances and trading activities.
Reuters says KPMG also pointed to "questionable transactions" by
ZenRock which involved the use of duplicate invoices to obtain
multiple financing, selling the same cargo to more than one company
and unusually large cash transactions.
HSBC Holdings PLC made similar allegations against ZenRock in May,
Reuters states.
KPMG said it is assisting Singapore police with investigations
following a police report made by HSBC, Reuters relays.
"ZenRock is unlikely to continue in the long term" its core
businesses of oil trading, gasoil blending and storage and
commodities derivatives trading, KPMG said, adding that "any
restructuring would, at best, preserve a fraction of ZenRock's
original business".
ZenRock Commodities Trading is wholly owned by ZenRock Holdings Pte
Ltd, which in turn is majority owned by Great Vantage Global Ltd,
the report, as cited by Reuters, said. Zenrock directors Tony Lin
Haitian and Xie Chun hold shares of 15.3% and 8.23%, respectively,
in ZenRock Holdings. Xie is the ultimate shareholder of Great
Vantage, the report said.
About ZenRock Commodities
Singapore-based ZenRock Commodities trades crude, oil products and
petrochemicals. ZenRock has offices in Singapore, Shanghai and
Geneva. The company was founded in Singapore in 2014 by a group of
veteran oil traders, including Xie Chun, formerly from Unipec, and
Tony Lin, formerly Vitol SA's China head.
Zenrock Commodities Trading Pte Ltd has been placed under the
management of a court-appointed supervisor following an application
by HSBC Holdings, the bank told Reuters on May 8, 2020.
*********
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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