/raid1/www/Hosts/bankrupt/TCRAP_Public/201112.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, November 12, 2020, Vol. 23, No. 227
Headlines
A U S T R A L I A
ATEC RAIL: First Creditors' Meeting Set for Nov. 23
CLEARVIEW WEALTH: Fitch Assigns BB+ Rating to AUD75MM Sub. Debt
HORIZON CONSTRUCTIONS: Second Creditors' Meeting Set for Nov. 19
SMILES INCLUSIVE: Enters Voluntary Administration
SMILES INCLUSIVE: First Creditors' Meeting Set for Nov. 19
UBICAR PTY: Second Creditors' Meeting Set for Nov. 19
C H I N A
BANK OF COMMUNICATIONS: Fitch Puts BB(EXP) Rating to New USD Bonds
KWG GROUP: Fitch Assigns BB- Rating to New USD Sr. Notes
LIONBRIDGE CAPITAL: Fitch Affirms B+ LT IDR, Outlook Positive
REDCO PROPERTIES: Fitch Assigns B Rating to New USD Sr. Notes
WANDA FILM: Raises $440 Million in Private Placement
YANGO GROUP: Fitch Assigns B+ Rating to New USD Sr. Notes
H O N G K O N G
SPI ENERGY: Issues $2.1 Million 10% Convertible Promissory Note
I N D I A
AAA VEHICLEADES: CRISIL Lowers Rating on INR82cr Cash Loan to D
ALTIUS TRAVELS: Insolvency Resolution Process Case Summary
ARUN VIDYUTH: CRISIL Withdraws D Rating on INR23cr Loans
AZURE POWER: Fitch Affirms BB Rating on $350.1MM Sr. Notes
CAUVERY POWER: CRISIL Lowers Rating on INR90cr LT Loan to D
COCO FIBRE: CRISIL Withdraws B+ Rating on INR7cr Debt
DIVYA PACKMAF: CRISIL Migrates B Debt Rating to Not Cooperating
GARUDA VENKATA: CRISIL Lowers Rating on INR5.5cr Term Loan to D
HAFIZ CONSTRUCTION: CRISIL Lowers Rating on INR21cr Loan to D
JINAAMS DRESS: CRISIL Lowers Rating on INR30cr Cash Loan to D
K.P. ABRAHAM: CRISIL Migrates B+ Debt Rating from Not Cooperating
KINGFISHER AIRLINES: SC Orders Winding Up of UBHL to Recover Dues
LEOLINE FOODS: CRISIL Moves D Debt Ratings from Not Cooperating
MAHAVIR CONSTRUCTION: CRISIL Hikes Rating on INR10.5cr Loan to B+
MINOP INNOVATIVE: CRISIL Hikes Rating on INR1cr Loan to B
PRASAD AND COMPANY: CRISIL Hikes Rating on INR59.94cr Loan to B
RAMA EDUCATIONAL: CRISIL Moves D Debt Ratings to Not Cooperating
RITA MASSAR: CRISIL Assigns B+ Rating to INR3.95cr Cash Loan
SHANTI DEVI: CRISIL Lowers Rating on INR95cr Term Loan to D
SHEKAR LOGISTICS: CRISIL Hikes Rating on INR13cr Loan to B
SHYAM GRAMODHYOG: CRISIL Assigns B+ Rating to INR1cr Loan
SOVIKA AVIATION: CRISIL Lowers Rating on INR30cr LT Loan to D
SREESHA EDUCATIONAL: CRISIL Assigns B- Rating to INR15cr Loan
SVS PIPE: CRISIL Assigns B+ Rating to INR7.0cr Loans
THREE SEASONS: CRISIL Lowers Rating on INR50cr LT Loan to D
UNIHEALTH CONSULTANCY: CRISIL Cuts Rating on INR2.5cr Loan to D
UNITED VIKAS: CRISIL Assigns B+ Rating to INR1cr Proposed LT Loan
USHA EDUCATIONAL: CRISIL Assigns B- Rating to INR20cr Term Loan
VICTORY PAPER: CRISIL Assigns B+ Rating to INR25cr Term Loan
VRA COTTON: CRISIL Withdraws B+ Rating on INR2cr Cash Credit
J A P A N
TAKATA CORP: Trustee Files Air Bag Lawsuit v. Insurer
[*] JAPAN: Pub, Restaurant Bankruptcies Growing at Record Pace
M A L A Y S I A
SERBA DINAMIK: Fitch Affirms BB- LT IDR, Outlook Stable
S I N G A P O R E
HYFLUX LTD: Receives Term Sheet from US Fund Manager
- - - - -
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A U S T R A L I A
=================
ATEC RAIL: First Creditors' Meeting Set for Nov. 23
---------------------------------------------------
A first meeting of the creditors in the proceedings of:
- ATEC Rail Group Limited;
- The Steel Mississippi Pty Ltd; and
- ATEC Freight Terminals Pty Ltd;
will be held on Nov. 23, 2020, at 10:00 a.m. at the offices of SV
Partners, 22 Market Street, in Brisbane, Queensland.
Terry Grant Van der Velde and David Michael Stimpson of SV Partners
were appointed as administrators of ATEC Rail on Nov. 11, 2020.
CLEARVIEW WEALTH: Fitch Assigns BB+ Rating to AUD75MM Sub. Debt
---------------------------------------------------------------
Fitch Ratings has assigned ClearView Wealth Limited's (ClearView;
Issuer Default Rating (IDR): BBB/Stable) AUD75 million of
wholesale, unlisted, regulatory compliant subordinated debt a final
rating of 'BB+'.
The final rating follows a review of the final terms and conditions
conforming to information already received when Fitch assigned the
expected rating on March 19, 2020.
KEY RATING DRIVERS
The subordinated securities are rated two notches below ClearView's
IDR, comprising two notches for 'Poor' baseline recoveries and zero
for 'Minimal' non-performance risk. The securities have a maturity
period of 10 years, are callable after five years, and carry a
coupon equal to 600 bp over the three-month bank bill swap rate.
The notching for 'Poor' recoveries reflects its assumptions for
subordinated debt issued at a holding company under its criteria.
Should the company be wound up, the issuer's payment obligations
under the securities rank behind all senior creditors, but ahead of
ordinary shares and Additional Tier 1 (AT1) securities. ClearView
does not have any AT1 securities on issue currently.
The notes would be written off or converted to equity, in part or
in full, should the Australian Prudential Regulation Authority
(APRA) deem that ClearView would become nonviable without
conversion or a public-sector capital injection. Fitch does not
think that APRA would activate the non-viability trigger unless the
event was sustained and would lead to ClearView's non-viability.
Fitch regards these features as having 'Minimal' non-performance
risk and Fitch has therefore not applied additional notching, as
per its criteria.
ClearView has applied AUD44 million of the proceeds to pay down its
existing bank credit facility. The group has also deployed AUD30
million as Tier 2 capital to its life operating subsidiary,
ClearView Life Assurance Limited (Insurer Financial Strength
Rating: BBB+/Stable).
The notes will receive 100% equity credit in Fitch's Prism
Factor-Based Model, due to the application of the agency's
regulatory override, subject to 100% regulatory capital
recognition. The notes will be treated as 100% debt in Fitch's
financial leverage ratio (FLR) calculation, as per its criteria.
Fitch expects ClearView's FLR to remain strong for the rating
category after the issuance while the fixed-charge coverage ratio
will weaken alongside the larger interest cost. Fitch estimates the
pro forma FLR to be below 20%. ClearView's FLR increased to 12% by
June 30, 2020 from 3% at June 30, 2019 as the group fully drew down
its AUD60 million bank credit facility.
ClearView's net profit after tax increased to AUD13 million in the
financial year ending June 30, 2020 (FY20) from AUD4 million in
FY19 as the FY19 result included large one-off impairment charges.
The group also strengthened its claims assumptions in FY20 and
added short-term overlays to reflect expected COVID-19 related
claims. Similar to other life operators, ClearView is in the
process of redesigning and repricing its individual disability
income insurance portfolio in response to regulatory
recommendations aimed at improving the sustainability of the
sector. The group's coverage of the regulatory prescribed capital
amount was comfortable at 2.0x at end-FY20 (end-FY19: 2.1x).
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
An upgrade of ClearView's Long-Term IDR would lead to an upgrade in
the rating on the subordinated notes
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
A downgrade of ClearView's Long-Term IDR would lead to a downgrade
in the rating on the subordinated notes
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).
HORIZON CONSTRUCTIONS: Second Creditors' Meeting Set for Nov. 19
----------------------------------------------------------------
A second meeting of creditors in the proceedings of Horizon
Constructions Pty Ltd has been set for Nov. 19, 2020, at 11:00 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 Nov. 18, 2020, at 4:00 p.m.
Giovanni Maurizio Carrello of BRI Ferrier Western Australia was
appointed as administrator of Horizon Constructions on Oct. 15,
2020.
SMILES INCLUSIVE: Enters Voluntary Administration
-------------------------------------------------
Matt Ogg at Business News Australia reports that the local
anaesthetic of turnaround promises has finally worn off for
embattled dental group Smiles Inclusive, as its inability to pay
back a $12 million loan to National Australia Bank triggered the
appointment of voluntary administrators on Nov. 9.
Business News Australia relates that the news came hot on the heels
of the departure of yet another director, and the belated
production of half-year results that not even the auditor had the
confidence to stand behind.
Questions about Smiles Inclusive's solvency have been raised by
former business partners for more than a year now, with parallel
allegations over hundreds of thousands of dollars owed, the report
says.
But the NAB debt, originally at $19 million but reduced in order to
recoup a portion of the loan, took centre stage.
Impeded by severe limitations on raising capital and operations
that have run at a loss, the Gold Coast-based company on Nov. 9
confirmed it had not been able to raise the funds needed to repay
amounts due under a deed with NAB.
As a result, NAB terminated the release deed having earlier
cancelled and demanded full payment of all amounts owing to it
under its facilities on October 19, 2020.
In response the dental company appointed Luci Palaghia and Tim
Heenan of Deloitte Restructuring Services as voluntary
administrators for both the Smiles Inclusive corporate group and
Totally Smiles Pty Ltd, the report discloses.
"Unfortunately, we were unable to refinance the NAB debt in the
time frame required so we have taken the decision to appoint
voluntary administrators to continue our efforts to restructure the
group," the report quotes chairman and founding director David
Usasz as saying. "The board will work with the voluntary
administrators to put forward a deed of company arrangement
proposal for the benefit of all stakeholders."
According to the report, CEO Michelle Aquilina, who took the reins
of the beleaguered outfit after former head Tony McCormack resigned
in the thick of nationwide lockdowns and staff stand downs, said
the decision was about securing the future of Totally Smiles and
emerging on the other side.
"Industry demand for oral health services remains strong and we
will continue to provide services to the community across our
network as we work through this process," she said.
"This current environment has been challenging and the Board
regrets these events have occurred just when we were progressing on
a significant transformation program to reset our cost base, which
included consolidation of our workforce, renegotiating supplier
agreements and simplification of our portfolio and as well as
taking steps to repair our balance sheet," the report relays.
Business News Australia adds that voluntary administrator Luci
Palaghia said the immediate priority was to work closely with joint
venture partners, management and practitioners to maintain
operations and minimise business disruption, while expressions of
interests are sought for the sale or recapitalisation of the
business.
Smiles Inclusive (ASX:SIL) -- https://smilesinc.com.au/ -- operates
a network of dental practices across Australia under the national
brand, Totally Smiles.
SMILES INCLUSIVE: First Creditors' Meeting Set for Nov. 19
----------------------------------------------------------
A first meeting of the creditors in the proceedings of Smiles
Inclusive Limited and Totally Smiles Pty Ltd will be held on Nov.
19, 2020, at 10:00 a.m. at the offices of Deloitte Financial
Advisory Pty Ltd, Level 23, Riverside Centre, 123 Eagle Street, in
Brisbane, Queensland.
Lucica Palaghia and Timothy Heenan of Deloitte were appointed as
administrators of Smiles Inclusive on Nov. 9, 2020.
UBICAR PTY: Second Creditors' Meeting Set for Nov. 19
-----------------------------------------------------
A second meeting of creditors in the proceedings of Ubicar Pty
Limited and Ubicar Insurance Pty Limited has been set for Nov. 19,
2020, at 11:00 a.m. via a virtual meeting.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by Nov. 18, 2020, at 5:00 p.m.
Liam William Paul Bellamy of Chan & Naylor was appointed as
administrator of Ubicar Pty on Oct. 15, 2020.
=========
C H I N A
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BANK OF COMMUNICATIONS: Fitch Puts BB(EXP) Rating to New USD Bonds
------------------------------------------------------------------
Fitch Ratings has assigned an expected rating of 'BB+(EXP)' to Bank
of Communications Co., Ltd.'s (BOCOM, A/Stable/bb-) proposed US
dollar-denominated undated capital bonds. The proposed bonds are
likely to qualify as Additional Tier 1 (AT1) capital, and the net
proceeds will be used to replenish AT1 capital. The final rating on
the bonds is subject to the receipt of final documentation
conforming to information already received.
KEY RATING DRIVERS
Under Fitch Ratings' Bank Rating Criteria, a bank's Issuer Default
Rating (IDR) is used as the anchor rating where Fitch believes
sovereign extraordinary support is likely to be extended further
down the capital structure into more junior obligations like AT1
notes, if required. Therefore, Fitch applies BOCOM's support-driven
Long-Term IDR of 'A' as the anchor for its proposed undated capital
bonds. This is in light of BOCOM's high systemic importance and
central state ownership, which is reflected in BOCOM's Support
Rating of '1' and Support Rating Floor of 'A' - similar to other
state banks in China.
Non-performance risk is mitigated due to its expectation for
sovereign support (hence zero notches) and that the proposed bonds
are notched twice from their anchor rating to reflect high loss
severity relative to senior unsecured instruments given their
subordination, implying a rating of 'BBB+'. However, Fitch's Bank
Rating Criteria imposes a rating cap of 'BB+' for issuers with
Support Rating Floors in the 'A' or 'BBB' category. As such, the
ratings of the proposed bonds are capped at 'BB+'.
The payment of any distribution on AT1 instruments should only be
paid out of distributable items under China's Administrative
Measures for the Capital of Commercial Banks (Trial) (The Capital
Management Rules). Any distributable items that are not distributed
in a given year are retained and are available for distribution in
subsequent years. The Company Law and Capital Management Rules,
however, do not expressly define distributable items in the context
of AT1 instruments.
That said, Fitch does not expect higher non-performance risk for
the proposed undated capital bonds due to the level of BOCOM's
undistributed profits (end-1H20: CNY176 billion). BOCOM also has
the discretion to cancel (in whole or in part) any distribution on
the bonds, subject to a relevant resolution passed at a general
meeting of the banks' shareholders.
The proposed bonds have lower recovery expectations than for
higher-ranking securities, due to their subordination status and
write-off features. The proposed bonds will be irrevocably
written-off, in whole or in part, upon the occurrence of a
non-viability trigger event. Such an event occurs when the China
Banking Insurance Regulatory Commission (CBIRC) determines that
without a write-off the bank would become non-viable, or when the
relevant authorities determine that without a public-sector
injection of capital or other equivalent support the bank would
become non-viable, whichever is earlier.
Once the principal amount of the bonds (in whole or in part) has
been written-off, the relevant written-off portion of the bonds
will not be restored or become payable again (whether in whole or
in part) in any circumstances (including where the relevant
non-viability trigger event ceases to continue), and any accrued
but unpaid distribution in respect of such relevant written-off
portion of the bonds shall cease to be payable.
The claims of the bondholders for payment of principal and any
distribution under the proposed undated capital bonds will rank in
priority to the claims of holders of all classes of equity capital
and junior obligations of the bank and be subordinated to the
claims of depositors, general creditors and holders of any
subordinated indebtedness that rank senior to the proposed undated
capital bonds, and rank pari passu with the claims of holders of
any other AT1 instruments issued or guaranteed by the bank that
rank pari passu with the proposed bonds and parity obligations of
the bank.
Under a non-viability trigger event, the proposed undated capital
bonds shall be written off concurrently with the write-off or
conversion into ordinary shares of the bank of the principal amount
of all other AT1 capital instruments with the same trigger event,
and before the write-off or conversion into ordinary shares of the
bank of the principal amount of all Tier 2 capital instruments.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
The rating for BOCOM's proposed bonds is sensitive to a change in
the bank's Long-Term IDR, which may occur due to any shift in the
perceived willingness or ability of the government to support the
bank in a full and timely manner, and/or the relative notching for
non-performance risk, potentially stemming from a change in Fitch's
assumptions around the state's ability and propensity to prevent
BOCOM from triggering the bonds' loss-absorption features. An
upgrade of BOCOM's Support Rating Floor and Long-Term IDR to 'AA-'
or higher would result in an upgrade of the notes' ratings to 'BBB'
under Fitch's criteria.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
The rating for BOCOM's proposed bonds will be downgraded if the
bank's Support Rating Floor and Long-Term IDR (as anchor) are
downgraded to below 'BBB'.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
The rating for BOCOM's proposed undated capital bonds is linked
directly to the bank's Long-Term IDR, and BOCOM's IDR is linked
directly to China's sovereign rating (A+/Stable).
ESG CONSIDERATIONS
Bank of Communications Co., Ltd.: Governance Structure: 4,
Financial Transparency: 4
BOCOM has an ESG Relevance Score of 4 for Financial Transparency
risk due to under-reporting of non-performing loans and
risk-weighted assets stemming from the use of off-balance-sheet
transactions. This has a negative effect on the bank's credit
profiles, and is relevant to the rating in conjunction with other
factors.
The bank has an ESG Relevance Score of 4 for Governance Structure
risk, as there is potential for significant state influence as the
owner or regulatory influence due to the lack of independence from
the state. This has a negative effect on the bank's credit
profiles, and is relevant to the rating in conjunction with other
factors.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
KWG GROUP: Fitch Assigns BB- Rating to New USD Sr. Notes
--------------------------------------------------------
Fitch Ratings has assigned a 'BB-' rating to KWG Group Holdings
Limited's (KWG, BB-/Stable) proposed US dollar senior notes. The
proposed notes are rated at the same level as KWG's senior
unsecured rating because they will constitute its direct and senior
unsecured obligations.
KWG's ratings are supported by its quality and sufficient land
bank, strong brand recognition in higher-tier cities across China,
consistently robust profitability, strong liquidity and healthy
maturity profile. The ratings are constrained by the small scale of
the company's development-property business as well as weak sales
efficiency.
KEY RATING DRIVERS
Diverse Coverage; Strong Branding: KWG's land bank is diversified
across China's Greater Bay Area, which includes Guangzhou, Foshan,
Shenzhen and Hong Kong, as well as eastern and northern China. The
company had 16.4 million square metres (sq m) of attributable land
in 1H20, spread across 40 cities in mainland China and Hong Kong,
with an average cost of CNY5,200/sq m (excluding Hong Kong). 51% of
its total sellable resources are located in the Greater Bay Area,
where the company has extensive experience and established
operations.
KWG has established strong brand recognition in its core cities by
focusing on first-time buyers and upgraders. It appeals to these
segments by engaging international architects and designers and
setting high building standards.
Robust Profitability Through Cycles: Fitch expects KWG's EBITDA
margin, excluding capitalised interest, to remain at 30% in the
next two years. Its consolidated EBITDA margin increased to around
30% by end-2019, from around 20% at end-2018, mainly due to the
sale of an office building that was classified as disposal of a
subsidiary and was not included in the margin calculation in 2018.
Profitability of KWG's development properties has remained strong
through business cycles and is one of the highest among Chinese
homebuilders. Protecting the margin is one of KWG's key objectives
and is achieved by maintaining higher-than-average selling prices
through consistently high-quality products. The company's
experienced project team also ensures strong execution capability
and strict cost control. Moreover, KWG has a low unit land cost of
around 25% of its average selling price due to its strong foothold
in Guangzhou, where land prices have not risen as much as in other
Tier 1 cities.
Leverage Under Control: Fitch expects leverage, measured by net
debt/adjusted inventory, to stay at around 35%-40% based on the
company's sales prospects and land-bank replenishment strategy.
KWG's leverage on an attributable basis was below 40% at 1H20. The
cash collection rate increased in 2019 and the company slowed land
acquisitions as it spent only 36% of sales proceeds to purchase
land compared with 61% in 2018.
JVs with Leading Peers: KWG's prudent expansion strategy has
created strong partnerships with leading industry peers, including
Sun Hung Kai Properties Limited (A/Stable), Hongkong Land Holdings
Limited, Shimao Group Holdings Limited (BBB-/Stable), China Vanke
Co., Ltd. (BBB+/Stable), China Resources Land Ltd (BBB+/Stable) and
Guangzhou R&F Properties Co. Ltd. (B+/Negative). These partnerships
help KWG lower project-financing costs, reduce competition in land
bidding and improve operational efficiency.
JV cash flow is well-managed and investments in new projects are
mainly funded by excess cash from mature JVs. Leverage is also
lower at the JV level because land premiums are usually funded at
the holding-company level and KWG pays construction costs only
after cash is collected from pre-sales.
Small Scale; Weak Churn: KWG's 2019 total pre-sales rose by 32% yoy
to CNY86.1 billion, but only 64% of total sales were attributable
to the company. KWG's sales target in 2020 of CNY103 billion, which
will be equivalent to an attributable sales scale of around CNY66
billion, remains smaller than 'BB' peers' over CNY90 billion in
2019. KWG's sales efficiency, measured by attributable contracted
sales/gross debt, of 0.6x is slower than most 'BB-' peers' of about
1.0x.
DERIVATION SUMMARY
KWG's ratings are supported by its established homebuilding
operations in Guangzhou and strong high-tier cities across China,
consistently robust profitability, strong liquidity and healthy
maturity profile. KWG has maintained one of the highest margins
among Chinese homebuilders throughout the cycle.
Its EBITDA margin is comparable with that of Logan Group Company
Limited (BB/Stable) and some investment-grade peers, such as Poly
Developments and Holdings Group Co., Ltd. (BBB+/Stable) and China
Jinmao Holdings Group Limited (BBB-/Stable), and is higher than
that of some 'BB' peers, including Seazen Group Limited
(BB/Stable), Yuzhou Group Holdings Company Limited (BB-/Stable) and
CIFI Holdings (Group) Co. Ltd. (BB/Stable). However, its contracted
sales scale is small compared with that of these peers.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Contracted sales gross floor area (GFA) rising by more than
20%
- Annual increase in average selling price of 5%
- EBITDA margin (exclude capitalised interest) maintained at
around 30% for 2020
- Land replenishment rate at 1.3x contracted sales GFA
(attributable) in 2020-2021
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Increase in scale without compromising financial metrics
- EBITDA margin sustained above 30%
- Net debt/adjusted inventory sustained below 35%
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- EBITDA margin below 25% for a sustained period
- Net debt/adjusted inventory sustained above 45%
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: KWG has well-established, diversified funding
channels and strong relationships with most offshore and onshore
banks. It has strong access to domestic and offshore bond markets
and was among the first companies to issue panda bonds. KWG had
available cash of CNY48.6 billion at end-1H20, which was enough to
cover the repayment of CNY33.4 billion in short-term borrowings and
outstanding land premiums. Fitch believes the group maintained
sufficient liquidity to fund development costs, land premium
payments and debt obligations due to its diversified funding
channels, healthy maturity profile and flexible land-acquisition
strategy.
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).
LIONBRIDGE CAPITAL: Fitch Affirms B+ LT IDR, Outlook Positive
-------------------------------------------------------------
Fitch Ratings has affirmed Lionbridge Capital Co., Limited's 'B+'
Long-Term Issuer Default Rating (IDR) with a Positive Outlook.
Lionbridge Capital is a holding company incorporated in Hong Kong
in 2011 and operates in China through Lionbridge China, its wholly
owned operating subsidiary representing nearly all of its total
assets. Lionbridge China provides commercial-vehicle financing and
has a niche franchise in the truck-leasing market in China.
KEY RATING DRIVERS
Lionbridge Capital's 'B+' IDR reflects the company's business model
focusing on the niche truck-leasing market, adequate risk
management to maintain stable asset quality and strengthening
funding access, which helps reduce refinancing risk. The rating is
balanced by the company's high leverage and reliance on wholesale
secured funding. The Positive Outlook on Lionbridge Capital
reflects Fitch's expectation of the benefits that are likely to
accrue from the strategic alliance with CCB Trust Co., Ltd. (CCBT),
and the access to additional funding facilities through CCBT's
involvement in the company.
CCBT raised its stake in Lionbridge to 32% in June 2020, becoming
the largest shareholder. CCBT is majority-owned by China
Construction Bank Corporation (CCB, A/Stable), the second-largest
state bank in China. The investment and alliance with Lionbridge
will allow the CCB group to expand its inclusive financing, which
is a policy focus of the Chinese government.
Lionbridge's funding profile has been strengthened by CCBT's
explicit support. CCBT has increased its loan facilities with
Lionbridge Group to CNY10 billion, and issued a letter of liquidity
support for Lionbridge's onshore yuan-denominated bond issuance and
a keepwell deed for Lionbridge's offshore borrowing. CCB also
entered a partnership agreement with Lionbridge and granted a CNY10
billion loan facility for Lionbridge to originate loans directly
for the bank. Fitch expects the additional funding options to
provide Lionbridge with greater operational flexibility, enhancing
the company's competitive position and franchise strength and
mitigating the risk associated with high leverage.
Fitch also expects China's economic recovery and the stabilised
operating conditions in China's truck-financing sector to mitigate
Lionbridge's asset-quality risks. The robust demand for trucks from
the logistics and infrastructure sectors after the coronavirus
outbreak supports truck lessees' cash flow generation and
debt-servicing capability, allowing Lionbridge to maintain stable
asset quality and continued access to the asset-backed securities
market.
Lionbridge's rating is based on its consolidated profile, which
considers the high integration between the company and Lionbridge
China, and the limited restrictions on the flow of funds between
the two companies. The rating reflects Lionbridge's standalone
credit profile, as Fitch believes any extraordinary support from
CCBT remains uncertain because of the short ownership history.
Fitch expects Lionbridge to continue to operate independently with
a limited level of integration with CCBT, and Lionbridge's role in
the overall CCB group is expected to be limited due to its small
contribution to the bank group.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- A strengthening of Lionbridge's franchise as a result of its
improved funding flexibility, a sustained improvement of
Lionbridge's profitability to above 2% of pretax income to average
assets, and an ongoing strengthening of the funding profile, as
measured by unsecured debt/gross debt to above 50% with reduced
liquidity mismatches, coupled with a reduction in leverage to 6x on
a permanent basis;
- Further strengthening in the strategic linkages between
Lionbridge and CCBT, characterised by increased ownership and
stronger integration, would lead to a rating uplift from its
standalone credit profile.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- A rise of leverage, measured by total debt/tangible equity,
approaching 8x would trigger the revision of outlook to Stable from
Positive;
- Weaker linkages between CCBT and Lionbridge, which would be
evident from lower provision of funding and reduced ownership. This
could be triggered by Lionbridge's underperformance, particularly
in its asset quality.
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
Lionbridge's ESG Relevance Score for Consumer Welfare of '3' is
higher than sector default score of '2' due to the fair-lending and
repossession practices involved in the truck-leasing business.
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
REDCO PROPERTIES: Fitch Assigns B Rating to New USD Sr. Notes
-------------------------------------------------------------
Fitch Ratings has assigned Redco Properties Group Ltd's
(B/Positive) proposed US dollar senior notes a rating of 'B', with
a Recovery Rating of 'RR4'.
The proposed notes are rated at the same level as Redco's senior
unsecured rating because they will constitute its direct and senior
unsecured obligations. Redco intends to use the net proceeds from
the issue to refinance existing debt. The company has also
announced a concurrent tender offer to purchase its existing notes
due May 2021.
Redco demonstrated consistent growth in attributable contracted
sales, indicated by the 29% increase to CNY14.5 billion in 2019 and
its expectation of CNY18.1 billion in attributable contracted sales
in 2020, helping its sales scale expand to close to that of
higher-rated peers. Redco also continued its geographical
diversification with 89 projects in 25 different cities. Redco's
leverage - measured by net debt/adjusted inventory, including
adjustments to joint ventures and associates - fell to 15% in 2019,
from 29% in 2018, and is better than that of 'B' rated peers.
Fitch believes Redco can maintain a low leverage ratio as the
company continues to build up a sufficient land bank size to
sustain rising contracted sales. Redco has saleable resources for
around four years of development. Profitability remained strong as
Redco delivered higher-margin projects and kept the cost of unsold
gross floor area (GFA) at only CNY1,978 per sq m.
KEY RATING DRIVERS
Small Scale but Strong Growth: Redco's rating is constrained by its
attributable sales scale of CNY14.5 billion in 2019, which is small
relative to that of peers in the higher 'B+' category, although
Fitch expects Redco's attributable sales to rise to at least CNY18
billion in 2020. Redco has transitioned to a fast-churn model,
which entails swifter sales turnover and faster sales growth.
Total contracted sales, including joint ventures, rose by 25% to
CNY27.4 billion in 2019 and by more than 65% in 2018. Attributable
contracted sales accounted for slightly over 50% of the total in
2019, a similar level to 2018. Redco maintained its sales
efficiency in 2019, with attributable sales/total debt, including
joint-venture debt, at 0.9x and attributable sales/adjusted
inventory at 0.7x.
Leverage Remains Low: Fitch expects Redco to continue to increase
contracted sales to develop a sustainable market presence. This
means the company is likely to acquire land to sustain its rising
contracted sales. Fitch expects this to heighten leverage, but it
should remain at less than 40% - the level below which Fitch would
consider positive rating action - as leverage fell to 15% in 2019,
from 29% in 2018, due to a more conservative land acquisition
strategy.
Land Bank Supports Growth: Fitch estimates Redco's land bank is
sufficient for around four years of attributable sales. Redco would
need to continually secure low-cost land to sustain a healthy
land-bank life if it were to reach its higher contracted sales
target. Redco boosted its land bank to around 14.6 million sq m in
2019, from 10.0 million sq m in 2018 and 4.9 million sq m in 2017,
with the cities of Tianjin, Nanchang, Hefei, Zhejiang and Jinan
accounting for the majority of the GFA.
Healthy Profit Margin: Redco's EBITDA margin narrowed to 25% in
2019, from 27% in 2018, due to higher average land-acquisition
costs of CNY2,641/sq m in 2019, against CNY1,829/sq m in 2018.
Redco acquires land mainly through M&A, allowing it to keep the
average cost of its unsold land bank at around CNY2,000/sq m. Its
sales are concentrated in non-prime locations in second-tier cities
and its product mix is targeted at first-time purchasers,
insulating the company from price-ceiling policies. This helps
Redco maintain healthy margins at a high churn rate.
DERIVATION SUMMARY
Redco's attributable contracted sales of CNY14.5 billion in 2019
were lower than those of 'B' rated peers, such as Modern Land
(China) Co., Limited's (B/Stable) CNY19.5 billion. However, Redco's
leverage was lower than that of Modern Land and it has a longer
land-bank life. Modern Land also has a lower margin than Redco.
Redco's high sales efficiency has made it easier for the company to
transform to a fast-churn business model while controlling
leverage.
Companies rated one notch above Redco, at 'B+', generally have
proven sustainable business models, with attributable sales of over
CNY20 billion. Redco's similarities are a land bank of more than
three years of development and stable leverage of below 45%. Some
'B+' rated homebuilders have a stronger nationwide presence, with
better regional project diversification.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Total contracted sales, including joint ventures, reaching
CNY33 billion in 2020, CNY38 billion in 2021 and CNY42 billion in
2022. Attributable sales at 55% of total.
- Gross profit margin from property development maintained at
between 30% and 35% during 2020-2023.
- Land premium accounting for 45%-50% of annual sales receipts in
2020-2023 and average land acquisition cost increasing at 3%
annually from 2021.
- 6% decrease in contracted sales average selling price in 2020
and no increase in 2021-2023.
- Construction costs accounting for around 45% of annual sales
receipts in 2020-2023.
KEY RECOVERY RATING ASSUMPTIONS
The recovery analysis assumes that Redco would be liquidated in a
bankruptcy rather than reorganised as a going-concern because it is
an asset-trading company.
Fitch has assumed a 10% administrative claim.
Liquidation Approach
- The liquidation estimate reflects Fitch's view of the value of
balance-sheet assets that can be realised in a sale or liquidation
process conducted during a bankruptcy or insolvency proceeding and
distributed to creditors.
- Cash balance is adjusted such that only cash in excess of the
higher of accounts payable and three months of contracted sales is
factored in.
- Advance rate of 70% is applied to its adjusted inventory, as
Redco has an EBITDA margin of above 20%.
- Property, plant and equipment advance rate at 50%.
- 75% advance rate applied to accounts receivable.
- Advance rate of 100% applied to restricted cash, which is
mainly guarantee deposits for construction and buyers' mortgages
for pre-sold properties.
Based on its calculation of adjusted liquidation value after
administrative claims, Fitch estimates the recovery rate for the
offshore senior unsecured debt to be within the 'RR4' recovery
range.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Annual attributable contracted sales sustained above CNY20
billion, while maintaining available-for-sale land bank at 2.5
years of development.
- Net debt/adjusted inventory sustained below 40%.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Failure to reach its Positive Outlook guidelines would lead to
the Outlook reverting to Stable.
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity: Redco's liquidity remains healthy, with total
cash of CNY15 billion (including restricted cash of CNY4.0
billion), compared with short-term debt of CNY12 billion at
end-2019.
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).
WANDA FILM: Raises $440 Million in Private Placement
----------------------------------------------------
Guan Cong and Timmy Shen at Caixin Global report that struggling
cinema operator Wanda Film Holding Co. Ltd. is poised to raise
CNY2.9 billion (US$438.2 million) in a private placement, as it
looks to pay down debt and boost liquidity after posting losses for
four straight quarters.
Caixin relates that Shenzhen-listed Wanda Film will issue new
shares to eight investors, including Shanghai Gaoyi Asset
Management Partnership Ltd., UBS AG and Citic Securities Co. Ltd.,
the company said in a filing on Nov. 9 to the Shenzhen Stock
Exchange.
About 30% of the proceeds will be used to supplement liquidity and
pay debt, while the rest will be used to build new cinemas, it said
in another Nov. 9 filing, Caixin relays.
Wanda Film Holding Co Ltd operates cinemas. The Company provides
film production, television production, film distribution, film
screening, and other services. Wanda Film Holding also conducts
cinema construction investment, advertising production, and other
businesses.
YANGO GROUP: Fitch Assigns B+ Rating to New USD Sr. Notes
---------------------------------------------------------
Fitch Ratings has assigned Chinese homebuilder Yango Group Co.,
Ltd.'s (B+/Stable) proposed US dollar senior notes a 'B+' rating
and a Recovery Rating of 'RR4'. The proposed notes will be issued
by its wholly owned subsidiary, Yango Justice International
Limited. The notes are rated at the same level as Yango's senior
unsecured rating as they will be unconditionally and irrevocably
guaranteed by the company.
The rating reflects Yango's stable financial profile, which has
significantly improved since 2018. Fitch estimates that its
leverage fell to around 55% by end-September 2020, from above 70%
at end-2017, as Yango cut back on land acquisitions in line with
its slower expansion after its attributable contracted sales
reached a sufficiently large CNY135 billion in 2019.
Fitch believes the company has the incentive and ability to
continue to reduce leverage towards 55%, supported by a quality
land bank that is sufficient for development in the next 2.5 years.
However, Yango's leverage is still higher than that of most 'B+'
rated peers' 40%-50%, and that of 'BB-' peers' 35%-45%, which will
constrain Yango's rating at the current level.
KEY RATING DRIVERS
Commitment to Deleverage: Yango's management fulfilled its
commitment to reduce leverage in 2018 and 2019 from a peak in 2017.
Its leverage - measured by net debt/adjusted inventory, including
guarantees provided to, and net assets of, joint ventures and
associates - improved to around 60% in 2019 and 1H20. Fitch
estimates the leverage has dropped further to around 55% by
end-September 2020. Yango spent less than 50% of sales receipts on
an attributable basis for land acquisition in 2018-2019 and around
53% in 1H20, compared with 80% in 2016 and above 100% in 2017.
Leverage Remains High; Risk Reduced: Fitch estimates Yango will
deleverage towards 50% over the next three years by controlling
land acquisition, with the aim of keeping land purchases at 35%-55%
of annual sales receipts. This is an improvement on 2017, but
leverage will remain high against that of most 'B+' and 'BB-'
peers. Yango's milder growth appetite will lower risks, as industry
prospects become more challenging, and ease the pressure to acquire
land. It aims to slow total contracted sales growth in 2020, from
the 80%-90% a year in 2017-2018.
Business Scale Supports Ratings: Yango's business scale is larger
than that of most 'BB' rating-category issuers and is a key
business profile strength. Yango's 2019 attributable sales
increased by 14% to CNY135 billion. Sales in 2020 to date are
satisfactory despite the COVID-19 outbreak. Total sales in
January-September dropped by 2% yoy to CNY147 billion, or 67% of
the annual target of CNY220 billion, which was 4% higher than
2019's CNY211 billion sales. Yango's well-located saleable
resources, mainly in higher tier cities, will continue to support
its growth.
Quality, Diversified Land Bank: Yango had 50 million sq m in total
land bank at end-June 2020. Fitch estimates Yango owns around 41
million sq m (attributable: 27 million sq m) of the land, excluding
the portion for entrusted construction and sales, which will
support property sales for around 2.5 years. The land bank is
nationwide, with around 30% of saleable resources in Greater Fujian
and the Yangtze River Delta, 35% in strategic cities in central and
western China and more than 25% in the Pearl River Delta region at
end-June 2020. Yango plans to continues to focus on core Tier 2 and
strong Tier 3 cities, where Fitch thinks demand is still resilient,
which would support mild sales growth.
Stable Margin: Yango's EBITDA margin, after adding back capitalised
interest in cost of goods sold, was healthy at 28% in 1H20 (2019:
26%). Average land-bank cost was low at CNY4,431/sq m at end-1H20,
or 36% of its average selling price (ASP) of CNY12,383/sq m.
Yango's new land cost in 9M20 rose to CNY6,431/sq m, from
CNY5,168/sq m in 2019, due mainly to more acquisitions from public
land auctions. Yango's reported gross profit margin in 3Q20 dropped
to 23.5% from 26.5% in 1H20 mainly due to delivery and recognition
of lower-margin projects. Yango aims for new land cost/ASP of about
1:3 to maintain its gross profit margin at 20%-25%.
Weak Parent-Subsidiary Linkages: Fitch assesses the linkage between
Yango and its parent, Fujian Yango Group Co., Ltd. (FJYG) as weak.
FJYG held 34% of Yango at end-June 2020 and controlled 44% of the
voting rights. FJYG has moderate management control, appointing
four of Yango's six board members, but the legal and operational
linkages between the two are not meaningful. Yango and FJYG
sometimes collaborate on education-related projects, which are
immaterial relative to Yango's size.
Parent's Distress May Affect Yango: Financial distress at FJYG may
affect Yango's access to funding, despite the weak
parent-subsidiary ties, as the two sometimes share credit
facilities from banks. Hence, Yango's rating is constrained to two
notches above FJYG's consolidated profile, which Fitch assesses as
'b-' due to higher consolidated leverage and the parent's tight
liquidity. Yango makes up around 90% of FJYG's EBITDA and drives
its consolidated profile.
Yango's leverage would have been 70% instead of 60% at end-June
2020 if FJYG's net debt, excluding those of listed companies, were
added to Yango's net debt. The parent's liquidity was tight with
available cash/short-term debt at only 0.3x on a deconsolidated
basis at end-June 2020, although FJYG had over CNY15 billion in
investments booked at cost, including shares in listed companies
such as Industrial Bank Co., Ltd (BBB-/Stable) and Jiangxi Bank
Co., Ltd. with a market value of over CNY8 billion, to service its
short-term debt of CNY4 billion.
Taikang Life Collaboration Credit-Positive: Fitch believes Taikang
Life Insurance Co., Ltd.'s (A/Negative) collaboration with the
company will help lower Yango's funding costs and reduce the impact
from a weaker parent's consolidated profile. Fitch also expects the
two to collaborate in expanding other property-related businesses.
Taikang Life and its affiliates have completed their acquisition of
13.46% of Yango's shares from the existing shareholder and become
the second-largest shareholder with two board seats as of October
26, 2020.
DERIVATION SUMMARY
Yango's diversified nationwide portfolio and large scale are
comparable with those of 'BB' rated Chinese homebuilders. Yango's
CNY135 billion attributable contracted sales in 2019 are comparable
with that of CIFI Holdings (Group) Co. Ltd. (BB/Stable) and
stronger than those of 'BB-' and 'B' rated peers, which usually
have contracted sales of below CNY60 billion. More than 70% of
Yango's land bank by saleable resources is located in Tier 1 and
Tier 2 cities, which Fitch believes have resilient demand to
cushion against the impact of a homebuilding-sector slowdown,
compared with lower-tier cities.
However, Yango's higher leverage constrains its rating at 'B+'. The
company has taken measures to consistently reduce leverage over the
last two years, but it remains higher than that of 'B+' rated
peers, whose leverage is between 40% and 50%, such as Zhenro
Properties Group Limited (B+/Stable).
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Attributable contracted sales of CNY130 billion-140 billion
during 2020-2021
- Land premium accounting for 55% of sales receipts per year
during 2020-2021
- Construction expenditure accounting for 25%-30% of sales
receipts per year during 2020-2021
- Cash collection rate at 80% (2018 and 2019: 80%)
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Net debt/adjusted inventory sustained below 50%
- Improvement of FJYG's consolidated profile, including the ratio
of consolidated net debt (excluding subsidiary Longking) to
adjusted inventory sustained below 65%
- EBITDA margin sustained above 20%
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Net debt/adjusted inventory above 65% for a sustained period
- EBITDA margin below 15% for a sustained period
- Deterioration of FJYG's consolidated profile, or significant
deterioration of the parent's liquidity
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Yango's liquidity has improved due to better
cash management and an improving debt maturity profile. Yango has
become more financially disciplined by budgeting cash outflow on
land acquisitions according to cash inflow from sales. It had
unrestricted cash on hand of CNY38.4 billion at end-September 2020,
sufficient to cover the CNY33.2 billion in short-term debt.
Unrestricted cash over short-term debt increased to around 1.2x by
end-September 2020, from 0.7x in 2017-2018.
Improvement in Debt Structure: Yango has optimised its debt
structure, with short-term debt dropping to around 30% of total
debt by end-June 2020, from 40% at end-2017 and end-2018. The
company is also replacing non-bank financing with bank loans, with
non-bank financing decreasing to 22% of total debt by end-June
2020, from 25% at end-2019 and 53% at end-2018. Fitch believes the
improvement in the debt structure reflects better access to
financing that gives the company greater financial flexibility, as
the funding environment for homebuilders remains challenging.
Yango's average funding cost fell to 7.5% by end-June 2020, from
7.8% at end-2019.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
=================
H O N G K O N G
=================
SPI ENERGY: Issues $2.1 Million 10% Convertible Promissory Note
---------------------------------------------------------------
SPI Energy Co., Ltd. issued a $2.1 million 10% convertible
promissory note to Streeterville Capital, LLC, a Utah limited
liability company.
The convertible promissory note, which was approved by SPI's board
of directors, bears interest at 10% and has a maturity date of Nov.
2, 2021. All or any portion of the note is convertible into shares
of SPI common stock at $26.00 per share. The convertible promissory
note was issued pursuant to Rule 506 under Regulation D promulgated
under the Securities Act of 1933, as amended.
About SPI Energy Co., Ltd.
SPI Energy -- http://www.spigroups.com/-- is a global provider of
photovoltaic solutions for business, residential, government and
utility customers, and investors. The Company develops solar PV
projects that are either sold to third party operators or owned and
operated by the Company for selling of electricity to the grid in
multiple countries in Asia, North America and Europe. The Company's
subsidiary in Australia primarily sells solar PV components to
retail customers and solar project developers. The Company has its
operating headquarter in Hong Kong and its U.S. office in Santa
Clara, California. The Company maintains global operations in Asia,
Europe, North America, and Australia.
SPI Energy reported a net loss attributable to shareholders of the
Company of $15.26 million for the year ended Dec. 31, 2019,
compared to a net loss attributable to shareholders of the Company
of $12.28 million for the year ended Dec. 31, 2018.
Marcum Bernstein & Pinchuk LLP, in Beijing China, the Company's
auditor since 2018, issued a "going concern" qualification in its
report dated June 29, 2020, citing that the Company has a
significant working capital deficiency, has incurred significant
losses and needs to raise additional funds to meet its obligations
and sustain its operations. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.
=========
I N D I A
=========
AAA VEHICLEADES: CRISIL Lowers Rating on INR82cr Cash Loan to D
---------------------------------------------------------------
CRISIL has downgraded the ratings on the bank facilities of AAA
Vehicleades Private Limited (AVPL) to 'CRISIL D Issuer Not
Cooperating' from 'CRISIL BB/Stable Issuer Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 82 CRISIL D (ISSUER NOT
COOPERATING; Downgraded from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Inventory Funding 3.5 CRISIL D (ISSUER NOT
Facility COOPERATING; Downgraded from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 40.5 CRISIL D (ISSUER NOT
Bank Loan Facility COOPERATING; Downgraded from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Rupee Term Loan 4 CRISIL D (ISSUER NOT
COOPERATING; Downgraded from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with AVPL for obtaining
information through letters and emails dated December 31, 2019,
January 13, 2020 and October 28, 2020 among others, apart from
telephonic communication. However, the issuer has remained non
cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of AVPL. This restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on AVPL is consistent
with 'Assessing Information Adequacy Risk'.
The rating also reflects instances of delay in payment of interest
and principal on term loan by AVPL on account of cash flow
mismatches.
Based on the last available information and lack of management
cooperation coupled with adverse information from bankers, CRISIL
has downgraded the ratings on the bank facilities of AVPL to
'CRISIL D Issuer Not Cooperating' from 'CRISIL BB/Stable Issuer Not
Cooperating'.
AVPL was incorporated in 2008 by Mr. Devender Rana and his wife,
Mrs Gunjan Rana. It is an exclusive dealer for all passenger cars
of MSIL in New Delhi.
ALTIUS TRAVELS: Insolvency Resolution Process Case Summary
----------------------------------------------------------
Debtor: Altius Travels Private Limited
Registered office:
1, Mudhra Appts.
Near Stadium Petrol Pump
Navrangpura
Ahmedabad 380014
Insolvency Commencement Date: November 2, 2020
Court: National Company Law Tribunal, Surat Bench
Estimated date of closure of
insolvency resolution process: April 30, 2021
Insolvency professional: CA Kailash Thanmal Shah
Interim Resolution
Professional: CA Kailash Thanmal Shah
505, 21st Century Business Centre
Near World Trade Centre
Ring Road, Surat 395002
Mobile: 9824150365
E-mail: ipktshah@gmail.com
cirp.altiustravels@gmail.com
Last date for
submission of claims: November 21, 2020
ARUN VIDYUTH: CRISIL Withdraws D Rating on INR23cr Loans
--------------------------------------------------------
CRISIL has withdrawn its rating on the bank facilities of Arun
Vidyuth Private Limited (AVPL) on the request of the company and
receipt of a no objection certificate from its bank. The rating
action is in line with CRISIL's policy on withdrawal of its ratings
on bank loans.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 14.51 CRISIL D (ISSUER NOT
COOPERATING; Rating Withdrawn)
Proposed Long Term 8.49 CRISIL D (ISSUER NOT
Bank Loan Facility COOPERATING; Rating Withdrawn)
CRISIL has been consistently following up with AVPL for obtaining
information through letters and emails dated July 27, 2020 and
August 25, 2020, among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of AVPL. This restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on AVPL is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the rating on bank facilities of AVPL
continues to be 'CRISIL D Issuer Not Cooperating'.
CRISIL has withdrawn its rating on the bank facilities of AVPL on
the request of the company and receipt of a no objection
certificate from its bank. The rating action is in line with
CRISIL's policy on withdrawal of its ratings on bank loans.
Incorporated in 2015, AVPL is promoted by KM Power Pvt Ltd (49%)
and Sai Achyuth Pvt Ltd (51%). The company operates a 5-megawatt
solar power plant in Mahaboob Nagar district, Telangana. It
commenced operations in March 2016.
AZURE POWER: Fitch Affirms BB Rating on $350.1MM Sr. Notes
----------------------------------------------------------
Fitch Ratings has affirmed Azure Power Solar Energy Private
Limited's (APSEPL) USD350.1 million 5.65% senior notes due 2024 at
'BB'. The Outlook is Stable.
RATING RATIONALE
The affirmation reflects the credit profile of a restricted group
of 10 entities (Azure RGII) that operate solar generation assets
across 10 Indian states with a combined capacity is 647.5MW. The
US-dollar notes represent the joint and several obligations of
APSEPL and Azure RGII and have been used to refinance existing
debt. The note rating is underpinned by Azure RGII's long-term,
fixed-price power purchase agreements (PPA) with customers, the use
of proven technology and a financial profile commensurate with the
relevant rating threshold.
Fitch applied a variation from its Renewable Energy Project Rating
Criteria. Typically, a debt instrument's rating may be capped by
the credit quality of its revenue counterparties. Fitch does not
rate Azure RGII's revenue counterparties, which are either
sovereign-backed entities or state distribution utilities that
purchase power from Azure RGII under PPAs. However, the impact on
cash flow from individual counterparties is limited.
Fitch considers the revenue from sovereign-backed Solar Energy
Corporation of India (SECI) - to which Azure RGII contracts 14% of
its total capacity - as fully contracted and applies the fully
contracted project threshold. SECI's credit quality does not
constrain the rating, as revenue exposure to SECI presents a
systematic sector risk.
The remaining 86% of capacity is contracted with other state
distribution utilities and government-owned entities. Fitch
believes the unknown credit quality of these off-takers does not
constrain the rating of the notes due to the diversified pool of
these customers and limited risk to debt repayment. In addition,
more than 60% of Azure RGII's customers are publicly rated by
well-known local rating agencies, with ratings of between 'AA+' and
'A-' on the Indian national rating scale. This supports its view
that the risk of near-term off-taker default is limited. However,
Fitch applies a merchant project threshold to the offtakers'
revenue, other than for SECI, to determine the rating and evaluate
cash flow on the contracted prices; this is a variation from its
Renewable Energy Project Rating Criteria.
KEY RATING DRIVERS
Fixed Tariff, Long-Term PPAs: Revenue Risk - Price: Stronger
Fitch assesses price risk as 'Stronger' because the entities in
Azure RGII sell power under 25-year fixed-price PPAs, which protect
the portfolio from merchant exposure and price uncertainty. Fitch
does not project any merchant market revenue in the financial
analysis.
Robust Energy Yield Forecast: Revenue Risk - Volume: Midrange
The energy yield forecast produced by a third-party expert for each
asset indicates an overall P50/one-year P90 spread of less than 6%,
which Fitch assesses as 'Stronger'. However, its overall assessment
is limited to 'Midrange' because most of the assets in Azure RGII
are newly commissioned and it is not yet clear if their generation
will meet forecasts. Curtailment risk is limited, as solar plants
are must-run stations and any back down by the grid will be
compensated in accordance with the Indian Electricity Grid Code
2010, unless it is due to grid security or emergency events. The
projects have so far experienced limited grid curtailment.
Proven Technology, Strong In-House O&M Capabilities: Operation
Risk: Midrange
Fitch assesses operation risk as 'Midrange', supported by a
comprehensive and well-budgeted operating and maintenance (O&M)
plan being carried out by an experienced team. About 96% of Azure
RGII's capacity uses crystalline silicon panels, a technology that
Fitch regards as having lower operating cost and less performance
uncertainty than other photovoltaic technologies based on its long
operating history. Fitch also believes the rapid growth of solar
photovoltaic and sharp drop in operating costs means that
replacement operators could be easily found for restricted group's
assets, should the incumbent fail. At the same time, Fitch does not
expect costs to increase significantly. These strengths are partly
offset by the assets' limited record and lack of cost validation
from a third-party engineer.
Ringfenced Structure, Manageable Refinance Risk - Debt Structure:
Midrange
Noteholders are protected by Azure RGII's ringfenced structure and
protective covenants. The notes pay a fixed interest rate and
APSEPL substantially hedges currency risk. Noteholders benefit from
a lock-up test at a backward-looking 1.3x debt service coverage
ratio (DSCR) for cash outflow. The restricted group does not
maintain a debt service reserve account or a major maintenance
reserve account, but this is in part balanced by the excess cash
required to be retained with the restricted group in the last 2.25
years of the life of the notes. Refinancing risk is mitigated by
the solar assets' established access to banks and the capital
market, with support from the tenors of the PPAs, which extend
beyond the maturity of the notes.
PEER GROUP
Fitch views Adani Green Energy Limited Restricted Group 1 (AGEL
RG1, senior secured rating: BB+/Stable) and Adani Green Energy
Limited Restricted Group 2 (AGEL RG2, senior secured rating:
BBB-/Negative) as Azure RGII's closest peers.
All three restricted groups are solar-only portfolios benefiting
from long-term fixed-price PPAs and proven technology. Meanwhile,
all projects share operation risk weaknesses; limited operating
records and operating-cost forecasts that lack independent
validation. AGEL RG1 and AGEL RG2 have stronger off-taker profiles,
with capacity of 57% and 61%, respectively, contracted with SECI,
against Azure RGII's 15%. This results in a lower metric threshold
for rating determination. AGEL RG1 and AGEL RG2 also have strong
debt structures with superior noteholder protection features,
including stronger distribution lock-up tests, debt service reserve
accounts and capex reserve accounts. AGEL RG2 is the least exposed
to refinance risk, as 76% of its principal is amortised across 20
years, while the remainder is bullet debt. AGEL RG1 has a
rating-case average DSCR of 1.35x, with a minimum DSCR of 1.15x,
while AGEL RG2 has a rating-case average DSCR of 1.45x, with a
minimum DSCR of 1.30x. The qualitative strengths of AGEL RG1 and
AGEL RG2 and their higher financial metrics against relevant
thresholds support their higher ratings than Azure RGII.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
Synthetic DSCR consistently above 1.45x
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
Synthetic DSCR persistently below 1.35x, which could be a result of
energy production persistently underperforming long-term
projections due to low solar resource or operational issues or
extended payment cycles; and/or less favourable refinancing terms
and structure (including cash retention in the restricted group
over time) than the assumptions made in Fitch's financial
analysis.
CREDIT UPDATE
Azure RGII's projects have achieved high plant availability of
about 99% on average in the financial year ended March 2020 (FY20)
and 1HFY21. Average grid availability was about 99.3% in FY20 and
99.7% in 1HFY21, suggesting limited grid curtailment even during
the Covid-19 pandemic.
However, actual energy production during this period was below the
one-year P90 forecast, as some of the projects were only partially
commissioned, with capacity being added in FY20, and India's
extended monsoon and heavy rains causing low solar radiation and
isolation. Performance has since improved and Fitch expects it to
at least track P90 in FY21.
Receivables days have been stretched, particularly for the 50MW
contract with Hubli Electricity Supply Company, a Karnataka state
distribution company. The restricted group's 32.5MW rooftop
projects also experienced longer payment cycles due to billing
delays as a result of joint meter-reading requirement at 250 sites
that had previously occurred in house. However, management expects
invoicing to improve once meter reading is outsourced in 2021.
Power demand in India has largely returned to pre-pandemic levels,
with growth in September and October 2020 as industrial and
commercial activity was revived. Hence, Fitch expects payments from
state utilities to improve next year, although Fitch still
incorporates conservative receivable days of 30-180 days in its
financial analysis to capture the uncertainty.
FINANCIAL ANALYSIS
Fitch's financial analysis is based on synthetic DSCRs over the
remaining PPA life, given the bullet structure of the notes,
assuming the notes will be refinanced upon maturity by long-term
fully amortising debt. Fitch's base-case synthetic DSCR profile
averages 1.61x (previously 1.64x) and the synthetic DSCR averages
1.42x (previously 1.43x) under its rating case.
Fitch's base case incorporates P50 energy production with a 5%
haircut to reflect solar resource uncertainty, receivable days of
30-180 days - depending on the offtakers' payment records and its
expectations. Fitch's rating case adopts one-year P90 energy output
with a 5% haircut, 10% stress on operating expenses and higher
degradation to simulate a reasonable downside case.
CRITERIA VARIATION
Fitch applied a variation to the Renewable Energy Project Rating
Criteria with respect to the usage of merchant thresholds against
contracted revenue. Fitch does not rate the offtakers that purchase
power from Azure RGII under PPAs, but Fitch does not believe a
default by one of the companies would necessarily lead to a default
of the transaction. However, Fitch sees it prudent to apply the
merchant project thresholds for the revenue from the offtakers
other SECI while evaluating the cash flow based on contracted
prices.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
CAUVERY POWER: CRISIL Lowers Rating on INR90cr LT Loan to D
-----------------------------------------------------------
CRISIL has downgraded the ratings on the bank facilities of Cauvery
Power Generation Chennai Private Limited (CPL) to 'CRISIL D/CRISIL
D Issuer Not Cooperating' from 'CRISIL B+/Stable/CRISIL A4 Issuer
Not Cooperating' due to delays in servicing debt obligations in
term loans.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 30 CRISIL D (ISSUER NOT
COOPERATING; Downgraded from
'CRISIL B+/Stable ISSUER NOT
COOPERATING')
Letter of Credit 16 CRISIL D (ISSUER NOT
COOPERATING; Downgraded from
'CRISIL A4 ISSUER NOT
COOPERATING')
Long Term Loan 90 CRISIL D (ISSUER NOT
COOPERATING; Downgraded from
'CRISIL B+/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 69.19 CRISIL D (ISSUER NOT
Bank Loan Facility COOPERATING; Downgraded from
'CRISIL B+/Stable ISSUER NOT
COOPERATING')
Term Loan 18.42 CRISIL D (ISSUER NOT
COOPERATING; Downgraded from
'CRISIL B+/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with CPL for obtaining
information through letters and emails dated December 31, 2019 and
January 28, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of CPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on CPL is consistent
with 'Assessing Information Adequacy Risk'.
Based on the last available formation, the ratings on the bank
facilities of CPL has been downgraded to 'CRISIL D/CRISIL D Issuer
Not Cooperating' from 'CRISIL B+/Stable/CRISIL A4 Issuer Not
Cooperating' due to delays in servicing debt obligations in term
loans.
CPL, set up by Mr. S Elangovan, operates a 63-megawatt coal-based
power plant in Chennai.
COCO FIBRE: CRISIL Withdraws B+ Rating on INR7cr Debt
-----------------------------------------------------
CRISIL has withdrawn the rating on bank facilities of Coco Fibre
Tex (CFT) continues to be 'CRISIL B+/Stable/CRISIL A4 Issuer Not
Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Foreign Bill 7 CRISIL B+/Stable (ISSUER NOT
Discounting COOPERATING; Rating Withdrawn)
Packing Credit 4 CRISIL A4 (ISSUER NOT
COOPERATING; Rating Withdrawn)
CRISIL has been consistently following up with CFT for obtaining
information through letters and emails dated August 29, 2020 and
September 25, 2020, among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of CFT. This restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on CFT is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the rating on bank facilities of CFT
continues to be 'CRISIL B+/Stable/CRISIL A4 Issuer Not
Cooperating'.
CRISIL has withdrawn its ratings on the bank facilities of CFT on
the request of the company and receipt of a no objection
certificate from its bank. The rating action is in line with
CRISIL's policy on withdrawal of its ratings on bank loans.
Incorporated as East West Exports in 1995 as sole proprietorship
firm by Mr. Baiju Sathyapalan and subsequently renamed as CFT in
2005. The firm is engaged in manufacturing and export of coir mats,
rubberized coir door mats and rugs. The firm has its manufacturing
facility located in Alappuzha, Kerala.
DIVYA PACKMAF: CRISIL Migrates B Debt Rating to Not Cooperating
---------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Divya Packmaf
Private Limited (DPPL) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 9 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with DPPL for obtaining
information through letters and emails dated August 29, 2020,
October 9, 2020 and October 14, 2020 among others, apart from
telephonic communication. However, the issuer has remained non
cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of DPPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on DPPL is consistent
with 'Assessing Information Adequacy Risk'. Therefore, on account
of inadequate information and lack of management cooperation,
CRISIL has migrated the rating on bank facilities of DPPL to
'CRISIL B/Stable Issuer not cooperating'.
DPPL, incorporated in 2010, manufactures plastic packing materials
such as containers, caps, and jars, mainly for DYMT and PAL. DPPL's
manufacturing facility is in Haridwar. Both DYMT and PAL are part
of the Patanjali group. Mr. Ram Bharat took full control of the
company in fiscal 2019.
GARUDA VENKATA: CRISIL Lowers Rating on INR5.5cr Term Loan to D
---------------------------------------------------------------
CRISIL has downgraded the ratings on bank facilities of Garuda
Venkata Sai Cold Storage Private Limited (GVSCSPL) to 'CRISIL D
Issuer Not Cooperating' from 'CRISIL B+/Stable Issuer Not
Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 5.5 CRISIL D (ISSUER NOT COOPERATING;
Downgraded from 'CRISIL B+/Stable
ISSUER NOT COOPERATING')
CRISIL has been consistently following up with Garuda GVSCSPL for
obtaining information through letters and emails dated December 31,
2019 and January 13, 2020 among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of GVSCSPL, which restricts
CRISIL's ability to take a forward looking view on the entity's
credit quality. CRISIL believes that rating action on GVSCSPL is
consistent with 'Assessing Information Adequacy Risk'. Based on the
last available information, the ratings on bank facilities of
GVSCSPL is downgraded to 'CRISIL D Issuer Not Cooperating' from
'CRISIL B+/Stable Issuer Not Cooperating'.
The downgrade reflects the delays in debt servicing on term loan
due to its stretched liquidity.
GVSCSPL, incorporated in September 2016, is promoted and managed by
Mrs K Radha, Mr. B Ramalakshmana, Mr. P Parimala, and Ms Savitri
Menon. The company is currently setting up a cold storage unit at
Hyderabad.
HAFIZ CONSTRUCTION: CRISIL Lowers Rating on INR21cr Loan to D
-------------------------------------------------------------
CRISIL has downgraded its ratings on the bank facilities of Hafiz
Construction Company Private Limited (HCCPL) to 'CRISIL D/CRISIL D'
from 'CRISIL BB/Stable/CRISIL A4+'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 30 CRISIL D (Downgraded from
'CRISIL A4+')
Proposed Long Term 3.5 CRISIL D (Downgraded from
Bank Loan Facility 'CRISIL BB/Stable')
Secured Overdraft
Facility 21 CRISIL D (Downgraded from
'CRISIL BB/Stable')
Term Loan 5.5 CRISIL D (Downgraded from
'CRISIL BB/Stable')
The ratings downgrade reflects delay in servicing of debt
obligations by HCCPL for September 2020, on account of inadequate
funds.
The ratings also reflect susceptibility to tender-based operations
and highly leveraged capital structure. These weaknesses are
partially offset by extensive industry experience of HCCPL's
promoters.
Key Rating Drivers & Detailed Description
Weaknesses
* Delay in servicing debt: HCCPL has not paid their debt
obligations for the month of September 2020, due to the lack of
availability of funds.
* Susceptibility to tender-based operations: Revenue and
profitability entirely depend on the ability to win tenders. Also,
entities in this segment face intense competition, thus requiring
to bid aggressively to get contracts, which restricts the operating
margin to a moderate level. Also, given the cyclicality inherent in
the construction industry, the ability to maintain profitability
margin through operating efficiency becomes critical.
* Highly leveraged capital structure: HCCPL has average financial
profile marked by high total outside liabilities to tangible
net-worth (TOL/TNW) of 4.29 times and gearing 3.14 as on March 31,
2020.
Strengths
* Extensive industry experience of the promoters: The promoters
have an experience of over a decade in civil construction industry.
This has given them an understanding of the dynamics of the market,
and enabled them to establish relationships with suppliers and
customers.
Liquidity Poor
Liquidity is poor marked by the delay in term debt obligation.
There has been delay in receiving payment from the counterparties
leading to mismatches in the cashflow.
Rating Sensitivity factors
Upward factor
* Regularisation of payment of debt obligations
* Sustained improvement in scale of operation by 20% and sustenance
of operating margin, leading to higher cash accruals.
HCCPL was incorporated in 2008 and, it is based out of Srinagar
(Jammu and Kashmir). HCCPL is owned & managed by Mr. Tariq Ahmad
Hafiz, Mr. Feroz Ahmad Hafiz and Mr. Farooq Ahmad Hafiz. HCCPL is
engaged in civil construction works.
JINAAMS DRESS: CRISIL Lowers Rating on INR30cr Cash Loan to D
-------------------------------------------------------------
CRISIL has downgraded its ratings on the bank facility of Jinaams
Dress Ltd (JDL) to 'CRISIL D/CRISIL D' from 'CRISIL
BB-/Negative/CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee .24 CRISIL D (Downgraded from
'CRISIL A4')
Cash Credit 30 CRISIL D (Downgraded from
'CRISIL BB-/Negative')
Proposed Fund- 6.76 CRISIL D (Downgraded from
Based Bank Limits 'CRISIL BB-/Negative')
CRISIL has taken cognizance of application made by JDL for
restructuring of its bank facilities under Reserve Bank of India
(RBI) guidelines issued on August 06, 2020-'Resolution Framework
for COVID-19-related Stress'. However final approval for same it
still pending.
The downgrade reflects poor liquidity profile marked by
overutilization of cash credit facility for over 30 days even prior
to the application of restructuring.
The ratings continue to reflect large working-capital requirement
and below-average debt protection metrics. These rating weaknesses
are partially offset by an established market presence supported by
the extensive experience of the promoters in the domestic readymade
garments industry.
Key Rating Drivers & Detailed Description
Weaknesses
* Delays in Servicing of Debt: There have been overutilization of
cash credit facility for over 30 days on account of stretched
liquidity position.
* Large working capital requirement: Gross current assets,
inventory and receivables were high at 583 days, 359 days and 183
days, respectively, estimated as on March 31, 2020. Operations are
expected to remain working capital intensive over medium term.
* Below-average debt protection metrics: The metrics have moderated
in fiscal 2020, with interest coverage ratio of 1.5 times as
against 2.8 times in fiscal 2019. The ratio is expected to
deteriorate significantly in fiscal 2021.
Strength
* Established market presence, backed by experience of the
promoters: Supported by the extensive experience of the promoters,
the company has established its position in the domestic readymade
garments market for more than a decade. The promoters have
maintained a longstanding relationship with customers while
successfully navigating through several business cycles.
Liquidity Poor
Liquidity is poor as reflected in weak liquidity profile marked by
overutilization of cash credit facility. In fiscal 2021, the
promoters infused INR1.5 crore to support liquidity. Net cash
accrual is expected to be negative in fiscal 2021 against repayment
obligation of around INR1 crore for fiscal 2021; thereby further
constraining liquidity.
Rating Sensitivity factors
Upward factors
* Track record of timely debt servicing for 90 days or more
* Significant improvement in liquidity due to restructuring of debt
or infusion of equity or a sizeable realization of payments from
customers
JDL was set up in 2002, in Surat, Gujarat, by Mr. Hemraj Oswal; it
is currently being managed by Mr. Rahul Oswal and his brothers, Mr.
Pritam Oswal and Mr. Vishal Oswal. The company manufactures
readymade garments, primarily women's wear, which it sells under
its own brands.
K.P. ABRAHAM: CRISIL Migrates B+ Debt Rating from Not Cooperating
-----------------------------------------------------------------
Due to inadequate information, CRISIL, in line with SEBI
guidelines, had migrated the rating of K.P. Abraham (KPA) to
'CRISIL B+/Stable/CRISIL A4 Issuer Not Cooperating'. However, the
management has subsequently started sharing requisite information,
necessary for carrying out comprehensive review of the rating.
Consequently, CRISIL is migrating the ratings on the bank
facilities of KPA to 'CRISIL B+/Stable/CRISIL A4' from 'CRISIL
B+/Stable/CRISIL A4 Issuer Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 2 CRISIL A4 (Migrated from
'CRISIL A4 ISSUER NOT
COOPERATING')
Cash Credit 4 CRISIL B+/Stable (Migrated
from 'CRISIL B+/Stable
ISSUER NOT COOPERATING')
The ratings reflect the firm's modest scale of operations in the
highly fragmented civil construction industry, and working
capital-intensive operations. These ratings are partially offset by
the long-standing industry experience of its proprietor.
Key Rating Drivers & Detailed Description
Weaknesses:
* Modest scale of operations in a highly fragmented industry:
The scale of operations of KPA is modest, as reflected in its
revenue of around INR4.0 crore in fiscal 2020. This is due to
tender-based nature of operations which results in volatility in
revenue and operating margin as the same vary across various
tenders.
* Working capital-intensive nature of operations: The construction
industry is inherently working capital intensive. The gross current
assets of KPA are high, at over 590 days as at March 31, 2020 on
account of various deposits the firm has to maintain with the
government agencies and blockage of funds as retention money and
margin money for bank guarantee.
Strength:
* Proprietor's experience in the civil construction industry:
Mr K.P. Abraham has more than three decades of experience in the
civil construction industry. KPA currently has a healthy order book
which provides the firm with healthy revenue visibility over the
medium term. The proprietor's industry experience has helped KPA to
bag projects frequently from central government bodies, going
forward, the firm will continue to derive benefits from the
proprietor's experience.
Liquidity Stretched
The bank limits were highly utilized at around 97% in the last
thirteen months ending July 2020, on account of working capital
intensive operations. The net cash accruals is expected to be
sufficient to meet the repayment obligations over the medium term.
Further, the current ratio stood at 1.2 times as at 31st March
2020.
Outlook: Stable
CRISIL expects KPA to benefit from its proprietor's extensive
industry experience.
Rating Sensitivity factors
Upward Factor
* Improvement in the revenue profile to more than INR12 crores.
* Improvement in the working capital requirements.
Downward Factor
* Decline in the topline to less than INR2 crores.
* Stretch in the working capital requirements.
KPA is a sole proprietorship firm, based in Aluva, Ernakulam
district in Kerala, which undertakes contracts for construction of
roads and buildings for central government bodies in the state.
KINGFISHER AIRLINES: SC Orders Winding Up of UBHL to Recover Dues
-----------------------------------------------------------------
The Times of India reports that the Supreme Court on Oct. 23
allowed winding up of United Breweries Holding Ltd (UBHL) for
recovery of dues payable by Kingfisher Airlines to creditors,
including banks, and dismissed the company’s plea against its
liquidation.
According to the report, a bench of Justices U U Lalit, Vineet
Saran and S Ravindra Bhat upheld the Karnataka high court verdict
on winding up the company and dismissed an appeal filed by UBHL
against the judgement.
TOI relates that UBHL has been fighting a legal battle for the last
three years after a single bench of the HC had in 2017 ordered
winding up which was then challenged before a division bench. The
division bench rejected the firm's plea in March.
Senior advocate C S Vaidyanathan, appearing for the company, told
the SC bench that assets of around INR14,000 crore belonging to
UBHL, Vijay Mallya and other entities had been attached by the
Enforcement Directorate when the total debt was only around
INR6,000 crore, the report says. He said attachment orders had
been challenged which were pending before a tribunal and no purpose
would be solved by winding up the firm.
TOI says Senior advocate Mukul Rohatgi, appearing for the SBI-led
consortium of lender banks, opposed the UBHL's plea and contended
that only INR3,595 crore had so far been recovered and the firm
still owed over INR11,000 crore.
Observing that winding up the firm should be the last resort, the
SC granted extensive hearing to all parties but finally dismissed
UBHL's plea, the report adds.
Headquartered in Mumbai, India, Kingfisher Airlines --
http://www.flykingfisher.com/-- formerly known as Deccan Aviation
Ltd., served about 35 domestic destinations with a fleet of more
than 40 aircraft, including Airbus jets and ATR 72 turboprops.
As reported in the Troubled Company Reporter-Asia Pacific on Jan.
15, 2014, Bloomberg News said Kingfisher Airlines has grounded
planes since October 2012. The airline lost its operating license
in January 2013 after failing to convince authorities it has enough
funds to restart flights.
As reported in the TCR-AP on Nov. 25, 2016, the Times of India said
the Karnataka high court has ordered the winding up of the
now-defunct Kingfisher Airlines (KFA). Justice Vineet Kothari gave
this direction on Nov. 18, while allowing a petition filed in 2012
by Aerotron, a UK-based company, for recovery of a little over $6
million due to it for supply of rotable aircraft
components to KFA.
LEOLINE FOODS: CRISIL Moves D Debt Ratings from Not Cooperating
---------------------------------------------------------------
Due to inadequate information and in-line with the Securities and
Exchange Board of India guidelines, CRISIL had migrated its rating
on the long-term bank facilities of Leoline Foods Private Limited
(LFPL) to 'CRISIL D; Issuer not cooperating'. However, the
company's management has started sharing the information necessary
for a review of the rating. Consequently, CRISIL is migrating the
rating to 'CRISIL D'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 2 CRISIL D (Migrated from
CRISIL D ISSUER NOT
COOPERATING')
Long Term Loan 6.23 CRISIL D (Migrated from
CRISIL D ISSUER NOT
COOPERATING')
Proposed Fund- 4.37 CRISIL D (Migrated from
Based Bank Limits CRISIL D ISSUER NOT
COOPERATING')
The rating factors in delay by LFPL in servicing its term debt and
the account being currently classified under special mention
account 2.
The rating continues to reflect LFPL's weak financial risk profile
and modest scale of operations. These weakness are partially offset
by the extensive experience of its promoters in the packaged food
industry.
Key Rating Drivers & Detailed Description
Weaknesses:
* Delay in servicing of debt: There has been a delay of more than
60 days in the servicing of term debt on account of weak
liquidity.
* Weak financial risk profile: The financial risk profile remains
constrained by low networth and high gearing of INR2.8 crore and
5.04 times, respectively, as on March 31, 2020. Debt protection
metrics were also inadequate with negative interest coverage ratio
in fiscal 2020.
* Modest scale of operations: Scale is expected to remain modest
over the medium term. In fiscal 2020, revenue declined to INR2.64
crore from INR6.48 crore the previous year. Going forward, the
small scale will continue to constrain the business risk profile.
Strength:
* Extensive experience of the promoters: The promoters' experience
of around a decade in the industry and their in-depth understanding
of market dynamics should continue to support the business.
Liquidity Poor
Liquidity is poor resulting in delay of more than 60 days in
servicing interest on the term debt.
Rating sensitivity factor
Upward factors
* Track record of timely debt servicing for at least 90 days
* Sustainable improvement in financial risk profile, especially
liquidity
Incorporated in 2015, LFPL is promoted by Mr. Ramesh Kumar Agarwal
and family. The company manufactures 2D and 3D pellets, pasta, and
vermicelli at Choti Nawada, Patna (Bihar).
MAHAVIR CONSTRUCTION: CRISIL Hikes Rating on INR10.5cr Loan to B+
-----------------------------------------------------------------
CRISIL has upgraded its rating on the long-term bank facility of
Mahavir Construction Company - Mumbai (MCC) to 'CRISIL B+/Stable'
from 'CRISIL B/Stable', and reaffirmed its rating on the short-term
facility at 'CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 4 CRISIL A4 (Reaffirmed)
Cash Credit 8 CRISIL B+/Stable (Upgraded
from 'CRISIL B/Stable')
Proposed Long Term 10.5 CRISIL B+/Stable (Upgraded
Bank Loan Facility from 'CRISIL B/Stable')
The upgrade reflects improvement in business risk and liquidity
profile of the group. Revenue of the group improved from INR46.29
crore in fiscal 2019 to INR78.32 crore in fiscal 2020. Revenue was
impacted on account of lockdown imposed by central and state
governments to contain the spread of covid. However, strong order
book provides revenue visibility over the medium term. Proprietor
had infused capital of INR85 lakhs and unsecured loans of INR3.7
crore in fiscal 2020 which was utilized to fund the incremental
working capital requirement leading to reduced reliance on external
debt thus moderation in bank limit utilization. Funding from
partners and unutilized bank lines is expected to support liquidity
over the medium term.
The ratings continue to reflect the group's large working capital
requirement, average financial risk profile and susceptibility of
the revenue profile to high geographical concentration in the order
book. These weaknesses are partially offset by extensive experience
of the proprietors in the road construction industry along with
fund support.
Analytical Approach
CRISIL has combined the business and financial risk profiles of MCC
and VNC Infraprojects (VNC). That is because both entities,
together referred to as the MCC group, have common management and
are in the same line of business.
Unsecured loans (outstanding at INR24.64 crore as on March 31,
2020) extended to the group have been treated as neither debt nor
equity as it is expected to be retained in business over the medium
term.
Key Rating Drivers & Detailed Description
Weaknesses
* Large working capital requirement: Operations of the group is
working capital intensive with gross current assets (GCA) days of
around 370 days as on March 31, 2020 on account of huge amount paid
in retention money and security deposits for its projects. Debtors
of the group have also been high at 70 days as on March 31, 2020.
Operations of the group is expected to remain high over the medium
term on account of nature of business.
* Average financial risk profile: Total outside liabilities to
adjusted networth (TOLANW) of the group was high at 6.95 times as
on March 31, 2020 on account of modest networth of INR10.98 crore.
Debt protection metrics were moderate with interest coverage and
net cash accruals to adjusted debt of 3.66 times and 0.17 time
respectively for fiscal 2020.
* High geographical concentration in revenue: MCC group has
executed majority of its projects in Maharashtra, and thus, remains
vulnerable to high geographical concentration. It also remains
exposed to risk from changes in policies related to civil
infrastructure, and the socio-economic and political conditions in
this region.
Strength
* Extensive experience of the proprietor in the civil construction
industry and fund support from them: The business risk profile of
group benefits from the extensive experience of the proprietors in
the civil construction industry. Group is promoted by Shah and Jain
Family and has experience of 3 decades. . Proprietors had infused
capital of INR85 lakhs and unsecured loans of INR3.7 crore in
fiscal 2020. Fund support from proprietors is expected over the
medium term as well.
Liquidity Stretched
Cash accruals of the group is expected at over INR2.5 crore in
fiscal 2021 and INR3.5 crore in fiscal 2022 against repayment
obligation of INR0.14 crore. Group has access to fund based bank
lines of INR12.5 untiled to the tune of 40% on average over the
last 12 months ending July 2020. Liquidity is supported by
unsecured loans of INR24.64 crore as on March 31, 2020.
Outlook: Stable
CRISIL believes MCC Group will continue to benefit over the medium
term from the extensive experience of proprietor
Rating Sensitivity factors
Upward factor
* Improvement in TOLANW to below 3 times on account of equity
infusion or healthy accretion to reserves or reduced external debt
* Sustained improvement in working capital cycle
Downward factor
* Increase in TOLANW of above 7 times
* Further stretch in working capital requirement
About the Group
MCC is a Mumbai-based proprietorship firm formed by Mr. Kishore
Shah in 1983. It undertakes civil construction activities on
contract or sub contract basis for Municipal Corporation of Greater
Mumbai (MCGM), Mumbai Metropolitan Region Development Authority
(MMRDA) and Maharashtra Housing and Area Development Authority
(MHADA).
VNC is a Mumbai-based proprietorship firm formed by Mr. Chirag Jain
in 2008. VNC undertakes civil construction activities on contract
or sub contract basis for MCGM, MMRDA, and MHADA.
MINOP INNOVATIVE: CRISIL Hikes Rating on INR1cr Loan to B
---------------------------------------------------------
Due to inadequate information and in line with the Securities and
Exchange Board of India guidelines, CRISIL had migrated its ratings
on the bank facilities of Minop Innovative Technologies Pvt. Ltd.
(MITPL) to 'CRISIL C/FC/CRISIL A4; Issuer not cooperating'.
However, the company's management has subsequently started sharing
the information required for carrying out a comprehensive review of
the ratings. Consequently, CRISIL is migrating the ratings to
'CRISIL B/Stable/FB/CRISIL A4'. CRISIL has also withdrawn the
rating on the fixed deposits at the company's request and on
receipt of no dues certificate. The rating action is in line with
CRISIL's policy for withdrawal of ratings.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 9 CRISIL A4 CRISIL A4 (Migrated
from 'CRISIL A4 ISSUER NOT
COOPERATING')
Cash Credit 1 CRISIL B/Stable (Migrated
from 'CRISIL C ISSUER NOT
COOPERATING')
Proposed Short Term 1 CRISIL A4 CRISIL A4 (Migrated
Bank Loan Facility from 'CRISIL A4 ISSUER NOT
COOPERATING')
Fixed Deposits 10 FB/Stable (Migrated from 'FC
ISSUER NOT COOPERATING';
Rating Withdrawn)
The ratings reflect high project concentration risk and modest
scale of operations. These weaknesses are partially offset by the
experience of the promoter in the coal industry and above-average
financial risk profile.
CRISIL has also considered the impact of Covid 19 pandemic, if any,
on the business and the steps taken by the company to mitigate the
same. Due to the countrywide lockdowns MITPL's operations were also
impacted. There were delays in delivery and installation of some of
the machinery which in turn affected the projection execution
pace.
Key Rating Drivers & Detailed Description
Weaknesses:
* Exposure to high project concentration risk: Only one contract
with Bharat Coking Coal Ltd (BCCL) exists. Therefore, any delays in
timely receipt of payments from BCCL results in cash flow
mismatches. The timely execution of the project, as per the planned
schedule, is also a key monitorable. Moreover, such projects
typically involve a high gestation period providing very low
certainty of revenue and cash flow.
* Modest scale of operations: Subdued scale is reflected in
operating income of INR1.98 crore in fiscal 2020. However, the
revenue is expected to improve significantly, over the medium term,
with progress in mine development activities.
Strengths:
* Extensive experience of the promoter: The promoter has experience
of over a decade in the design and planning, exploration and
development of mines through the group company, Hilltop Hirise Pvt
Ltd (CRISIL BBB-/Stable/CRISIL A3), engaged in similar line of
business.
* Above-average financial risk profile: MITPL's networth is
moderate at INR11.01 crore and low gearing at 0.86 time in fiscal
2020. The debt protection metrics are average, as reflected by
interest coverage of 1.09 in fiscal 2020.
Liquidity Poor
Bank limit utilisation averaged 79% over the 12 months through
September 2020. Cash accrual, estimated at INR27 lakh in fiscal
2020, is sufficient to meet debt obligation of INR7.28 lakh.
Liquidity is further supported by the promoter's capability to
infuse need-based funds.
Outlook: Stable
CRISIL believes MITPL will continue to benefit from the extensive
experience of the promoter and its above-average financial risk
profile.
Rating Sensitivity factors
Upward factors
* Timely execution of the project, resulting in steady increase in
revenue to INR45 crore and stable operating margin leading to
higher cash accrual
* Efficient working capital management, as indicated by gross
current assets of less than 180 days, thus strengthening liquidity
Downward factors
* Delay in project execution leading to cash accrual below INR200
lakh or stretch in the working capital cycle
* Large, debt-funded capital expenditure weakening the financial
risk profile
Incorporated in December 2005, MITPL has undertaken a contract for
the development of the Muraidih underground mines of BCCL in
Jharkhand and extraction of coal from Muraidih I and III seam. The
company obtained the contract under a consortium, with it being the
leader. MITPL is owned by Mr. Navin Kumar Tulsyan.
PRASAD AND COMPANY: CRISIL Hikes Rating on INR59.94cr Loan to B
---------------------------------------------------------------
CRISIL has upgraded its rating on the long-term bank facilities of
Prasad and Company (Project Works) Limited (PCPL) to 'CRISIL
B/Stable' from 'CRISIL C/Stable' while reaffirming the short-term
rating at 'CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 210 CRISIL A4 (Reaffirmed)
Bank Guarantee 123.76 CRISIL A4 (Reaffirmed)
Cash Credit 59.94 CRISIL B/Stable (Upgraded
from 'CRISIL C')
Cash Credit# 3.30 CRISIL B/Stable (Upgraded
from 'CRISIL C')
Funded Interest
Term Loan 4.44 CRISIL B/Stable (Upgraded
from 'CRISIL C')
Proposed Bank
Guarantee 17.47 CRISIL A4 (Reaffirmed)
*Includes INR30 crore interchangeable with letter of credit
#Additional working capital line on account of Covid-19
The upgrade factors in improvement in the liquidity profile as
reflected in improvement in bank limit utilisation. The company's
bank line utilisation has reduced marginally and is at an average
of 96% for last 6 months as compared to 100% utilisation prior to
March 2020. Inflows from promoters in the form of unsecured loans
and proceeds from monetisation of a land parcel has supported the
company's liquidity, despite stretch in working capital cycle. The
company has monetised a land parcel for INR47.5 crore and proceeds
from this sale have been largely utilised to pay off bank
borrowings. Total external debt has come down to INR66.2 crore as
on March 31, 2020 from INR113.6 crore as on March 31, 2019.
Furthermore, unsecured loans have increased by INR30 crore in
fiscal 2020, to support the increase in working capital
requirement.
PCPL's performance has been adversely impacted in fiscal 2021
because of measures taken by the central and state governments to
contain the spread of the Covid-19 pandemic, including a nationwide
lockdown imposed from March 24, 2020, which resulted in stoppage of
construction activity on all sites. Although the lockdown was
partially relaxed from April 2020, issues around availability of
labour and raw material have persisted and operations have not
normalised yet. Revenue for the first six months of fiscal 2021
stood at INR198.5 crore, against INR220 crore for the first half of
the previous fiscal. Assuming normalcy will be restored by the end
of the third quarter of fiscal 2021, loss of execution is expected
in the first three quarters, which would impact operating
performance this fiscal. However, PCPL benefits from its healthy
order book of around INR2,100 crore which gives revenue visibility
over the medium term. Operations resuming normalcy will remain a
key monitorable.
The ratings continue to reflect the modest debt protection metrics
because of high debt, large working capital requirement and limited
diversity in revenue. These weaknesses are partially offset by
PCPL's established position in the construction industry.
Analytical Approach
For arriving at its ratings, CRISIL has considered unsecured loans
extended by the shareholders and directors (outstanding at INR187.3
crore as on March 31, 2020) as part of total debt as these loans
carry interest and have been repaid in the past. Furthermore,
CRISIL has also considered the interest-bearing advances from
customers as debt.
Key Rating Drivers & Detailed Description
Weaknesses:
* Modest debt protection metrics: While total external debt has
come down to INR66.2 crore as on March 31, 2020 from INR113.6 crore
as on March 31, 2019, overall debt remained high at INR340 crore
(inclusive of interest-bearing advances and unsecured loans from
the directors and shareholders) as on March 31, 2020. The debt
protection metrics remain modest because of high dependence on
borrowings and modest cash accrual. Interest coverage and net cash
accrual to total debt ratios for fiscal 2020 stood at 1.5 times and
0.03 time, respectively.
* Working capital-intensive operations: Gross current assets (GCAs)
were high at 429 days as on March 31, 2020, driven by sizeable
receivables of 348 days (including retention money). Around 40% of
receivables have been outstanding for over six months (including
retention money). Delay in project completion and funding issues
faced by certain state governments, because of the pandemic, have
led to a stretch in the working capital cycle. Improvement in the
working capital cycle, will remain a key rating sensitivity
factor.
* Limited diversity in revenue: Operations are restricted to
engineering, procurement and construction (EPC) works in the
infrastructure segment, primarily in irrigation and power sectors.
Furthermore, a large proportion of the current orders have seen
considerable delays in release of funds and getting relevant
approvals, leading to slow execution rate. Outstanding executable
orders were around INR2,100 crore (of the total order book of
INR2,626 crore as on September 30, 2020). Also, the top 10 orders
comprise around 80% of the total unexecuted projects, leading to
customer concentration risk.
Strength:
* Established position in the construction industry and moderate
revenue visibility: Over four decade-long experience of the
promoters, established execution capabilities, and healthy
relationships with customers should continue to support the
business. The order execution cycle is typically 2-3 years,
providing medium-term revenue visibility. Revenue for the first six
months of fiscal 2021 stood at INR198.5 crore, against INR220 crore
for the first half of fiscal 2020. The decline in revenue was on
account of operations of the company being impacted by the
pandemic. Nonetheless, established execution capabilities along
with executable orders of around INR2,100 crore as of September
2020, should continue to support revenue visibility and operations
over the medium term.
Liquidity Poor
The fund-based limits of INR105 crore were reduced to INR60.22
crore in fiscal 2020 to bring down interest costs. The company has
availed INR3.3 crore of Covid-19 line which has increased its cash
credit limit to INR63.24 crore as on September 30, 2020.
Utilisation of fund-based limits for the last six months since
April 2020 stood at 96%. The company has long-term debt of around
INR5 crore as on March 31, 2020. Accrual should be sufficient to
meet debt obligation of INR2-3 crore in fiscals 2021 and 2022. On
account of interest being applied on the last date of the month,
there are instances of overdrawals in the cash credit facilities,
however the company has been regularising overdrawals within 10-15
days. The company relies on non-fund-based limits to manage its
working capital requirement and its utilisation stood at around 77%
as on August 31, 2020. Furthermore, the promoters are likely to
extend support in the form of unsecured loans to meet working
capital requirement and debt obligation. The outstanding loans from
promoters stood at INR187.3 crore as on September 30, 2020.
Outlook: Stable
CRISIL believes PCPL will continue to benefit from its established
position in the construction industry.
Rating sensitivity factors:
Upward factors
* Improvement in GCAs to below 300 days
* Improvement in the operating performance marked by growth in
revenue and accruals
Downward factors
* Accrual deteriorates below INR5 crore, weakening liquidity and
financial risk profile
* Deterioration in the operating performance and thereby net cash
accrual
* Stretch in the working capital cycle
PCPL was set up as a partnership in 1963 and was reconstituted as a
private limited company in 1983. It was founded by the late Mr.
Sagi Ramakrishnam Raju, and is currently managed by his son, Mr.
Sagi Prasad Raju. The company undertakes irrigation and civil
infrastructure construction projects across India, mainly in Andhra
Pradesh, Telangana and Maharashtra.
The company primarily worked on irrigation projects of state and
central governments in its early stage of operations. Gradually, it
ventured into power projects, roads and highways, and building and
housing segments.
RAMA EDUCATIONAL: CRISIL Moves D Debt Ratings to Not Cooperating
----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Sri Rama
Educational Trust (SRET) to 'CRISIL D/CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 1 CRISIL D (ISSUER NOT
COOPERATING; Rating Migrated)
Cash Credit 5 CRISIL D (ISSUER NOT
COOPERATING; Rating Migrated)
Long Term Loan 33.23 CRISIL D (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Fund- 2.77 CRISIL D (ISSUER NOT
Based Bank Limits COOPERATING; Rating Migrated)
CRISIL has been consistently following up with SRET for obtaining
information through letters and emails dated October 15, 2020 and
October 20, 2020 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of SRET, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on SRET is consistent
with 'Assessing Information Adequacy Risk'. Therefore, on account
of inadequate information and lack of management cooperation,
CRISIL has migrated the rating on bank facilities of SRET to
'CRISIL D/CRISIL D Issuer not cooperating'.
Established in 2000, SRET runs a medical college at Vizianagaram
(AP) in the name of Maharaja Institute of Medical Sciences, and a
general hospital. The medical college offers undergraduate courses
including bachelor programmes in medicine, surgery, and homeopathy,
and clinical and non-clinical post graduate courses and
para-medical courses.
RITA MASSAR: CRISIL Assigns B+ Rating to INR3.95cr Cash Loan
------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the bank
facilities of Rita Massar (RM).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 3.95 CRISIL B+/Stable (Assigned)
Proposed Long Term
Bank Loan Facility 2.05 CRISIL B+/Stable (Assigned)
The ratings reflect the firm's modest scale and working
capital-intensive operations. These weaknesses are partially offset
by the extensive experience of the proprietor and her family in the
coal and consumable fuels industry, and the firm's healthy capital
structure.
Key Rating Drivers & Detailed Description
Weaknesses:
* Modest scale of operations: Consistent decline in revenue to
around INR3 cr in fiscal 2020, from INR30 crore in fiscal 2018, has
has constrained scalability of operations. Further, exposure to
intense competition in the coal and consumable fuels industry and
changes in regulations, may continue to limit the operating
flexibility.
* Working capital-intensive operations: Gross current assets ranged
between 211 and 11,129 days over the three fiscals ended March 31,
2020, mainly driven by large inventory and long credit extended to
customers. Given the need of the business, the company needs to
hold large inventory.
Strengths:
* Extensive experience of the proprietor and her family: The
two-decade-long experience of the proprietor and her family in the
coal and consumable fuels industry has enabled them gain strong
understanding of market dynamics and maintain healthy relationships
with suppliers and customers.
* Comfortable networth and gearing: Capital structure remains
moderately healthy, aided by limited reliance on external debt.
Further, infusion of capital of around INR20 crore kept gearing and
total outside liabilities to adjusted networth (TOL/ANW) ratios low
at 0.10 time each, as on March 31, 2020. Due to the capital
infusion, the networth has also remained comfortable at around
INR33 Cr as on 31st March, 2020. Though the proprietor is expected
to withdraw some capital in the current fiscal, the networth and
gearing will remain comfortable after withdrawal as well.
Liquidity Stretched
Liquidity remains adequate, marked by cash accrual of around INR76
lakh in fiscal 2020, against no debt obligation. The firm is likely
to generate sufficient accrual even during the current fiscal. Bank
limit utilisation was moderate averaging around 81.54% for the 12
months ended September 30, 2020. Current ratio was also healthy
around 8.7 times on March 31, 2020. The promoters will also
continue to infuse need-based capital in the business over the
medium term.
Outlook: Stable
CRISIL believe RM will continue to benefit from the extensive
experience of its proprietor and her family, and established
relationships with clients.
Rating Sensitivity factors
Upward factors
* Growth in revenue to over INR30 crore and sustenance of margin
around 5%
* Better working capital management, with improvement in inventory
levels
Downward factors
* Decline in revenue to below INR1 crore
* Substantial withdrawal of capital by proprietor
* Any large debt-funded capital expenditure weakening the capital
structure
* Sharp increase in working capital requirement constraining
liquidity and financial risk profile
RM was formed as a partnership or proprietary concern in 1988. The
Shilong (Meghayala)-based firm is owned and managed by Mrs Rita
Massar. It undertakes coal mining and trading and also has petrol
pumps. Recently the firm has also started mining and trading of
limestone.
SHANTI DEVI: CRISIL Lowers Rating on INR95cr Term Loan to D
-----------------------------------------------------------
Due to inadequate information, CRISIL, in line with Securities and
Exchange Board of India guidelines, had migrated the ratings on the
bank facilities of Shanti Devi Charitable Trust (Regd.) (SDCT) to
'CRISIL B-/Stable/CRISIL A4 Issuer Not Cooperating'. However, the
management has subsequently started sharing the requisite
information for carrying out a comprehensive review of the ratings.
Consequently, CRISIL is downgraded the ratings to 'CRISIL D/CRISIL
D'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 13.5 CRISIL D (Downgraded from
'CRISIL A4 ISSUER NOT
COOPERATING')
Cash Credit 3.2 CRISIL D (Downgraded from
'CRISIL B-/Stable ISSUER NOT
COOPERATING')
Term Loan 95 CRISIL D (Downgraded from
'CRISIL B-/Stable ISSUER NOT
COOPERATING')
The downgrade reflects delays in payment of interest on the term
loan for the three months through October 2020.
Moreover, the trust has a modest scale of operations with
geographical concentration, and a limited track record of
operations. These weaknesses are partially offset by the extensive
experience of the trustees.
Key Rating Drivers & Detailed Description
Weaknesses
*Delay in interest payment: Interest on the term loan has not been
paid for the past three months.
*Modest scale of operations with geographic concentration: The
trust operates a hospital and medical college at Panipat, Haryana.
Revenue is estimated at just INR42.47 crore for fiscal 2020.
*Limited track record of operations: The medical college commenced
operations only in the academic session 2016-17. Though there was
full occupancy in the first year, absence of a proven track record
could constrain growth prospects.
Strength
* Extensive experience of the trustees: The trustee family has two
decades of experience in the education industry through other
trusts running institutes offering engineering, management, and
medical courses.
Liquidity Poor
Although cash accrual has remained negative in past, interest
payment and principal repayment due on the term loan have been
funded through unsecured loans. Such support is expected to
continue over the medium term against repayment obligation of about
INR10 crore per fiscal.
Rating Sensitivity Factors
Upward factors:
* Track record of timely debt servicing for at least 90 days, with
utilisation of the working capital within the limit
* Significant improvement in operating performance, with adequate
cash accrual and enhancement in liquidity.
SDCT, which was set up in 2006, runs a medical college with a
300-bed hospital, NC Medical College and Hospital, at Panipat.
SHEKAR LOGISTICS: CRISIL Hikes Rating on INR13cr Loan to B
----------------------------------------------------------
Due to inadequate information, CRISIL, in line with SEBI
guidelines, had migrated the rating of Shekar Logistics Private
Limited (SLPL) to CRISIL D/CRISIL D Issuer Not Cooperating'.
However, the management has subsequently started sharing requisite
information, necessary for carrying out comprehensive review of the
rating. Consequently, CRISIL is migrating the rating on bank
facilities of SLPL from CRISIL D/CRISIL D Issuer Not Cooperating to
CRISIL B/CRISIL A4' on 'Rating Watch with Developing
Implications'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 1.5 CRISIL A4/Watch Developing
(Migrated from 'CRISIL D
ISSUER NOT COOPERATING';
Placed on 'Rating Watch with
Developing Implications')
Cash Credit 13.0 CRISIL B/Watch Developing
(Migrated from 'CRISIL D
ISSUER NOT COOPERATING';
Placed on 'Rating Watch with
Developing Implications')
Drop Line 3.48 CRISIL B/Watch Developing
Overdraft Facility (Migrated from 'CRISIL D
ISSUER NOT COOPERATING';
Placed on 'Rating Watch with
Developing Implications')
Proposed Fund- 29.91 CRISIL B/Watch Developing
Based Bank Limits (Migrated from 'CRISIL D
ISSUER NOT COOPERATING';
Placed on 'Rating Watch with
Developing Implications')
Term Loan 4.84 CRISIL B/Watch Developing
(Migrated from 'CRISIL D
ISSUER NOT COOPERATING';
Placed on 'Rating Watch with
Developing Implications')
The rating revision factors in track record of timely servicing of
debt obligation since March 2020 supported by marginal improvement
in operating performance. Further, it also takes into consideration
improvement in the financial risk profile and liquidity. Networth
increased to INR46.17 crore as on March 31, 2020, from INR40.17
crore a year earlier, along with moderate debt protection metrics,
reflected in interest coverage and net cash accrual to adjusted
debt ratios of 3.67 times and 0.60 time in fiscal 2020.
The ratings have been placed on watch because SLPL's management,
along with its bankers, has confirmed applying for restructuring of
its Bank loan facilities on October 24, 2020, under the Reserve
Bank of India's (RBI's) guidelines issued on August 06, 2020,
called Resolution Framework for Covid-19-related Stress. As
confirmed by SLPL's and its bankers, the proposal is being
evaluated.
CRISIL will closely monitor the outcome of the loan restructuring
and its implications on SLPL. The ratings will be removed from
watch and a final rating action will be taken once CRISIL has more
clarity on the outcome of loan restructuring. If there is any delay
in receipt of approval from the lenders, timely repayment remains
critical.
The rating continue to reflect a modest scale of operations in the
highly fragmented road transport industry and working
capital-intensive operations. These rating weaknesses are partially
offset by the extensive industry experience of promoter and his
established relationship with key customer, Tata Steel Ltd (TSL).
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations in highly fragmented road transport
industry: SLPL is engaged in the conventional road transportation
business. The sector is dominated by a few large players and
numerous small players, given the low entry barriers and modest
capital and technology requirements, and easy availability of
finances for vehicles. SLPL's revenue is likely to remain modest at
INR60.14 crore for fiscal 2020 on account of intense competition
and fragmentation in the industry, preventing significant
improvement in SLPL's scale of operations, and status as an
exclusive transporter in southern India for TSL.
* Working-capital-intensive operations: The company has working
capital intensive nature of operations, with high gross current
asset (GCA) days of 200 days on 31 March 2020. GCA remains high, on
account of long collection cycle. This coupled with low supplier
credit, the company's working capital requirements remains high.
CRISIL believes that the working capital intensive operations will
continue to constrain the business risk profile of the firm.
Strength
* Promoters' extensive industry experience and established
relationship with key customer, TSL: SLPL's promoters have been in
the transport business since 1971, and have had a healthy
relationship with its key customer, TSL, since inception. SLPL's
established relationship with TSL resulted in SLPL acquiring
exclusive transportation contracts with all four of TSL's depots in
South India for outward movement of products, on a long-term basis.
CRISIL believes that SLPL will continue to benefit over the medium
term from its promoters' extensive industry experience and
established relationship with its key customer, TSL.
Liquidity Stretched
Liquidity remains stretched marked by highly utilized bank lines.
Owing to large working capital requirements, the bank limit
utilization remains full. Further, cash accrual are expected to be
over INR11.5 which are sufficient against term debt obligation of
INR7.1 crores over the medium term.
In addition, the promoters are likely to extend support in the form
of equity and unsecured loans to meet its working capital
requirements and repayment obligations.
Rating Sensitivity Factor
Upward factors
* Sustained increase in debt service coverage ratio (DSCR) to above
2 times over the medium term
* Improvement in working capital cycle
Downward factors
* Absence of liquidity back-up in case of rejection of loan
restructuring proposal by lenders
* Sustained fall in debt service coverage ratio (DSCR) to below 1.1
times over the medium term
Larger-than-expected time taken for realizing receivables leading
to short-term liquidity crunch.
SLPL was established in 2001 by Mr. Chandrasekhar Viswanath. It
provides transportation, material movement, and handling services.
SHYAM GRAMODHYOG: CRISIL Assigns B+ Rating to INR1cr Loan
---------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long term
bank facilities of Shyam Gramodhyog Sansthan (SGS).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Fund-
Based Bank Limits 1 CRISIL B+/Stable (Assigned)
The rating reflects small scale of operations, average financial
flexibility marked by modest net worth and high dependence on
government authorities for contracts. These weakness are partially
offset by its established network and track record of successful
contract execution in the past.
Key Rating Drivers & Detailed Description
Weaknesses:
* Small scale of operations: SGS is organized as a not-for-profit
society. The primary purpose of SGS is to promote the mid-day meal
scheme and provide free nutritional food to old-age home, schools
and other welfare programme, etc. Owing to low-value government
social projects in limited Tier-2 and 3 cities, SGS's operations
have remained small with an annual turnover of around INR5.69 crore
reported in 2019-20. CRISIL believes that SGS's scale of operations
will remain a key rating sensitivity factor over the medium term.
* Average financial flexibility marked by modest net worth: The
society's modest net worth of INR1.11 crore constrains its
financial flexibility to raise addition debt in case of adverse
times.
* High dependence on government authorities for contracts: Work
order is received from the authority on an annual basis. Societies
and NGOs need a license that is renewed yearly. It also manages
training and development programs and mobile creche and Anganwadi
centers for workers, which are also government schemes and require
yearly licenses.
Strengths:
* Established network and track record of successful contract
execution in the past: The society has extensive network coverage
in 6 districts of Uttar Pradesh from past 20 years. The society
caters mostly the weaker sections of the rural and urban areas and
also planning to provide more benefits under various govt. schemes
which are also mandated by the GOI.
Liquidity Stretched
The society has not availed any bank loan facility and hence will
remain debt-free over the medium term, further the cash accruals
remains modest at INR8-10 lacs. However, limited networth will
continue to constrain the financial flexibility. Current ratio was
modest at 0.99 times as on March 31, 2020.
Outlook: Stable
CRISIL believes that SGS business risk profile will remain
constrained over the medium term on account of its small scale of
operations.
Rating Sensitivity factors
Upward factor
* Sustained improvement in scale of operation by 25% and sustenance
of operating margin, leading to higher cash accruals
* Improvement in working capital cycle
Downward factor
* Decline in profitability or stretch in working capital cycle
* Large debt-funded capital expenditure weakens capital structure
leading to gearing in excess of 2-3 times.
SGS was registered in 1998, as a not-for-profit society and is
managed by its Mr. Ram Kumar as (president), Mr. Nathuram
(Secretory) and nine other members. It is located at Charra
town-ship of district Aligarh of Uttar Pradesh. The society
provides free meals under mid-day meal scheme, old-age welfare
Programmeand various other government mandated schemes.
SOVIKA AVIATION: CRISIL Lowers Rating on INR30cr LT Loan to D
-------------------------------------------------------------
CRISIL has downgraded its ratings on the bank facilities of Sovika
Aviation Services Pvt Ltd (SASPL) to 'CRISIL D/CRISIL D' from
'CRISIL B+/Stable/CRISIL A4'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 15 CRISIL D (Downgraded from
'CRISIL A4')
Cash Credit 15 CRISIL D (Downgraded from
'CRISIL B+/Stable')
Proposed Long Term 30 CRISIL D (Downgraded from
Bank Loan Facility 'CRISIL B+/Stable')
Term Loan 30 CRISIL D (Downgraded from
'CRISIL B+/Stable')
The downgrade reflects delays in debt servicing by SASPL and its
account consequently being classified as a non-performing asset.
SASPL has a weak financial risk profile and its promoters have
extensive experience in the aviation services.
Key Rating Drivers & Detailed Description
Weaknesses
* Delay in servicing of debt: SASPL has delayed servicing its debt
obligation due to a stretched liquidity, which resulted from weak
cash flow.
* Weak financial risk profile: Financial risk profile may continue
to be constrained as operating losses in the past few fiscals have
completed eroded the networth, leading to large working capital
debt.
Strength
* Experience of promoters: The promoters' experience of 30 years
through group companies, their strong understanding of market
dynamics and healthy relationships with suppliers and customers
should continue to support the business.
Liquidity Poor
Liquidity has been stretched, resulting in significant delays in
servicing debt obligation.
Rating Sensitivity factors
Upward factor
* Timely repayment of debt obligations for 90 days
* Improvement in liquidity profile
SASPL, incorporated in 2007, is a part of the Sovika group based in
Mumbai and promoted by Mr. Soham Mehta and his family members.
SASPL undertakes cargo forwarding business and underwrites the
belly capacity for cargo of the airline's entire fleet of aircraft.
SREESHA EDUCATIONAL: CRISIL Assigns B- Rating to INR15cr Loan
-------------------------------------------------------------
CRISIL has assigned its 'CRISIL B-/Stable' rating to the long term
bank facilities of Sreesha Educational Services LLP (Sreesha; part
of the Sreesha group).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 15 CRISIL B-/Stable (Assigned)
The rating reflects Sreesha group's modest scale of operations and
exposure to intense competition, vulnerability to stringent
regulations and weak financial risk profile. These weakness are
partially offset by the extensive industry experience of the
promoters.
Analytical Approach
For arriving at the ratings, CRISIL has combined the business and
financial risk profiles of Sreesha and Usha Educational Foundation
(Usha). This is because both the entities, together referred as the
Sreesha group, operate in the same industry and have operational
and financial linkages.
Key Rating Drivers & Detailed Description
Weakness
* Modest scale of operation and exposure to intense competition:
The group's business profile is constrained by its scale of
operations in the intensely competitive Education Services
industry. The schools are based out of Bengaluru and faces stiff
competition from many other institutions in the state. The group
reported revenues of INR2.10 crores for fiscal 2020.On account of
the pandemic, fee collections are expected to remain muted during
the current year. The group's scale of operations will continue
limit its operating flexibility.
* Vulnerability to stringent regulations: Establishment and
operations of educational institutions are regulated by various
governmental and quasi-governmental agencies, such as the
University Grants Commission (UGC), MCI, AICTE, CBSE, universities,
state governments etc. Each body has detailed procedures for
granting permission to set up institutions, and approvals need to
be renewed every three or five years. Any non-compliance will
result in cancellation of affiliation, license, etc leading to loss
of reputation for the college and revenue for the trust.
* Weak financial risk profile: The schools have been operational
since 2019 and is yet to become profitable which has resulted in
erosion in networth. Further the group has availed external debt
for funding of its capex. With low accretion to reserves and high
reliance on external borrowings, financial risk profile is expected
to remain weak over the medium term.
Strength
* Extensive industry experience of the promoters: The promoters
have an experience of over a decade in the Education Services
industry. This has given them an understanding of the dynamics of
the market, and enabled them to establish visibility in the
region.
Liquidity Stretched
Liquidity is stretched. Cash accrual is likely to be modest over
the medium term. Repayments are expected to commence in fiscal
2023.While the accruals are expected to remain negative during
fiscal 2021 and 2022, it is expected to improve in fiscal 2023.
Accruals are expected to be around INR0.80-0.90 crores which is
expected to be sufficient against repayment obligation of INR0.50
crores during fiscal 2023. The promoters are likely to extend
support in the form of unsecured loans to meet its working capital
requirements and repayment obligations. The group has applied for
one time loan restructuring as per RBI policy. Formal approval is
awaited from the lenders. If there is any delay in receipt of
approval from the lenders, timely debt servicing remains critical.
Outlook: Stable
CRISIL believes the group will continue to benefit over the medium
term from the management's extensive experience in the sector.
Rating Sensitivity Factor
Upward factor
* Significant increase in the occupancy resulting in higher than
expected revenues and substantial increase its accruals to over
INR1 cr
* Improvement in financial risk profile
Downward factor
* More-than-expected delay in receipt of fees leading to liquidity
mismatch
* Decline in occupancy to below 70%.
Established in 2018, Shreesha runs a school from grade 1 to grade
8, and is based out of Bengaluru, Karnataka. The firm is promoted
by Mr. Mahesh Reddy & Mrs. Usha Reddy.
Established in 2017, Usha operates a pre-primary school in
Bangalore, and it commenced its operations in June 2019.
SVS PIPE: CRISIL Assigns B+ Rating to INR7.0cr Loans
----------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long-term
bank facilities of SVS Pipe Industries (SVSPI).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 4 CRISIL B+/Stable (Assigned)
Cash Credit 2.15 CRISIL B+/Stable (Assigned)
Proposed Fund-
Based Bank Limits .85 CRISIL B+/Stable (Assigned)
The rating reflects the susceptibility of the firm's profitability
to fluctuations in raw material prices and expected below-average
financial risk profile. These weaknesses are partially offset by
the extensive industry experience of the proprietor.
Key Rating Drivers & Detailed Description
Weaknesses:
* Susceptibility of profitability to fluctuations in raw material
prices: Entities in the pipes segment are exposed to risk of
fluctuations in raw material requirements and prices. Also, input
prices are susceptible to change in global prices and regional
demand-supply dynamics.
* Below-average financial risk profile: Networth is expected to be
small at INR2.49 crore and gearing is likely to be weak at 2.2
times, as on March 31, 2021. Debt protection metrics are expected
to be moderate, with interest coverage and net cash accrual to
total debt ratios of 4 times and 0.11 time, respectively, for
fiscal 2021.
Strength:
* Extensive industry experience of the proprietor: Presence of
around 15 years in the pipes and pipe fittings industry has enabled
the proprietor to understand market dynamics and establish strong
relationships with suppliers and customers.
Liquidity Stretched
Cash accrual are expected over INR0.80-1.2 crore will be sufficient
to meet term debt obligation of INR20-40 lakh, over the medium
term. Bank limits of INR2.15 crore will support the working capital
requirement. Liquidity was supported by moratorium granted by the
bank for debt obligation till August 2020. Unsecured loans from the
proprietor are also likely to aid liquidity.
Outlook: Stable
CRISIL believes SVSPI will benefit from its proprietor's extensive
experience.
Rating Sensitivity factors
Upward factors
* Stabilisation of operations, sustained revenue growth and stable
operating margin leading to Cash accrual above INR1 crore
* Improvement in financial risk profile
Downward factors
* Slower ramp up leading to lower than expected revenue and cash
accruals below INR0.30 crore
* Substantial increase in working capital requirement and weak
financial risk profile
SVSPI was established in September 2019 as a proprietorship firm by
Mr. Vinay Kumar Singh. It recently set up a manufacturing unit for
various types of plastic-based pipes, such as polyvinyl chloride
(PVC) pipes, plastic pipes, conduits, rigid PVC pipes, and garden
pipes. Facility is located in village Kudari of Kaimur district,
Bihar. Commercial operations began in July 2020.
THREE SEASONS: CRISIL Lowers Rating on INR50cr LT Loan to D
-----------------------------------------------------------
CRISIL has downgraded its rating on the long-term bank facility of
Three Seasons Exim Limited (TSEL) to 'CRISIL D' from 'CRISIL
B/Stable'. The downgrade reflects the delay in servicing interest
on term debt by TSEL in October 2020.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 50 CRISIL D (Downgraded from
'CRISIL B/Stable')
The rating reflects the limited track record of the promoters in
the seafood processing industry and the company's exposure to risks
related to timely implementation of the project and stabilisation
of operations thereafter. These weaknesses are partially offset by
the extensive experience of the promoters in the real estate
business.
Key Rating Drivers & Detailed Description
Strengths:
Weaknesses
* Delay in payment of interest on term loan: Liquidity remained
constrained, following the Covid-19 pandemic, and this led to a
delay in repayment of interest on the term loan due in October
2020.
* Exposure to risks related to timely implementation of the project
and stabilisation of operations: The proposed shrimp processing
unit is likely to commence commercial production from April 2021.
Timely implementation and stabilisation of operations, and
commensurate ramp-up in sales remain critical during the initial
phase of operations.
* Limited track record of the promoters in the seafood industry:
TSEL's promoters have been engaged in varied businesses such as
logistics, real estate, operation of mini power plants and
construction of rural godowns, but do not have experience in the
shrimps processing industry. As a result, their ability to scale up
the business is a key monitorable.
Strengths
* Rising global demand for Indian-bred shrimps: Supply of shrimps
from Thailand, China, and Vietnam face issues such as early
mortality syndrome (EMS) and increased domestic demand. Under such
circumstances, Indian-bred Vannamei shrimps have gained popularity
in the past two years. Increasing focus of consumers on dietary
plans and protein-rich shrimps may also drive up demand from
overseas. As TSEL is setting up a plant that processes vannamei
shrimps, it should benefit from the surge in global demand.
* Low funding risk: Promoters have infused equity of INR25 crore
and extended an unsecured loan of INR8.5 crore as on March 31,
2020. Term loan of INR45 crore has already been disbursed. So far,
the project has been funded in a debt-to-equity ratio of 1.34.
Therefore, funding risk remains low.
Liquidity Poor
Liquidity remains weak, as reflected by delay in servicing of
repayment in October 2020, amidst the Covid-19 pandemic. The
company availed the moratorium on its bank loan between March and
August 2020. Due to the extended lockdown imposed to curb the
pandemic, construction of the project got delayed. Modest networth
and a leveraged capital structure will continue to constrain
liquidity over the medium term.
Rating sensitivity factors
Upward factors
* Timely servicing of debt obligation for at least three months
* Improvement in liquidity, supported by receipt of customer
advances
TSEL, incorporated in fiscal 2014, is setting up a unit to process
shrimps and export them. The unit, at East Godavari district,
Andhra Pradesh, is likely to commence operations by April 2021.
UNIHEALTH CONSULTANCY: CRISIL Cuts Rating on INR2.5cr Loan to D
---------------------------------------------------------------
CRISIL has downgraded its rating on the long-term bank facility of
Unihealth Consultancy Private Limited (UCPL) to 'CRISIL D' from
'CRISIL B/Stable'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Foreign Currency 2.5 CRISIL D (Downgraded from
Term Loan 'CRISIL B/Stable')
The downgrade reflects instances of delay in interest servicing and
repayment of principal on term loans availed by UCPL during the
past 90 days.
The rating continues to reflect the company's weak financial risk
profile, modest scale of operations, and large working capital
requirement. The weaknesses are partially offset by the company's
established operations through its subsidiaries in Africa and the
expertise of the promoters in the healthcare industry.
Analytical Approach
For arriving at its ratings, CRISIL has consolidated the business
and financial risk profiles of UCPL along with its subsidiaries and
joint venture, collectively referred to as the Unihealth group, as
they are in the similar line of business and have significant
operational and financial linkages. Kindly refer to annexure for
details
Key Rating Drivers & Detailed Description
Weaknesses:
* Weak financial risk profile: The financial risk profile is
constrained by negative networth, high leverage, weak debt
protection metrics, and tightly matched net cash accrual and term
debt obligation over the medium term at company's consolidated
level.
* Modest scale of operations and risk associated with project
phase: The modest scale of operations is indicated by estimated
revenue of INR20.5 crore in fiscal 2019 at consolidated level.
Revenue is likely to be materially impacted by outbreak of pandemic
and likely to remain subdued over the medium term.
* Large working capital requirement: Operations are highly working
capital intensive, as reflected in gross current assets of 228 days
as on March 31, 2019, led by receivables of around 180 days, mainly
due to subdued economic conditions in Africa. The gross current
assets are expected at 250-275 days over the medium term.
Strength:
* Established operations and expertise of the promoters: The
company has established a hospital in Uganda with modern
infrastructure and equipment and has medical centres across small
cities which can refer patients to the hospital. The demand-supply
scenario for the healthcare segment in African countries is
positive as the healthcare penetration is low. Moreover, promoters
have extensive experience in setting up and managing hospitals,
which should support business risk profile over the medium term
Liquidity Poor
Poor liquidity position on account of subdued business performance
due to pandemic related disruption and stretch in collections; as
reflected in delay in repayment and interest servicing on term
loans. Liquidity profile is likely to remain poor over the medium
term
Rating Sensitivity factors
Upward factors:
* Regularisation of all the bank facilities and track record of
satisfactory operations without irregularities at least for a
period of 3 months
* Improvement net cash accrual and liquidity position
Incorporated in 2010, UCPL operates in the field of medical tourism
and hospital management, and trades in medical equipment. The
company also operates hospitals in Africa though its subsidiaries.
UNITED VIKAS: CRISIL Assigns B+ Rating to INR1cr Proposed LT Loan
-----------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long term
bank facility of United Vikas Samiti (UVS).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Proposed Long Term
Bank Loan Facility 1 CRISIL B+/Stable (Assigned)
The rating reflects UVS's high dependence on government authorities
for contracts and small scale and not-for-profit nature of
operations. These weaknesses are partially offset by its
established network and track record of successful contract
execution in the past.
Key Rating Drivers & Detailed Description
Weaknessess:
* High dependence on government authorities for contracts: The
society's operations are largely based upon the tenders issued by
the government department under various schemes. Hence the scale of
operations are dependant entirely on its ability to win tenders.
* Small scale and not-for-profit nature of operations: UVS is
organized as a not-for-profit society. The primary purpose of UVS
is to promote the mid-day meal scheme and provide free nutritional
food to old-age home, schools and other welfare programme, etc.
Owing to low-value government social projects in limited Tier-2 and
3 cities, UVS's operations have remained small with an annual
turnover of around INR1.34 crore reported in 2019-20.
Strength:
* Established network and track record of successful contract
execution in the past: The society has extensive network coverage
in 11 districts of Uttar Pradesh from past 24 years. The society
caters mostly the weaker sections of the rural and urban areas and
also planning to provide more benefits under various govt. schemes
which are also mandated by the GOI.
Liquidity Poor
There are not debt obligation for the society in the medium term
and the society uses advances from authorities to meet its working
capital requirements.
Outlook: Stable
CRISIL believe UVS will continue to benefit from the extensive
experience of its promoter, and established relationships with
clients.
Rating Sensitivity factors
Upward factor
* Sustained improvement in scale of operation by 20% and sustenance
of operating margin, leading to higher cash accruals
* Improvement in working capital cycle
Downward factor
* Weakening of the financial risk profile due to withdrawal of
unsecured loans, or any additional borrowed funds
* Significant increase in Gross Current Assets or decline in
income.
UVS was registered in 1996, as a not-for-profit society and is
managed by Mr. Farha Ikram. It is located at Badaun town-ship of of
Uttar Pradesh. The society provides free meals under mid-day meal
scheme, women welfare Programme and various other government
mandated schemes.
USHA EDUCATIONAL: CRISIL Assigns B- Rating to INR20cr Term Loan
---------------------------------------------------------------
CRISIL has assigned its 'CRISIL B-/Stable' rating to the long term
bank facilities of Usha Educational Foundation (Usha; part of the
Sreesha group).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 20 CRISIL B-/Stable (Assigned)
The rating reflects Sreesha group's modest scale of operations and
exposure to intense competition, vulnerability to stringent
regulations and weak financial risk profile. These weakness are
partially offset by the extensive industry experience of the
promoters.
Analytical Approach
For arriving at the ratings, CRISIL has combined the business and
financial risk profiles of Usha and Sreesha Educational Services
LLP (Sreesha). This is because both the entities, together referred
as the Sreesha group, operate in the same industry and have
operational and financial linkages.
Key Rating Drivers & Detailed Description
Weakness
* Modest scale of operation and exposure to intense competition:
The group's business profile is constrained by its scale of
operations in the intensely competitive Education Services
industry. The schools are based out of Bengaluru and faces stiff
competition from many other institutions in the state. The group
reported revenues of INR2.10 crores for fiscal 2020.On account of
the pandemic, fee collections are expected to remain muted during
the current year. The group's scale of operations will continue
limit its operating flexibility.
* Vulnerability to stringent regulations: Establishment and
operations of educational institutions are regulated by various
governmental and quasi-governmental agencies, such as the
University Grants Commission (UGC), MCI, AICTE, CBSE, universities,
state governments etc. Each body has detailed procedures for
granting permission to set up institutions, and approvals need to
be renewed every three or five years. Any non-compliance will
result in cancellation of affiliation, license, etc leading to loss
of reputation for the college and revenue for the trust.
* Weak financial risk profile: The schools have been operational
since 2019 and is yet to become profitable which has resulted in
erosion in networth. Further the group has availed external debt
for funding of its capex. With low accretion to reserves and high
reliance on external borrowings, financial risk profile is expected
to remain weak over the medium term.
Strength
* Extensive industry experience of the promoters: The promoters
have an experience of over a decade in the Education Services
industry. This has given them an understanding of the dynamics of
the market, and enabled them to establish visibility in the
region.
Liquidity Stretched
Liquidity is stretched. Cash accrual is likely to be modest over
the medium term. Repayments are expected to commence in fiscal
2023.While the accruals are expected to remain negative during
fiscal 2021 and 2022, it is expected to improve in fiscal 2023.
Accruals are expected to be around INR0.80-0.90 crores which is
expected to be sufficient against repayment obligation of INR0.50
crores during fiscal 2023. The promoters are likely to extend
support in the form of unsecured loans to meet its working capital
requirements and repayment obligations. The group has applied for
one time loan restructuring as per RBI policy. Formal approval is
awaited from the lenders. If there is any delay in receipt of
approval from the lenders, timely debt servicing remains critical.
Outlook: Stable
CRISIL believes the group will continue to benefit over the medium
term from the management's extensive experience in the sector.
Rating Sensitivity Factor
Upward factor
* Significant increase in the occupancy resulting in higher than
expected revenues and substantial increase its accruals to over
INR1 cr
* Improvement in financial risk profile
Downward factor
* More-than-expected delay in receipt of fees leading to liquidity
mismatch
* Decline in occupancy to below 70%.
Established in 2017, Usha operates a pre-primary school in
Bangalore, and it commenced its operations in June 2019.
Established in 2018, Shreesha runs a school from grade 1 to grade
8, and is based out of Bengaluru, Karnataka. The firm is promoted
by Mr. Mahesh Reddy & Mrs. Usha Reddy.
VICTORY PAPER: CRISIL Assigns B+ Rating to INR25cr Term Loan
------------------------------------------------------------
CRISIL has assigned its 'CRISIL B+/Stable' rating to the long-term
bank facility of Victory Paper and Boards India Ltd (VPBL).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Term Loan 25 CRISIL B+/Stable (Assigned)
The rating reflects VPBL's nascent stage of operations and weak
operating efficiencies. These weaknesses are partially offset by
the extensive industry experience of the promoter and funding
support from promoters and group companies.
Key Rating Drivers & Detailed Description
Weaknesses:
* Nascent stage of operations: The business risk profile is
constrained because of nascent stage of operations. Revenue is
expected to improve gradually over the medium term.
* Weak operating efficiencies: Operating margin and return on
capital employed (RoCE) are low, driven by low capacity utilisation
and nascent stage of operations.
Strength:
* Extensive industry experience of the promoters and funding
support from them: VPBL is a part of the Anna-Kitex group, which is
one of the oldest business conglomerates in Kerala, with businesses
spanning from aluminium products, textiles and spices to trading.
The group, founded by Mr. M.C. Jacob in 1968, is currently managed
by Mr. Boby M. Jacob. VPBL was taken over by the present management
in fiscal 2018. Furthermore, the company's liquidity is supported
by timely, need-based funds extended by the promoter and group
companies.
Liquidity Stretched
Liquidity will remain stretched, with annual cash accrual expected
at INR1-3 crore over the medium term, against debt obligation of
INR2-4 crore. However, liquidity is supported by infusion of
unsecured loans by the promoter and group companies.
Outlook: Stable
CRISIL believes VPBL will continue to benefit from the extensive
experience of its promoter and established relationships with
clients.
Rating Sensitivity factors
Upward factors
* Significant increase in revenue and earnings before interest,
tax, depreciation and amortisation (EBITDA) margin of more than 5%
* Improvement in the financial risk profile
Downward factors
* Decline in revenue or EBITDA margin
* Stretch in the working capital cycle, resulting in weakening of
the liquidity profile
VPBL is a public limited company and was originally incorporated on
December 9, 1994. Subsequently, during fiscal 2018, VPBL was taken
over by the present management, belonging to the Kizhakkambalam
Anna group of companies. In fiscal 2019, the company acquired a
ready-to-use textile unit at Karur, Tamil Nadu, and is currently
engaged in production of apparel and readymade garments. VPBL also
started aluminium roofing sheet production from fiscal 2019.
VRA COTTON: CRISIL Withdraws B+ Rating on INR2cr Cash Credit
------------------------------------------------------------
CRISIL has withdrawn its ratings on the bank facilities of VRA
Cotton Mills Private Limited (VRA) on the request of the company
and receipt of a no objection certificate from its bank. The rating
action is in line with CRISIL's policy on withdrawal of its ratings
on bank loans.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 2 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Withdrawn)
Export Packing 45 CRISIL A4 (ISSUER NOT
Credit COOPERATING; Rating Withdrawn)
CRISIL has been consistently following up with VRA for obtaining
information through letters and emails dated August 29, 2020 and
September 25, 2020, among others, apart from telephonic
communication. However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution with reference to the rating assigned/reviewed
with the suffix 'ISSUER NOT COOPERATING' as the rating is arrived
at without any management interaction and is based on best
available or limited or dated information on the company. Such non
co-operation by a rated entity may be a result of deterioration in
its credit risk profile. These ratings with 'ISSUER NOT
COOPERATING' suffix lack a forward looking component.'
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of VRA. This restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on VRA is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the rating on bank facilities of VRA
continues to be 'CRISIL B+/Stable/CRISIL A4 Issuer Not
Cooperating'.
CRISIL has withdrawn its ratings on the bank facilities of VRA on
the request of the company and receipt of a no objection
certificate from its bank. The rating action is in line with
CRISIL's policy on withdrawal of its ratings on bank loans.
Incorporated in 1999 and promoted by Mr. Vinod Ahuja and his
family, VRA is headquartered in Abohar (Punjab) and primarily
trades in cotton bales. It also operates a ginning unit.
=========
J A P A N
=========
TAKATA CORP: Trustee Files Air Bag Lawsuit v. Insurer
-----------------------------------------------------
Law360 reports that a trust set up to compensate people killed or
injured by defective Takata Corp. air bags is suing one of the
company's insurers in Delaware bankruptcy court, saying the insurer
is refusing to cover claims by those victims despite agreeing to
under Takata's Chapter 11 reorganization plan.
In a complaint filed Thursday, November 5, 2020, Eric D. Green,
trustee for the Takata Airbag Tort Compensation Trust Fund, says
that Mitsui Sumitomo Insurance Co. Ltd. is trying to "exploit" the
Bankruptcy Code to avoid paying out a $120 million policy.
About TAKATA USA
Japan-based Takata Corporation (TYO:7312) --
http://www.takata.com/en/-- develops, manufactures and sells
safety products for automobiles. The Company offers seatbelts,
airbags, steering wheels, child seats and trim parts. Headquartered
in Tokyo, Japan, Takata operates 56 plants in 20 countries with
approximately 46,000 global employees worldwide. The Company has
subsidiaries located in Japan, the United States, Brazil, Germany,
Thailand, Philippines, Romania, Singapore, Korea, China and other
countries.
Takata Corp. filed for bankruptcy protection in Tokyo and the U.S.,
amid recall costs and lawsuits over its defective airbags. Takata
and its Japanese subsidiaries commenced proceedings under the Civil
Rehabilitation Act in Japan in the Tokyo District Court on June 25,
2017.
Takata's main U.S. subsidiary TK Holdings Inc. and 11 of its U.S.
and Mexican affiliates each filed voluntary petitions under Chapter
11 of the U.S. Bankruptcy Code (Bankr. D. Del. Lead Case No.
17-11375) on June 25, 2017. Together with the bankruptcy filings,
Takata announced it has reached a deal to sell all its global
assets and operations to Key Safety Systems (KSS) for US$1.588
billion.
Nagashima Ohno & Tsunematsu is Takata's counsel in the Japanese
proceedings. Weil, Gotshal & Manges LLP and Richards, Layton &
Finger, P.A., are serving as counsel in the U.S. cases.
PricewaterhouseCoopers is serving as financial advisor, and Lazard
is serving as investment banker to Takata. Ernst & Young LLP is tax
advisor. Prime Clerk is the claims and noticing agent. The Debtors
Meunier Carlin & Curfman LLC, as special intellectual property
counsel.
Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal
counsel, KPMG is serving as financial advisor, Jefferies LLC is
acting as lead financial advisor. UBS Investment Bank also provides
financial advice to KSS.
On June 28, 2017, TK Holdings, as the foreign representative of the
Chapter 11 Debtors, obtained an order of the Ontario Superior Court
of Justice (Commercial List) granting, among other things, a stay
of proceedings against the Chapter 11 Debtors pursuant to Part IV
of the Companies' Creditors Arrangement Act. The Canadian Court
appointed FTI Consulting Canada Inc. as information officer. TK
Holdings, as the foreign representative, is represented by McCarthy
Tetrault LLP.
The U.S. Trustee has appointed an Official Committee of Unsecured
Trade Creditors and a separate Official Committee of Tort
Claimants.
The Official Committee of Unsecured Creditors has selected
Christopher M. Samis, Esq., L. Katherine Good, Esq., and Kevin F.
Shaw, Esq., at Whiteford, Taylor & Preston LLC, in Wilmington,
Delaware; Dennis F. Dunne, Esq., Abhilash M. Raval, Esq., and Tyson
Lomazow, Esq., at Milbank Tweed Hadley & McCloy LLP, in New York;
and Andrew M. Leblanc, Esq., at Milbank, Tweed, Hadley & McCloy
LLP, in Washington, D.C., as its bankruptcy counsel. The Committee
has also tapped Chuo Sogo Law Office PC as Japan counsel.
The Official Committee of Tort Claimants selected Pachulski Stang
Ziehl & Jones LLP as counsel. Gilbert LLP will evaluate of the
insurance policies. Sakura Kyodo Law Offices will serve as special
counsel.
Roger Frankel, the legal representative for future personal injury
claimants of TK Holdings Inc., et al., tapped Frankel Wyron LLP and
Ashby & Geddes PA to serve as co-counsel.
Takata Corporation ("TKJP") and affiliates Takata Kyushu
Corporation and Takata Services Corporation commenced Chapter 15
cases (Bankr. D. Del. Case Nos. 17-11713 to 17-11715) on Aug. 9,
2017, to seek U.S. recognition of the civil rehabilitation
proceedings in Japan. The Hon. Brendan Linehan Shannon oversees the
Chapter 15 cases. Young, Conaway, Stargatt & Taylor, LLP, serves
as Takata's counsel in the Chapter 15 cases.
* * *
In February 2018, the U.S. Bankruptcy Court confirmed the Fifth
Amended Chapter 11 Plan of Reorganization filed by TK Holdings,
Inc. ("TKH"), Takata's main U.S. subsidiary, and certain of TKH's
subsidiaries and affiliates.
[*] JAPAN: Pub, Restaurant Bankruptcies Growing at Record Pace
--------------------------------------------------------------
NHK World-Japan reports that results of a private survey show that
pubs and restaurants in Japan are going bankrupt at a record pace
because of the coronavirus outbreak.
According to NHK, Tokyo Shoko Research said 730 pubs and
restaurants filed for bankruptcy with debts of over JPY10 million,
or about US$95,000, between January and October this year.
There were more restaurant bankruptcies in 2011, the year a massive
earthquake triggered a tsunami and a nuclear accident, with 800
cases. But the survey company said the rate of increase this year
is even higher, NHK relays.
Ramen noodle shops, Japanese cuisine restaurants and other
specialized establishments that failed totaled 177, up 6.6 percent
from the same period last year, the report discloses.
Cafeteria-type and Western-style restaurants totaled 169, and pubs
150.
Osaka Prefecture had the most bankruptcies at 132, followed by
Tokyo with 116 and Aichi Prefecture with 73, NHK says.
NHK adds that company researchers said sales have not recovered as
expected, and the effects of public support appear to be waning.
They warn that more establishments could fail toward the year-end.
===============
M A L A Y S I A
===============
SERBA DINAMIK: Fitch Affirms BB- LT IDR, Outlook Stable
-------------------------------------------------------
Fitch Ratings has affirmed Malaysia-based Serba Dinamik Holdings
Berhad's (SDHB) Long-Term Issuer Default Rating (IDR) at 'BB-' with
a Stable Outlook. At the same time, Fitch has affirmed SDHB's 'BB-'
senior unsecured debt rating.
The affirmation follows SDHB's steady performance despite the
coronavirus pandemic, with no order cancellations to date. The
affirmation also considers additional investments and capex in
light of the company's rising order book and the financing of the
investments, although the company has flexibility over the timing
of any investment. Revenue rose by 28% and EBITDA by 35% yoy in
1H20, accounting for its forecasts of 53% and 55%, respectively,
for the full year. Its EBITDA margin of 19% in 1H20 was largely in
line with its expectations, while leverage of 2.4x, measured by net
adjusted debt/adjusted EBITDA that proportionately consolidates
minority stakes in a number of associates, was slightly below its
negative rating sensitivity threshold of 2.5x.
SDHB's rating reflects its strong market position in Malaysia,
where it was the fourth-largest provider of operation and
maintenance (O&M) services to the oil and gas industry by revenue
in 2019. The rating is also supported by SDHB's solid financial
profile, short-to-medium term revenue visibility and low earnings
cyclicality. The company's smaller operating scale and limited
product and end-market diversification relative to other
higher-rated peers constrain its rating
KEY RATING DRIVERS
Strong Position; Orders Rising: SDHB has an established reputation
for project completion. Its order book rose by more than eightfold
in the five years to 2019. It had about RM18.5 billion in
outstanding orders at end-August 2020. SDHB's order book-to-revenue
ratio was about 2.4x at end-June 2020 and Fitch expects it to
remain at 1.5x-2x in the medium term, providing revenue visibility.
Fitch believes SDHB is well-positioned to benefit from vendor
consolidation and rising capex in the downstream segment by
Malaysian national oil company Petroliam Nasional Berhad (PETRONAS;
A-/Negative).
Resilient Operations: There were no order cancellations or requests
for price adjustments, despite the challenging operating
environment. New orders slowed in 2Q20, but the renewal rate
remained high at 80%-90%. SDHB's maintenance services, considered
essential, have more resilient demand during industry downturns,
partly offsetting its exposure to the cyclical oil and gas sector,
where lower prices lead to curtailment in activity and spending.
Over 60% of SDHB's order book is from the downstream oil and gas
segment, which makes its cash flow less sensitive to the
exploration business and commodity-price fluctuations.
Limited Diversification; High Capex: Fitch believes SDHB's rating
is constrained by its small operating scale, its limited product
and end-market diversification relative to Fitch-rated peers, and
the need for capex to support its growth, which dampens its ability
to generate neutral-to-positive free cash flow.
This is partly compensated by the company's focus on mid-tier
clients, which boosts its bargaining power, resulting in
industry-leading profit margins. The company's O&M contracts, which
account for the majority of revenue, are typically non-exclusive,
exposing it to substitution risk by competitors, especially those
from outside Malaysia. Fitch believes the risk is mitigated by
SDHB's operating licences in different regions, its long-term
client relationships and its strong track record in the industry.
Revenue Visibility: SDHB typically enters into two-to-five-year
contracts for its O&M services and 1.5-year to three-year contracts
for engineering, procurement, construction and commissioning (EPCC)
projects, which provide some revenue visibility.
Adequate Liquidity: SDHB has sufficient liquidity as it raised
USD500 million from bond sales as of end-2019, as well as MYR177
million from an associate stake sale and MYR457 million via a
private placement in 2020. It also raised USD97 million in
syndicated loans for a bond buyback exercise.
Active Leverage Management: The company used the funds from the
private placement to repay MYR200 million in maturing bank
borrowings. The gain from the bond buyback exercise was immaterial,
but the company reduced about MYR24 million in debt and saved an
estimated RM11 million per year in interest payments, cutting its
USD300 million in notes due 2022 to USD222.2 million. Its USD200
million in notes due 2025 have similarly been reduced to USD180.1
million.
Expected Deleveraging: Fitch expects SDHB's leverage, after
adjusting for the key financials of associates to which SDHB
provides proportionate financial guarantees, to rise to around 2.8x
by end-2020 (end-2019: 2.6x) on higher working-capital needs to
fulfil new orders. Leverage is also affected by the associates'
debt that it guarantees. Nevertheless, Fitch expects EBITDA
contribution from the associates to be more meaningful, helping
leverage to improve to below 2.5x in 2022.
Acquisition Risks: SDHB may make small acquisitions of around USD10
million per year as part of the company's asset-ownership strategy.
Fitch believes this could drive growth in the longer term, but the
acquisitions present integration risks and leverage may increase,
which could affect the company's credit profile. Fitch believes
these risks are mitigated by the modest value of the acquisitions,
the short investment payback period and SDHB's expertise in the
industry.
DERIVATION SUMMARY
SDHB's rating may be compared with that of PT Bukit Makmur Mandiri
Utama (BUMA, BB-/Negative), PT ABM Investama Tbk (B+/Negative), PT
Wijaya Karya (Persero) Tbk (WIKA, BB-/Negative, Standalone Credit
Profile: b-) and Emeco Holdings Limited (B+/Stable). BUMA is
Indonesia's second-largest mining contractor, with a 20% market
share. Fitch believes SDHB's greater customer and product
diversification and lower earning sensitivity to commodity prices
compensate for its thinner profit margin. This was evident from
SDHB's revenue growth when oil prices were low in 2014-2016, while
BUMA's scale shrank when coal prices fell in 2012-2016.
ABM focuses on coal production, mining contracting services,
integrated logistics, engineering services and distributive power.
Fitch believes SDHB's higher geographical diversification, lower
earnings sensitivity to commodity prices and stronger leverage
profile offset ABM's wider profit margin and stronger free cash
flow generation. SDHB also has more stable profit margins, while
ABM has a weakening business profile due to the loss of key
contracts and a short reserve life. The differences result in ABM
being rated a notch lower than SDHB.
The ratings of SDHB and WIKA are supported by strong domestic
market franchises. WIKA is one of Indonesia's leading and most
diversified state-owned contractors, with an established record in
the EPCC of large infrastructure and power-plant projects. SDHB's
operating scale is smaller, but it has a wider profit margin,
greater geographical diversification and a stronger leverage
profile than WIKA. Fitch also believes WIKA's order book, which is
based on EPCC and infrastructure projects, is more unpredictable
than SDHB's O&M-based order book. This results in SDHB's rating
being higher than WIKA's Standalone Credit Profile.
SDHB and Australia-based Emeco have comparable leverage profiles
and operating scales. Nevertheless, Fitch believes the one-notch
difference between the two companies' ratings is warranted by
Emeco's highly volatile business and high earnings sensitivity to
commodity prices as its profitability, cash flow generation and
operating scale have deteriorated during past global
commodity-price downturns.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Its Rating Case for the Issuer
- Bid book to increase by 5%-10% annually from 2020.
- New order-book win rate of 25%-30% in 2020-2022
- Order-book renewal rate of 25%-30% in 2020-2022
- EBITDA margin of around 18% in 2020-2022 (2019: 18%)
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
- Fitch does not anticipate any positive rating action over the
next 18-24 months. However, Fitch may consider positive rating
action should the company achieve a material improvement in
operating scale and generally neutral free cash flow, while
maintaining a stable financial profile
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
- Significant weakening of the order-book profile, primarily
driven by loss of key contracts or customers
- Net debt/EBITDA above 2.5x on a sustained basis. Fitch has
adjusted the leverage metric by including the key financials of the
associate entities to which SDHB provides proportionate financial
guarantees
- EBITDA margin sustained below 12%
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: SDHB had readily available cash of around
MYR1.18 billion at end-September 2020, compared with short-term
debt maturities of MYR535 million at end-June 2020. The company
also has around MYR900 million in unused credit facilities as of
September 30, 2020. Furthermore, Fitch believes the company's
liquidity profile is supported by strong banking access, given its
long-term relationships with both regional and global banks, and
capital market access, which will provide the company with
flexibility in financing its capex plans.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF
RATING
The principal sources of information used in the analysis are
described in the Applicable Criteria.
ESG CONSIDERATIONS
Unless otherwise disclosed in this section, the highest level of
ESG credit relevance is a score of '3'. This means ESG issues are
credit-neutral or have only a minimal credit impact on the entity,
either due to their nature or the way in which they are being
managed by the entity.
=================
S I N G A P O R E
=================
HYFLUX LTD: Receives Term Sheet from US Fund Manager
----------------------------------------------------
Raphael Lim at The Business Times reports that Hyflux Ltd has
received a term sheet for a negotiated transaction from American
fund manager Strategic Growth Investments (SGI), the company said
in an exchange filing on Nov. 10.
The term sheet is regarding the proposed reorganisation and
restructuring of Hyflux and its other affiliated companies by
certain investment funds managed directly or indirectly by SGI, BT
says.
According to BT, the beleaguered water treatment firm said it is
considering the content of the term sheet and expects it will need
further clarification and details from SGI. It added that it will
make the appropriate announcements as and when there are any
further material developments on this matter.
Last month, Hyflux announced that it received a formal expression
of interest from SGI to invest at least SGD204.78 million, the
report notes.
BT relates that Hyflux said in July this year that a then-unnamed
North American fund manager with "a strong track record of
investing in infrastructure, technology and real estate globally"
was keen to invest.
About Hyflux
Singapore-based Hyflux Ltd -- https://www.hyflux.com/ -- provides
various solutions in water and energy areas worldwide. The company
operates through two segments, Municipal and Industrial. The
Municipal segment supplies a range of infrastructure solutions,
including water, power, and waste-to-energy to municipalities and
governments. The Industrial segment supplies infrastructure
solutions for water to industrial customers. It has business
operations across Asia, Middle East and Africa.
As reported in the Troubled Company Reporter-Asia Pacific on May
24, 2018, Hyflux Ltd. said that the Company and five of its
subsidiaries, namely Hydrochem (S) Pte Ltd, Hyflux Engineering Pte
Ltd, Hyflux Membrane Manufacturing (S) Pte. Ltd., Hyflux Innovation
Centre Pte. Ltd. and Tuaspring Pte. Ltd. have applied to the High
Court of the Republic of Singapore pursuant to Section 211B(1) of
the Singapore Companies Act to commence a court supervised process
to reorganize their liabilities and businesses. The Company said
it is taking this step in order to protect the value of its
businesses while it reorganises its liabilities.
The Company engaged WongPartnership LLP as legal advisors and Ernst
& Young Solutions LLP as financial advisors in this process. On
Jan. 29, 2019, WongPartnership applied to discharge themselves due
to difficulties relating to "loss of confidence and good cause" in
working with the client. The Company subsequently appointed
Clifford Chance and Cavenagh Law as its legal advisers in WongP's
place.
In November 2019, Hyflux entered into a restructuring deal with
United Arab Emirates-based utility Utico FZC, according to Reuters.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter-Asia Pacific is a daily newsletter co-
published by Bankruptcy Creditors' Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2020. All rights reserved. ISSN: 1520-9482.
This material is copyrighted and any commercial use, resale or
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