/raid1/www/Hosts/bankrupt/TCRAP_Public/201228.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
A S I A P A C I F I C
Monday, December 28, 2020, Vol. 23, No. 259
Headlines
A U S T R A L I A
CARDINAL RESOURCES: Dongshan to Make AUD1.20 Per Share Cash Offer
FORTESCUE METALS: Moody's Completes Review, Retains Ba1 Rating
INTERSTAR MILLENIUM 2004-5: Fitch Affirms 'B' Rating on Cl. B Notes
LA TROBE 2019-1: S&P Assigns B(sf) Rating on Class F Notes
LIBERTY FUNDING 2020-4: Moody's Gives (P)B2 Rating to Class F Notes
MCLENNAN ASSET: First Creditors' Meeting Set for Jan. 8
MINERAL RESOURCES: Moody's Completes Review, Retains Ba3 Rating
MKS PROPERTY: ASIC Obtains Freezing Orders vs. Property Developer
NORTH EAST SOLUTION: Second Creditors' Meeting Set for Jan. 4
PERENTI GLOBAL: Moody's Completes Review, Retains Ba2 Rating
STRATH PASTORAL: First Creditors' Meeting Set for Jan. 7
THORN ABS 1: Fitch Keeps 'BB' Rating on E Notes on Watch Negative
TRITON TRUST 10: Fitch Affirms BB- Rating on Series 2019-1 F Notes
B A N G L A D E S H
BANGLADESH: Moody's Completes Review, Retains Ba3 Issuer Rating
C A M B O D I A
CAMBODIA: Moody's Completes Review, Retains B2 Issuer Rating
C H I N A
CHINA MINMETALS: Moody's Completes Review, Retains Ba3 BCA
CHINA NATIONAL: Moody's Completes Review, Retains B1 BCA
FANTASIA HOLDINGS: Fitch Assigns 'B+' on Proposed USD Senior Notes
IDEANOMICS INC: Enters Into $25M Convertible Debenture with YA II
POWER BEST: Fitch Gives 'B+' Rating on Proposed USD Sr. Notes
RUGAO ECONOMIC: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
SEAZEN HOLDINGS: Fitch Corrects Dec. 7 Ratings Release
SHANDONG RUYI: Missed Notes Payment Factored in Moody's Caa3 CFR
TAHOE GROUP: Subsidiaries Win Reprieve to Repay Mounting Debt
YANKUANG GROUP: Moody's Completes Review, Retains Ba1 CFR
YANZHOU COAL: Moody's Completes Review, Retains Ba1 CFR
ZIJIN MINING: Moody's Completes Review, Retains Ba1 CFR
F I J I
FIJI: Moody's Completes Review, Retains Ba3 Issuer Rating
I N D I A
AARTI SUITINGS: CARE Keeps D Debt Ratings in Not Cooperating
AMARAVATHI TOURISM: CARE Cuts Rating on INR7.90cr Loan to D
BALAGANESAN SPINNERS: CRISIL Cuts Ratings on INR5cr Loan to B
CUCKU ENTERPRISES: CARE Lowers Rating on INR7.50cr Loan to C
HCO INFRASTRUCTURE: CRISIL Keeps D Debt Ratings in Not Cooperating
INTERJEWEL PRIVATE: CARE Keeps D Debt Ratings in Not Cooperating
KONARK SYNTHETIC: CARE Keeps D Debt Ratings in Not Cooperating
MOTILAL DHOOT: CRISIL Keeps D Debt Ratings in Not Cooperating
N.V. KHAROTE: CARE Keeps D on INR13cr Loans in Not Cooperating
NEW ERA: CRISIL Reaffirms B Rating on INR2cr Cash Loan
PALLAVI CONSTRUCTIONS: CRISIL Keeps C Debt Rating in NonCooperating
PARA ENTERPRISES: CRISIL Keeps D Debt Ratings in Not Cooperating
PATIL CONSTRUCTION: CARE Keeps D on INR24 Loan in Not Cooperating
RUHATIYA COTTON: CRISIL Lowers Rating on INR7cr Cash Loan to B
SAI PRIYA: CARE Withdraws D Rating on Bank Loans
SHIRAGUPPI SUGAR: CARE Keeps D Debt Ratings in Not Cooperating
SHUBHAM INDUSTRIES: CRISIL Keeps D Debt Rating in Not Cooperating
SPM WEAVING: CARE Keeps C on INR15cr Loans in Not Cooperating
SUBA PLASTICS: CARE Keeps C on INR6cr Loans in Not Cooperating
VENTA REALTECH: CARE Keeps D on INR90cr Loan in Not Cooperating
WEST COAST FINE: CARE Lowers Rating on INR24cr LT Loan to D
WEST COAST FROZEN: CARE Keeps D Debt Ratings in Not Cooperating
I N D O N E S I A
ABM INVESTAMA: Moody's Completes Review, Retains B1 CFR
ADARO INDONESIA: Moody's Completes Review, Retains Ba1 CFR
BAYAN RESOURCES: Moody's Completes Review, Retains Ba3 CFR
BUKIT MAKMUR: Moody's Completes Review, Retains Ba3 Rating
BUMI RESOURCES: Moody's Completes Review, Retains Caa1 Rating
INDIKA ENERGY: Moody's Completes Review, Retains Ba3 CFR
JASA MARGA: S&P Withdraws 'BB-' LongTerm Issuer Credit Rating
REJEKI ISMAN: Fitch Alters Outlook on BB- LongTerm IDR to Negative
SOECHI LINES: Fitch Lowers Rating on US Dollar Notes to B-
WASKITA BETON: Fitch Withdraws 'CC(idn)' National LongTerm Rating
J A P A N
TOSHIBA CORP: Moody's Withdraws B1 Corp. Family Rating
M O N G O L I A
MONGOLIA: Moody's Completes Review, Retains B3 Issuer Rating
N E W Z E A L A N D
TRADE ME GROUP: S&P Alters Outlook to Stable & Affirms 'B-' ICR
P A K I S T A N
PAKISTAN: Moody's Completes Review, Retains B3 Issuer Rating
P A P U A N E W G U I N E A
PAPUA NEW GUINEA: Moody's Completes Review, Retains B2 Rating
P H I L I P P I N E S
CHINA BANKING: Fitch Withdraws BB+ Issuer Default Rating
S I N G A P O R E
EZION HOLDINGS: Net Loss Widens to US$224.5MM in Q3 Ended Sept. 30
GEO ENERGY: Moody's Completes Review, Retains Caa1 Rating
GOLDEN ENERGY: Moody's Completes Review, Retains B1 Rating
PUMA ENERGY: Fitch Puts BB- LongTerm IDR on Watch Negative
S R I L A N K A
SRI LANKA: Moody's Completes Review, Retains Caa1 Issuer Rating
V I E T N A M
VIETNAM: Moody's Completes Review, Retains Ba3 Issuer Rating
- - - - -
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A U S T R A L I A
=================
CARDINAL RESOURCES: Dongshan to Make AUD1.20 Per Share Cash Offer
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Dongshan Investments Limited has announced its intention to make an
off-market takeover offer of AUD1.20 per share to acquire all of
the ordinary shares in Cardinal Resources Limited ACN 147 325 620.
Highlights
* Intention to make an all-cash takeover offer of AUD1.20.
* Offer represents a 15% premium to the 3 (three) month Volume
Weighted Average Price of 1.045AUD per Cardinal Share and a
12% premium to the maximum price offered under the current
offer by Shandong (1.075AUD per Cardinal Share).
* Conditions to the Offer will include financing, limited due
diligence, and regulatory approvals (a full list of the
conditions to the Offer is provided in Annexure 1 of this
announcement).
* Dongshan has a full cycle exploration and mining business in
the Republic of the Sudan with production capacity of up to
95,000 ounces of gold per year (approx. 3 t Au/yr) which is
supported by a strong in-house geological and production team
with 10+ years' experience in exploration and mining (further
information of Dongshan's technical experience is set out in
Section 'About Dongshan' below).
* Dongshan's Sudanese subsidiary, Alliance for Mining Co. Ltd.,
is the biggest industrial gold producer in Sudan.
* Dongshan is aiming to enhance its gold production portfolio
by acquiring world-class assets, and the Namdini Gold Project
in Ghana, which is owned by the Cardinal Group (the "Namdini
Project"), perfectly fits this development strategy.
Background to the Offer
In September 2020, Dongshan became an Emirati-Russian joint
venture. Dongshan's shareholders tasked management with increasing
Dongshan's resource base and bringing new exploration and mining
projects to the group's portfolio. "This is when the Namdini
Project came to our attention as the first acquisition target. We
believe that by acquiring the Namdini Project and later building
it, we will establish ourselves as a major gold producer in West
Africa," Dongshan said.
Offer conditions
The Offer is subject to a number of conditions, including a limited
due diligence condition and funding condition. A full list of the
conditions to the Offer is provided in Annexure 1 of this
announcement.
Dongshan requires that limited due diligence be undertaken to
confirm circumstances listed in Annexure 2 of this announcement.
Dongshan is ready to commence due diligence immediately upon being
granted access by Cardinal and intends to complete this process by
January 31, 2021 at the latest.
Dongshan's majority shareholder, Wahaj Commercial Investment - Sole
Proprietorship L.L.C. ("WAHAJ") has received confirmation from
First Abu Dhabi Bank, U.A.E. of the availability of a credit
facility of up to USD300,000,000 for the purposes of WAHAJ
supporting the Offer, subject to First Abu Dhabi Bank's internal
approvals and availability of limits.
About Dongshan
Dongshan is an Emirati-Russian joint venture that has been
established by a common effort of Emirati and Russian business
circles to develop high potential mining projects in different
countries, especially countries in Africa.
Over the past 10 years, Dongshan has built a profound in-house
exploration and mining expertise (mainly in Africa), enabling it to
make independent verifications and geological evaluations for both
internal and external clients and operate projects at all stages of
their lifecycle from securing financing and exploration to
marketing and monetization. The experience of the Dongshan team in
mineral resources exploration covers countries as Sudan, Niger,
Mali, Chad, Ivory Coast, Mauritania, Zimbabwe, and Eritrea.
Currently, Dongshan has an active gold production project in Sudan
where it successfully proceeded from gold exploration to production
stage with production capacity of up to 95,000 ounces of gold per
year (approx. 3 t Au/yr). The main milestones which have been
achieved in relation to this project are:
* April 2013 - obtainment of exploration license for Block 30;
* May 2015 - commenced gold production;
* March 2016 - production of 1st ton of gold;
* January 2018 - extension of production capacity of the gold
processing plant to up to 3 t Au/y.
In addition, Dongshan currently has an active exploration project
in the Islamic Republic of Mauritania.
Dongshan is aiming to increase its gold production portfolio with
world-class assets, and the Namdini Project perfectly fits this
development strategy.
Advisers
Dongshan has engaged the following advisers in relation to the
Offer:
* Financial advisor – PricewaterhouseCoopers Corporate Finance
Inc. (Canada);
* Legal and tax advisor – PricewaterhouseCoopers Legal
(Australia);
* Technical advisor – in-house geological and production team
of Alnair Mineral Services DMCC (a wholly-owned subsidiary of
Dongshan).
This release has been authorised by the Board of Directors of
Dongshan.
Annexure 1 - Offer Conditions
Minimum acceptance
At the end of the Offer Period, Dongshan has a Relevant Interest in
at least 50.1% (by number) of the Cardinal Shares (on a fully
diluted basis)
FIRB
Before the end of the Offer Period:
* Dongshan has received a written notice under FATA from the
Treasurer (or a delegate) stating that, or to the effect
that, there are no objections to the acquisition by Dongshan
of all the Cardinal Shares, either without conditions or
subject to only Standard Tax Conditions; or
* following notice of the proposed acquisition by Dongshan of
all the Cardinal Shares having been given to the Treasurer
under FATA, the Treasurer ceases to be empowered to make any
order under Part 3 of FATA.
No restraints
Between the Announcement Date and the end of the Offer Period (each
inclusive), there is no judgement, injunction, order or decree in
consequence of or in connection with the Offer (other than an
application to, or a decision or order of, or action or
investigation by, ASIC or the Takeovers Panel in exercise of the
powers and discretions conferred by the Corporations Act) which
restrains, prohibits or impedes, or threatens to restrain, prohibit
orimpede, or may otherwise materially impact upon, the making of
the Offer and the completion of the Offer and any transactions or
arrangements contemplated by the Bidder's Statement (including,
without limitation, full, lawful, timely and effectual
implementation of the intentions set out in the Bidder's Statement)
or which requires the divestiture by Dongshan of any Cardinal
Shares or the divestiture by any Cardinal Group Member of any
material assets of the Cardinal Group.
Regulatory approvals
Between the Announcement Date and the end of the Offer Period (each
inclusive), any approvals, consents, waivers, exemptions or
declarations that are required by law or by any Public Authority,
to permit:
* the Offer to be lawfully made to and accepted by Cardinal
shareholders; and
* the Offer to be complete,
are granted, given, made or obtained on an unconditional basis and
remain in full force and effect in all respects, and do not become
subject to any notice, intimation or indication of intention to
revoke, suspect, restrict, modify or not renew them.
Funding
That Dongshan has secured committed financing (either directly or
through any of its shareholders) for the purposes of funding the
Offer for an amount of up to USD300,000,000 and the conditions
precedent to draw down of funds under those financing arrangements
have been satisfied (other than conditions relating to the
conditions of the Offer being satisfied or relating to procedural
matters or documentary requirements which, by their terms or nature
can only be satisfied or performed once the conditions of the Offer
are satisfied).
Due diligence
Between the Announcement Date and the end of the Offer Period (each
inclusive), Cardinal promptly (and in any event within two business
days of a request) provides Dongshan with access to the following
information, as may be requested by Dongshan:
* information and contractual arrangements with respect to the
Namdini Project (including the existing concession agreement,
copies of exploration and mining licenses and other related
permits, any correspondence with the regulatory authorities
with respect to the Namdini Project);
* technical, financial and legal information, including
information that has been provided by Cardinal to other
bidders or potential bidders for Cardinal (whether by
takeover, scheme of arrangement or other proposals likely to
lead to a change of control of a Cardinal Group Member, or
the acquisition of substantially all the assets and
operations of Cardinal), that is not generally available
relating to Cardinal or any of Cardinal Group Member or their
respective assets, liabilities or operations; and
* clarification information that may be requested by Dongshan
or its advisors in connection with the above, and that
information confirms that the Due Diligence Criteria are
satisfied.
No litigation on foot or pending
Between the Announcement Date and the end of the Offer Period (each
inclusive), no litigation against any Cardinal Group Member which
may reasonably result in a judgement of 10,000,000 US Dollars (or
equivalent in another currency) or more is commenced, is threatened
to be commenced, is announced, or is made known to Dongshan
(whether or not becoming public) or Cardinal, other than that which
is in the public domain as at the Announcement Date.
No material acquisitions or disposals
Between the Announcement Date and the end of the Offer Period (each
inclusive), no Cardinal Group Member acquires or disposes of, or
enters into or announces any agreement for the acquisition of, any
material assets or business, or enters into any corporate
transaction, which would or would be likely to involve a material
change in the manner in which Cardinal conducts its business or the
nature (including balance sheet classification), extent or value of
the assets or liabilities or the Cardinal Group as at the
Announcement Date.
Without limitation, the following events or actions will be deemed
to trigger this condition:
* any Cardinal Group Member disposers of, or enters into or
announces any agreement for the disposal of, any of its
rights to the Namdini Project;
* any Cardinal Group Member makes any change to its
constitutional documents or increases its charter capital;
* any liquidation, reorganization and/or bankruptcy procedures
are commenced against any Cardinal Group Member;
* any financial liability in the amount exceeding 10,000,000 US
Dollars (or equivalent in another currency) is incurred by
any Cardinal Group Member;
* any Cardinal Group Member commences business activities not
already carried out as at the Announcement Date, whether by
acquisition or otherwise.
Third party rights
Between the Announcement Date and the end of the Offer Period (each
inclusive), no third party exercises, purports to exercise or
announces an intention to exercise, any change of control rights,
pre-emptive rights, deemed offer or disposal or similar right in
any Material Contracts to which any Cardinal Group Member is party,
as a result of either the announcement of the Offer or any change
of control which may occur as a result of acceptances of the
Offer.
No Prescribed Occurrence
Between the Announcement Date and the end of the Offer Period (each
inclusive), no Prescribed Occurrence happens.
Annexure 2 - Due Diligence Criteria
* Cardinal Group does not have any material undisclosed
financial liabilities in the amount exceeding 10,000,000 US
Dollars;
* Gold reserves of the Cardinal Group amount to 5.1M ounces
(138.6Mt grading 1.13 g/t);
* CAPEX and OPEX expenses for the development of the Namdini
Project will not likely exceed the Capital Estimate Summary
set out in clause 21.2 of the Feasibility Study dated
November 28, 2019 performed by Golder Associates Pty Ltd,
Perth, Lycopodium Minerals Pty Ltd and others (the
"Feasibility Study");
* Recovery rate not less than confirmed by the Feasibility
Study;
* Geological and explorations licenses that belong to the
Cardinal Group are:
- valid and fully effective;
- not subject to any lien, charge or any other
encumbrance;
- no actions have been undertaken by regulatory
authorities to suspend or terminate any of such
licenses;
* All ancillary regulatory and environmental permits and
licenses that are material for carrying out of the Cardinal
Group's business are:
- valid and fully effective;
- not subject to any lien, charge or any other
encumbrance;
- no actions have been undertaken by regulatory
authorities to suspend or terminate any of such permits
and licenses;
* There are no outstanding decisions to increase the charter
capital of any Cardinal Group Member;
* There are no material outstanding litigation and/or
administrative, environmental, regulatory or other claims
against the Cardinal Group exceeding 10,000,000 US Dollars in
aggregate;
* The capital structure of Cardinal (including terms and
conditions of all securities or rights to acquire securities)
is the same as has been disclosed to the ASX;
* Each Cardinal Group Member is duly incorporated and validly
exists in accordance with the relevant applicable laws;
* Cardinal owns and controls its operational subsidiaries which
own relevant exploration and mining licenses (including
exploration and mining licenses for the Namdini Project);
* No insolvency (bankruptcy) proceedings have been initiated
against any Cardinal Group Member or any of its subsidiaries
and there are no legal grounds to initiate the same against
any Cardinal Group Member.
Annexure 3 - Definitions
Announcement Date means the date of this announcement.
ASIC means the Australian Securities and Investments Commission.
Cardinal means Cardinal Resources Limited ACN 147 325 620.
Cardinal Group means Cardinal and each of its Related Bodies
Corporate.
Cardinal Group Member means any member of the Cardinal Group.
Cardinal Shares means fully paid ordinary shares issued in the
capital of Cardinal.
Corporations Act means the Corporations Act 2001 (Cth).
Due Diligence Criteria means the matters set out in Annexure 2.
FATA means the Foreign Acquisitions and Takeovers Act 1975 (Cth).
Material Contract means the concession agreement in respect of the
Namdini Project and any other contracts that are material for
carrying out of the business of the Cardinal Group.
Offer Period means the period the Offers are open for acceptance.
Prescribed Occurrence means the occurrence of any of the following
where that occurrence was not consented to by Dongshan in writing:
* any Cardinal Group Member converting all or any of its
securities into a larger or smaller number of securities;
* any Cardinal Group Member resolving to reduce its capital in
* any way or reclassifying, combining, splitting, redeeming or
cancelling directly or indirectly any of its securities;
* any Cardinal Group Member entering into a buy-back agreement
or resolving to approve the terms of such agreement;
* any Cardinal Group Member making any issue of securities or
granting an option over its securities or agreeing to make
such an issue or grant such an option;
* any Cardinal Group Member issuing, or agreeing to issue,
convertible notes;
* any Cardinal Group Member disposes, or agrees to dispose, of
the whole or substantial part of its business or property;
* any Cardinal Group Member charging, or agreeing to charge,
the whole, or a substantial part, of its business or
property;
* any Cardinal Group Member resolving to be wound up;
* the appointment of a liquidator or provisional liquidator of
any Cardinal Group Member;
* the making of an order by a court for the winding up of any
Cardinal Group Member;
* an administrator of any Cardinal Group Member being
appointed;
* any Cardinal Group Member executing a deed of company
arrangement; or
* the appointment of a receiver or a receiver and manager in
relation to the whole, or a substantial part, of the property
of any Cardinal Group Member.
Public Authority means any government or any governmental,
semi-governmental, statutory, administrative, fiscal or judicial
body, department, commission, tribunal, entity, agency or
authority, whether in Australia or elsewhere, including (without
limitation) any minister of the Crown in the right of the
Commonwealth of Australia or any
State of Australia, any other federal, state, provincial or local
government, the Takeovers Panel, ASIC, ACCC and FIRB, and including
any self-regulatory organisation established under statute or
otherwise discharging substantially public or regulatory functions,
and ASX or any other stock exchange.
Related Body Corporate has the meaning given in the Corporations
Act.
Relevant Interest has the meaning given in the Corporations Act.
Standard Tax Conditions means the conditions set out in the list of
standard tax conditions published in Guidance Note 47 on the
website of the Foreign Investment Review Board and such other
Tax-related conditions as a customarily imposed by the Foreign
Investment Review Board (including, for the avoidance of doubt,
conditions requiring information or confirmations to be provided in
respect of matters such as ownership structure, borrowings, capital
structure, related party financing, cross border related party
financing arrangements, distributions, tax consolidation,
arrangements covered by "Taxpayer Alerts and thin capitalisation
rules).
Takeovers Panel means the Takeovers Panel of Australia.
About Cardinal Resources
Cardinal Resources Limited operates as a mineral exploration and
development company. The Company develops multiple projects through
expansion drilling programs, pre-feasibility studies, and
metallurgical test work. Cardinal Resources serves customers in
Australia, Canada, and West Africa.
FORTESCUE METALS: Moody's Completes Review, Retains Ba1 Rating
--------------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Fortescue Metals Group Ltd and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Fortescue's Ba1 rating reflects the company's solid operating
profile, with large-scale production and a low cost position, as
well as a large base of long-life reserves. The rating also
reflects the company's strong financial and liquidity profiles.
Fortescue's rating is constrained by the company's limited
operational, geographic and product diversity. The company is also
exposed to downside risk around iron ore prices and discounts for
the lower grade ore it produces. However, the significant cost
reduction achieved by the company over the last several years,
along with reduced debt levels, support its ability to maintain
solid credit metrics in weaker pricing environments.
The principal methodology used for this review was Mining published
in September 2018.
INTERSTAR MILLENIUM 2004-5: Fitch Affirms 'B' Rating on Cl. B Notes
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Fitch Ratings has affirmed 25 note classes from nine Challenger and
Interstar transactions. These transactions are securitisations of
Australian conforming residential mortgages originated through a
network of mortgage originators and brokers under the Challenger
Millennium Trust and Interstar Millennium Trust Securitisation
programmes. The notes are issued by Perpetual Trustees Victoria
Limited in its capacity as trustee.
The social and market disruptions caused by the coronavirus and
related containment measures have not negatively affected the
ratings because there is sufficient credit enhancement to cover
Fitch’s expectation of higher defaults, and because Fitch views
liquidity protection as sufficient to support the current ratings.
The Stable Outlook on the notes reflects their liquidity support
and ability to withstand the sensitivity to higher defaults
stemming from the coronavirus pandemic.
DEBT RATING PRIOR
---- ------ -----
Interstar Millennium Series 2004-5 Trust
B AU300INTA040 LT Bsf Affirmed Bsf
Interstar Millennium Series 2005-2L Trust
Class A1 46071TAA1 LT AAAsf Affirmed AAAsf
Class A2 AU300INTC012 LT AAAsf Affirmed AAAsf
Class AB AU300INTC020 LT Asf Affirmed Asf
Class B AU300INTC038 LT Bsf Affirmed Bsf
Interstar Millennium Series 2005-3E Trust
Class AB AU300INTD010 LT AAAsf Affirmed AAAsf
Class B AU300INTD028 LT Bsf Affirmed Bsf
Interstar Millennium Series 2006-1 Trust
Class A AU300INTE018 LT AAsf Affirmed AAsf
Class AB AU300INTE026 LT BBBsf Affirmed BBBsf
Class B AU300INTE034 LT Bsf Affirmed Bsf
Interstar Millennium Series 2006-2G Trust
Class A1 USQ49677AA73 LT AAsf Affirmed AAsf
Class A2 USQ49677AB56 LT AAsf Affirmed AAsf
Class AB AU0000INBHC6 LT BBBsf Affirmed BBBsf
Class B AU0000INBHD4 LT Bsf Affirmed Bsf
Interstar Millennium Series 2006-3L Trust
Class A2 AU0000INNHB3 LT AAAsf Affirmed AAAsf
Class AB AU0000INNHC1 LT Asf Affirmed Asf
Class B AU0000INNHD9 LT Bsf Affirmed Bsf
Interstar Millennium Series 2006-4H Trust
A2 AU3FN0000816 LT Asf Affirmed Asf
AB AU3FN0000824 LT BBsf Affirmed BBsf
B AU3FN0000832 LT Bsf Affirmed Bsf
Challenger Millennium Series 2007-1E
Class AB XS0280787226 LT AAAsf Affirmed AAAsf
Class B XS0280788976 LT Bsf Affirmed Bsf
Challenger Millennium Series 2007-2L
Class A AU0000CHUHA5 LT AAAsf Affirmed AAAsf
Class AB AU0000CHUHB3 LT Asf Affirmed Asf
Class B AU0000CHUHC1 LT Bsf Affirmed Bsf
KEY RATING DRIVERS
Asset Performance Resilient to Pandemic: The transactions' 30+ day
and 90+ day arrears as of end-October 2020 are all above Fitch's
3Q20 Dinkum RMBS Index arrears of 1.00% and 0.64%, respectively,
except for Interstar Millennium 2006-4H Trust. Interstar Millennium
2006-4H Trust had zero 30+ day arrears while the other transactions
ranged from 5.1% for Interstar Millennium Series 2005-3E Trust to
14.7% for Interstar Millennium Series 2005-2L Trust. All
transactions have extremely low bond factors of less than 6%, which
means that the arrears balances, which have remained stable over
recent years, are magnified due to being compared with a shrinking
pool. The elevated arrears have not led to correspondingly high
losses, which ranged from 0.45% for Interstar Millennium Series
2006-1 Trust to 1.98% for Interstar Millennium 2006-4H Trust. The
portfolios have lenders' mortgage insurance (LMI) coverage for all
loans and all losses have been covered by LMI or excess spread. The
aggregate payment ratio on LMI claims made is 90.7%.
A review of payment holiday arrangements, which ranged from zero
loans for Interstar Millennium Series 2006-1 to 3.6% of loans for
Challenger Millennium Series 2007-2L, showed that the rated notes
will not be affected as they have sufficient credit enhancement to
absorb Fitch's base-case scenario of the pandemic.
The class B notes for all transactions are restricted to 'Bsf'
based on the "Rating Junior Notes with 100% LMI Cover" section of
the criteria. The transactions have continued to deleverage with
more than 10 years of WA seasoning.
Limited Liquidity Risk from Payment Holidays: Fitch has reviewed
the ability of the transactions to survive a significant proportion
of borrowers taking a payment holiday. The transactions benefit
from liquidity reserves that cover at least five months of required
payments at the current bank-bill swap rate if 100% of the pools
were under payment holiday arrangements, which is well above the
proportion of mortgages on COVID-19 hardship arrangements at
end-October 2020. The transactions can also use any principal
payments received to pay interest if not all borrowers take up
payment holidays.
Credit Enhancement Supports Ratings: All transactions, except
Interstar Millennium Series 2006-4H Trust, are currently paying
sequentially and building up credit enhancement for the rated
notes. Interstar Millennium Series 2006-4H Trust is paying pro-rata
as the subordination triggers have been met. Interstar Millennium
Series 2004-5 Trust, Interstar Millennium Series 2005-3E Trust and
Challenger Millennium Series 2007-1E do not have pro-rata triggers
and pay sequentially until final maturity. The remaining
transactions have breached their arrears triggers, which switches
amortisation back to sequential, building up subordination for the
rated notes.
Low Operational Risk: Advantedge Financial Services Pty Ltd
(Advantedge), part of the National Australia Bank Group, is the
servicer for these transactions. Fitch undertook an operational
review and found that the operations of the servicer were
comparable with market standards and that there were no material
changes that may affect Advantedge's ongoing ability to undertake
administration and collection activities. The collection and
servicing activities have not been disrupted due to the pandemic as
staff can work remotely and have access to the office, if needed.
Economic Rebound to Support Stable Outlook: Fitch expects loan
performance to deteriorate in the near term, but to continue to
support the Stable Outlook on the rated notes. Fitch forecasts
Australia's GDP to contract by 2.8% in 2020, with the unemployment
rate at 6.5%. This is to be partially offset by a low Official Cash
Rate of 0.10% and the application of both central bank and
government stimulus measures. Fitch expects GDP growth to bounce
back to 3.8% in 2021, with the unemployment rate falling to 6.2%.
The five transactions listed below have an ESG Relevance Score of 5
for Transaction & Collateral Structure due to tail risk identified
for tranches resulting from lower-than-expected credit enhancement
build-up caused by less stringent pro-rata amortisation conditions,
which has a negative impact on the credit profile, and is highly
relevant to the ratings, resulting in a rating constraint. -
Interstar Millennium Series 2005-2L Trust - Interstar Millennium
Series 2006-1 Trust - Interstar Millennium Series 2006-3L Trust -
Interstar Millennium Series 2006-4H Trust - Challenger Millennium
Series 2007-2L
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- The rated notes are at 'AAAsf', which is the highest level on
Fitch's scale, or are constrained from being upgraded due to
non-model related rating caps. The ratings cannot be upgraded.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A longer pandemic than Fitch expects that leads to
deterioration in macroeconomic fundamentals and consumers'
financial position in Australia beyond Fitch's baseline
scenario. Available credit enhancement cannot compensate for
higher credit losses and cash flow stresses, all else being
equal.
-- The class B notes have no credit enhancement other than LMI
and excess income. These notes may be downgraded if there is a
significant deterioration in performance, a significant
reduction in the payment of LMI claims or substantial decrease
in excess spread.
Upgrade Sensitivity
As the notes are rated 'AAAsf' or are constrained from being
upgraded due to non-model related rating caps, upgrade sensitivity
stresses are not relevant.
Coronavirus Downside Scenario Sensitivity
Under Fitch's downside scenario, re-emergence of infections in
major economies prolongs the health crisis and confidence shock,
prompts extensions or renewals of lockdown measures and prevents a
recovery in financial markets. All rated notes have sufficient
credit enhancement to absorb Fitch's downside scenario of the
pandemic.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset
pools and the transactions. There were no findings that were
material to this analysis. Fitch has not reviewed the results of
any third-party assessment of the asset portfolio as part of its
ongoing monitoring. Fitch did not undertake a review of the
information provided about the initial underlying asset pools ahead
of the transactions' initial closing. The subsequent performance of
the transactions over the years is consistent with the agency's
expectations given the operating environment and Fitch is therefore
satisfied that the asset pool information relied upon for its
rating analysis was adequately reliable. Overall, Fitch's
assessment of the asset pool information relied upon for the
agency's rating analysis according to its applicable rating
methodologies indicates that it is adequately reliable.
The issuer has informed Fitch that not all relevant underlying
information used in the analysis of the rated notes is public.
ESG CONSIDERATIONS
The five transactions listed below have an ESG Relevance Score of 5
for Transaction & Collateral Structure due to tail risk identified
for tranches resulting from lower-than-expected credit enhancement
build-up caused by less stringent pro-rata amortisation conditions,
which has a negative impact on the credit profile, and is highly
relevant to the ratings, resulting in a rating constraint. -
Interstar Millennium Series 2005-2L Trust - Interstar Millennium
Series 2006-1 Trust - Interstar Millennium Series 2006-3L Trust -
Interstar Millennium Series 2006-4H Trust - Challenger Millennium
Series 2007-2L 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.
LA TROBE 2019-1: S&P Assigns B(sf) Rating on Class F Notes
----------------------------------------------------------
S&P Global Ratings affirmed its ratings on 28 classes of
nonconforming RMBS notes issued by Perpetual Corporate Trust Ltd.
as trustee for five La Trobe Financial Capital Markets Trust
transactions. The five are La Trobe Financial Capital Markets Trust
2017-1, La Trobe Financial Capital Markets Trust 2018-1, La Trobe
Financial Capital Markets Trust 2018-2, La Trobe Financial Capital
Markets Trust 2019-1, and La Trobe Financial Capital Markets Trust
2019-2.
The rating affirmations reflect:
-- S&P's view of the credit quality of the underlying collateral
portfolios, which have been amortizing in line with its
expectations. Current loan-to-value ratios for the five pools have
decreased as principal has been repaid. That S&P has factored into
its analysis the arrears performance of these transactions. For the
five transactions, the arrears performance generally has been
higher relative to the Standard & Poor's Performance Index (SPIN)
for nonconforming loans in the past 12 months. Arrears have
increased during 2020 because of COVID-19 and as loans roll out of
the initial repayment holiday period granted at the onset of the
pandemic.
-- That each transaction has built up some additional credit
support to each class of rated notes due to the sequential
repayment of the structure at present, which offsets the increase
to credit support from the higher arrears position of the pool.
-- That as of Oct. 31, 2020, 10.4% of the 2017-1 trust is more
than 30 days in arrears, of which 6.3% is more than 90 days in
arrears. For the 2018-1 trust, 7.9% is more than 30 days in
arrears, of which 4.7% is more than 90 days in arrears. For the
2018-2 trust, 6.0% is more than 30 days in arrears, of which 3.1%
is more than 90 days in arrears. For the 2019-1 trust, 5.9% is more
than 30 days in arrears, of which 3.5% is more than 90 days in
arrears. For the 2019-2 trust, 4.2% is more than 30 days in
arrears, of which 2.0% is more than 90 days in arrears. However,
losses to date have been moderate and all have been covered by
excess spread. There have been no charge-offs to any of the notes.
-- That loss of income for borrowers in the coming months because
of COVID-19 will likely put upward pressure on mortgage arrears.
S&P has recently updated its outlook assumptions for Australian
RMBS in response to changing macroeconomic conditions as a result
of the COVID-19 outbreak, which increased credit support. Each
transaction has sufficient resources to cover the increased
potential losses.
-- That the turbo repayment of the most subordinated note in each
transaction has created overcollateralization, which provides
additional credit support for the rated tranches.
-- S&P's expectation that the various mechanisms to support
liquidity within each transaction will remain available for the
rated notes to support the timely payment of interest, including
liquidity facilities, yield reserves, and principal draws.
-- That as of Oct. 31, 2020, borrowers with COVID-19-related
hardship arrangements make up 6.2% of the 2017-1 trust, 6.9% of the
2018-1 trust, 6.7% of the 2018-2 trust, 6.9% of the 2019-1 trust,
and 5.7% of the 2019-2 trust.
S&P Global Ratings believes there remains a high degree of
uncertainty about the evolution of the coronavirus pandemic.
Reports that at least one experimental vaccine is highly effective
and might gain initial approval by the end of the year are
promising, but this is merely the first step toward a return to
social and economic normality; equally critical is the widespread
availability of effective immunization, which could come by the
middle of next year. S&P said, "We use this assumption in assessing
the economic and credit implications associated with the pandemic.
As the situation evolves, we will update our assumptions and
estimates accordingly."
RATINGS AFFIRMED
La Trobe Financial Capital Markets Trust 2017-1
Class Rating
A1 AAA (sf)
A2 AAA (sf)
A3 AAA (sf)
B AAA (sf)
C AA (sf)
D A (sf)
E BBB- (sf)
F B+ (sf)
La Trobe Financial Capital Markets Trust 2018-1
Class Rating
A1L AAA (sf)
A2 AAA (sf)
B AA (sf)
C A (sf)
D BBB (sf)
E BB (sf)
F B (sf)
La Trobe Financial Capital Markets Trust 2018-2
Class Rating
A1L AAA (sf)
A2 AAA (sf)
La Trobe Financial Capital Markets Trust 2019-1
Class Rating
A1L AAA (sf)
A2S AAA (sf)
A2L AAA (sf)
B AA (sf)
C A (sf)
D BBB (sf)
E BB (sf)
F B (sf)
La Trobe Financial Capital Markets Trust 2019-2
Class Rating
A1L AAA (sf)
A2S AAA (sf)
A2L AAA (sf)
LIBERTY FUNDING 2020-4: Moody's Gives (P)B2 Rating to Class F Notes
-------------------------------------------------------------------
Moody's Investors Service has assigned the following provisional
ratings to the notes to be issued by Liberty Funding Pty Limited in
respect of Liberty Series 2020-4.
Issuer: Liberty Funding Pty Limited in respect of Liberty Series
2020-4
AUD300.0 million Class A1 Notes, Assigned (P)Aaa (sf)
AUD57.2 million Class A2 Notes, Assigned (P)Aaa (sf)
AUD8.0 million Class B Notes, Assigned (P)Aa1 (sf)
AUD14.0 million Class C Notes, Assigned (P)A2 (sf)
AUD3.6 million Class D Notes, Assigned (P)Baa2 (sf)
AUD6.0 million Class E Notes, Assigned (P)Ba2 (sf)
AUD2.0 million Class F Notes, Assigned (P)B2 (sf)
The AUD9.2 million Class G Notes are not rated by Moody's.
The transaction is a securitisation of Australian residential
mortgages loans. All mortgages were originated and are serviced by
Liberty Financial Pty Limited. The transaction features a two-year
substitution period, whereby additional loans can be sold into the
portfolio on a monthly basis, subject to substitution parameters
and portfolio performance triggers being met.
Liberty is an Australian non-bank lender. It started originating
non-conforming residential mortgages in 1997. It subsequently
expanded into prime residential mortgage origination, as well as,
among others, auto loans, small commercial mortgage loans and
personal loans. Residential mortgages remain Liberty's predominant
business. As of November 2020, it had a portfolio of Australian
mortgage assets over AUD8.4 billion.
RATINGS RATIONALE
The provisional ratings take into account, among other factors,
evaluation of the underlying receivables, the two-year substitution
period together with the substitution parameters, the evaluation of
the capital structure and credit enhancement provided to the notes,
the availability of excess spread over the life of the transaction,
the liquidity reserve in the amount of 2.00% of the notes balance,
the legal structure, and the credit strength and experience of
Liberty as Servicer.
Moody's MILAN credit enhancement for the collateral pool is 9.0%,
while the expected loss is 1.50%.
MILAN CE represents the loss we expect the portfolio to suffer in a
severe recessionary scenario, and does not take into account
structural features of the transaction. The expected loss
represents a stressed, through-the-cycle loss relative to
Australian historical data.
Substitution parameters in this deal significantly reduce the risk
of material deterioration in the collateral quality due to addition
of new loans to the pool during the two-year substitution period.
This is because these parameters, applicable to monthly
substitutions, are closely aligned with the parameters of the pool
as of closing date. Substitution parameters limit, among other,
proportions of loans with adverse credit, alt-doc verification, and
scheduled loan-to-value ratios above 80% and 90%.
Moody's have considered the limited risk posed by the substitutions
at the MILAN CE and expected loss levels.
Furthermore, substitution of new loans will stop while there are
any unreimbursed carryover charge-offs or if proportion of loans in
arrears greater than 60 days - on a three-month average basis -
exceeds 4%.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to
disrupt economies and credit markets across sectors and regions.
Moody's analysis has considered the effect on the performance of
consumer assets from the current weak Australian economic activity
and a gradual recovery for the coming months. Although an economic
recovery is underway, it is tenuous and its continuation will be
closely tied to containment of the virus. As a result, the degree
of uncertainty around our forecasts is unusually high.
Moody's regards the coronavirus outbreak as a social risk under its
ESG framework, given the substantial implications for public health
and safety.
The key transactional features are as follows:
Class A1 Notes and Class A2 Notes benefit from 25.0% and 10.7%
note subordination respectively.
Following the end of the substitution period, the notes will
initially be repaid sequentially. Once stepdown conditions are met,
all Notes, excluding Class G Notes, will receive a pro-rata share
of principal payments. The stepdown conditions which include, among
others, the payment date falling at least one year after the most
recent mortgage acquisition and absence of charge offs. Principal
pay-down will revert to sequential once the aggregate loan amount
is at 20% or less of the aggregate loan amount at closing, or on or
following the payment date in November 2025.
The guarantee fee reserve account, which is unfunded at closing
and will build up to a limit of 0.30% of the issued notional from
the bottom of the interest waterfall prior to interest paid to the
Class G Notes noteholders. The reserve account will firstly be
available to meet losses on the loans and charge-offs against the
notes. Secondly, it can be used to cover any required payment
shortfalls that remain after drawing on principal and the liquidity
facility. Any reserve account balance used can be reimbursed to its
limit from future excess income.
The key features of the mortgage loan pool are as follows:
The portfolio has a scheduled LTV ratio of 68.4%, with a
relatively high proportion of loans with a scheduled LTV ratio
above 80.0% (16.3%) and above 90% (7.7%).
Around 24.0% of the loans in the portfolio were extended to
self-employed borrowers.
6.8% of the loans in the portfolio were extended on an alternative
documentation basis.
The portfolio contains 2.7% exposure with respect to borrowers
with prior credit impairment (default, judgment or bankruptcy).
Moody's assesses these borrowers as having a significantly higher
default probability.
Methodology Underlying the Rating Action:
The principal methodology used in these ratings was "Moody's
Approach to Rating RMBS Using the MILAN Framework" published in May
2020.
Factors that would lead to an upgrade or downgrade of the ratings:
Levels of credit protection that are greater than necessary to
protect investors against current expectations of loss could lead
to an upgrade of the ratings. Moody's current expectations of loss
could be better than its original expectations because of fewer
defaults by underlying obligors or higher recoveries on defaulted
loans. The Australian job market and the housing market are primary
drivers of performance.
A factor that could lead to a downgrade of the notes is
worse-than-expected collateral performance. Other reasons for
performance worse than Moody's expects include poor servicing,
error on the part of transaction parties, a deterioration in credit
quality of transaction counterparties, fraud and lack of
transactional governance.
MCLENNAN ASSET: First Creditors' Meeting Set for Jan. 8
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Mclennan
Asset Services Pty Ltd will be held on Jan. 8, 2021, at 11:00 a.m.
via virtual meeting by telephone.
Timothy Cook of Balance Insolvency was appointed as administrator
of Mclennan Asset on Dec. 24, 2020.
MINERAL RESOURCES: Moody's Completes Review, Retains Ba3 Rating
---------------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Mineral Resources Limited and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Mineral Resources Limited's Ba3 credit profile reflects its
operational diversity and solid position in providing mining
services to high credit quality, low cost counterparties;
integrated commodities business and strong liquidity position.
The company's credit profile is constrained by current weak lithium
market fundamentals and its direct and indirect exposure to
commodity prices and mining cycles.
The principal methodology used for this review was Mining published
in September 2018.
MKS PROPERTY: ASIC Obtains Freezing Orders vs. Property Developer
-----------------------------------------------------------------
Australian Securities and Investments Commission (ASIC) has
commenced civil proceedings and obtained urgent interim orders in
the Federal Court against Ms. Monica Kaur, MKS Property
Investments/Developments Pty Ltd, Paradise Property Group Pty Ltd
as well as against Sadu Singh, Melvin Paul Singh and Stephanie Lee
(together, the defendants).
ASIC is concerned that Ms Kaur is providing unlicensed financial
advice services and that she, together with the defendants, are
involved in promoting and operating an unregistered managed
investment scheme.
On Dec. 16, 2020, ASIC obtained urgent interim orders:
* restraining the defendants from removing their assets from
Australia, disposing of their property, and freezing monies
in their bank accounts; and
* preventing Ms. Kaur, Mr. Singh and Mr. Melvin Singh from
leaving Australia.
ASIC alleges the defendants raised at least $11.3 million from
around 300 investors during the period March 1, 2017 to Sept. 22,
2020 through MKS Property. It is alleged that investors were
encouraged to establish a self-managed superannuation fund (SMSF)
and invest part or all of their SMSFs or other funds into property
investments and developments set up by MKS Property and/or Paradise
Property. These funds would be pooled together to invest in
property development.
ASIC also alleges the defendants used investor funds, at least in
part, for their own personal use and to pay returns to investors.
On Dec. 17, 2020, ASIC, with the assistance of the AFP, executed
search warrants on a residential premise and business premises.
On Dec. 22, 2020, the parties agreed that the asset and travel
restraint orders regarding the defendants should continue with
slight variation until further order of the Court. The matter is
next in Court on a date to be fixed.
This matter demonstrates ASIC's readiness to take urgent action to
protect superannuation consumers in the current COVID-19
environment.
ASIC's investigation is continuing.
NORTH EAST SOLUTION: Second Creditors' Meeting Set for Jan. 4
-------------------------------------------------------------
A second meeting of creditors in the proceedings of North East
Solution Pty Ltd ACN 129 466 851 in its own right and As Trustee
For Bendigo Supermarkets Trust A.B.N. 66 798 260 452 129 466 851
has been set for Jan. 4, 2021, at 10:30 a.m. via online video
conferencing.
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 Jan. 3, 2020, at 4:00 p.m.
Gideon Isaac Rathner and Matthew Brian Sweeny of Lowe Lippmann were
appointed as administrators of North East Solution on Nov. 30,
2020.
PERENTI GLOBAL: Moody's Completes Review, Retains Ba2 Rating
------------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Perenti Global Limited and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Perenti Global Limited's Ba2 credit profile reflects its improved
scale and geographic diversity; long track record of successfully
operating in higher-risk jurisdictions; strong position in
providing integrated mining services; ability to execute contracts
with a diverse range of counterparties and ongoing earnings growth
and deleveraging efforts supporting solid margins and credit
metrics.
The company's credit profile is constrained by the cyclicality of
the mining services sector; high jurisdiction risk associated with
its African mining operations and strong competition over the next
12-18 months.
The principal methodology used for this review was Business and
Consumer Service Industry published in October 2016.
STRATH PASTORAL: First Creditors' Meeting Set for Jan. 7
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Strath
Pastoral Pty Ltd will be held on
Jan. 7, 2021, at 11:00 a.m. via teleconference facilities.
Stuart Otway of SV Partners was appointed as administrator of
Strath Pastoral on Dec. 23, 2020.
THORN ABS 1: Fitch Keeps 'BB' Rating on E Notes on Watch Negative
-----------------------------------------------------------------
Fitch Ratings has maintained the Rating Watch Negative (RWN) on
Thorn ABS Warehouse Trust No. 1. The transaction consists of notes
backed by a pool of first-ranking Australian automotive and
commercial-finance receivables originated by Thorn Group Limited.
The notes were issued by Perpetual Corporate Trust Limited as
trustee for Thorn ABS Warehouse Trust No. 1.
DEBT RATING PRIOR
---- ------ -----
Thorn ABS Warehouse Trust No. 1
A LT AAAsf Rating Watch Maintained AAAsf
B AU3FN0043949 LT AAsf Rating Watch Maintained AAsf
C AU3FN0043956 LT Asf Rating Watch Maintained Asf
D AU3FN0043964 LT BBBsf Rating Watch Maintained BBBsf
E AU3FN0043972 LT BBsf Rating Watch Maintained BBsf
KEY RATING DRIVERS
Fitch's analysis of the Thorn portfolio, as discussed in the rating
action commentary published on 6 July 2020, assumed increased
defaults and reduced recoveries due to the pandemic. When modelling
these adjustments, preliminary results showed the ratings of the
tranches placed on RWN are sensitive to the assumptions and
negative rating action would result if the assumptions materialise.
Thorn Equipment Finance advised Fitch that it was intending to
restructure Thorn ABS Warehouse Trust No. 1. This has been delayed,
although Thorn has advised that subject to board approval it still
intends to restructure the transaction.
Fitch will review the new structure and will conduct a full
analysis as part of resolving the RWN. The analysis will include an
assessment of asset credit quality, asset security and portfolio
composition, which are captured in the rating default rate and
rating loss rate produced by Fitch's Portfolio Credit Model (PCM).
The PCM output will be based on the coronavirus sensitivity
analysis and a proxy portfolio that has been stressed to the
portfolio parameters.
The portfolio had 15.3% loans in 30+ day arrears at end-November
2020. This figure includes all loans currently on Covid-19-related
payment suspensions, and has resulted in the early amortisation
trigger being met. The portfolio has experienced cumulative net
losses of AUD7.4 million and the class F notes have AUD2.5 million
of carryover charge-offs.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the
information it has received about the performance of the asset pool
and the transaction. There were no findings that were material to
this analysis. Fitch has not reviewed the results of any
third-party assessment of the asset portfolio as part of its
ongoing monitoring.
TRITON TRUST 10: Fitch Affirms BB- Rating on Series 2019-1 F Notes
------------------------------------------------------------------
Fitch Ratings has affirmed six classes of notes from Triton Trust
No. 10 Titan Warehouse Series 2019-1. The transaction consists of
notes backed by a pool of first-ranking Australian residential
mortgages originated by Columbus Capital Pty Limited.
The notes were issued by Perpetual Corporate Trust Limited as
trustee for Triton Trust No.10 Titan Warehouse Series 2019-1.
DEBT RATING PRIOR
---- ------ -----
Triton Trust No. 10 Titan Warehouse Series 2019-1
A LT AAAsf Affirmed AAAsf
B Q7447#AA2 LT AAsf Affirmed AAsf
C Q7447#AB0 LT Asf Affirmed Asf
D Q7447#AC8 LT BBBsf Affirmed BBBsf
E LT BB+sf Affirmed BB+sf
F LT BB-sf Affirmed BB-sf
TRANSACTION SUMMARY
The transaction is a warehouse that purchases receivables on a
revolving basis during an availability period. The current term for
the availability period expires in March 2021; however, it can be
extended at the request of the manager and the subsequent agreement
of the financiers, and is subject to eligibility criteria and pool
parameters. The transaction will move to sequential principal
payment if an amortisation event is subsisting.
As per the transaction documents, payment of class A subordinated
interest and of class B, C, D, E and F residual interest is
excluded from Fitch’s rating analysis. Class A subordinated
interest is subordinated below losses if an amortisation event is
subsisting for more than six months, while class B, C, D, E and F
residual interest is subordinated below losses when the outstanding
asset balance is below AUD77.5 million. Non-payment of subordinated
or residual interest will not lead to an event of default, as
outlined in the transaction documentation.
The social and market disruption caused by the coronavirus pandemic
and related containment measures has not negatively affected the
ratings because there is sufficient credit enhancement (CE) and
excess spread to cover Fitch’s expectation of higher defaults,
and because Fitch views liquidity protection as sufficient to
support the current ratings. The sensitivity of the ratings to
scenarios more severe than Fitch currently expects is provided in
the Rating Sensitivities section.
The Stable Outlook on all the notes reflects the liquidity support
and the notes' ability to withstand the sensitivity to higher
defaults stemming from the pandemic.
KEY RATING DRIVERS
Asset Performance Resilient to Pandemic: Actual 30+ day and 90+ day
arrears at end-November 2020 were 0.04% and 0.00%, respectively,
against 1.0% and 0.64% for Fitch's 3Q20 Dinkum RMBS Index.
Transaction performance has been strong, with no losses since
closing. The transaction has an availability period, therefore,
Fitch's analysis is based on a proxy pool stressed to pool
parameters provided by Columbus Capital and further stressed by
Fitch. Stress levels are based on originator and historical data
and Fitch's forward-looking view. Compared with the previous
review, Fitch has reduced the magnitude of stress applied to a
number of portfolio characteristics to reflect the historical
portfolio composition and its expectation of the pool's future
composition.
Fitch has updated criteria assumptions for Australia to account for
the expected effects of the coronavirus pandemic. Fitch applied
1.5x the five-year average of Columbus Capital's mortgage portfolio
arrears to December 2019 for each arrears bucket, which increased
the AAAsf weighted-average foreclosure frequency (WAFF) modelled by
0.4%. Additional multiples were applied to foreclosure frequency at
the 'Asf' category or below to reflect changes in Fitch's
forward-looking views, given the macroeconomic outlook. As a
result, the overall updated assumption has increased post-lenders'
mortgage insurance (LMI) net losses at 'AAAsf' by 0.1% and by 0.2%
at 'Bsf'.
The portfolio's 'AAAsf' WAFF of 12.8% is driven by the stressed
weighted-average (WA) unindexed loan/value ratio (LVR) of 67.9%,
loans with LVR greater than 80% making up 10.3% of the portfolio,
stressed investment loans of 74.9% and Fitch-adjusted 30+ arrears
of 1.62%. The 'AAAsf' post-LMI weighted-average recovery rate
(WARR) of 57.7% is driven by the stressed portfolio's WA indexed
scheduled LVR of 69.3%, the stressed LMI coverage of 15% and the
portfolio's 'AAAsf' WA market value decline of 60.2%.
Increased Required CE Support Ratings: Full cash flow analysis was
performed for the trust utilising the documented note limits and
minimum CE. Documented minimum CE percentages have been increased
to 4.9%, 3.2%, 2.1%, 1.4% and 0.9% for class B, C, D, E and F
notes, respectively, and remained unchanged at 10.0% for class A
during the availability period. The transaction employs a
sequential structure after the availability period with no pro rata
pay down permitted. The transaction also benefits from a liquidity
reserve sized at 1.4% of the outstanding note balance, subject to a
documented floor of AUD375,000. The rated notes pass all relevant
stresses applied in the cash-flow analysis.
Limited Liquidity Risk from Payment Holidays: Fitch has reviewed
the ability of the transaction to withstand a significant
proportion of borrowers being offered, and taking up, a payment
holiday. The transaction's liquidity reserve would be able to cover
the entire portfolio taking up a payment holiday for 6.3 months,
assuming there are no principal or interest collections. No
borrowers were on payment holiday arrangements at end-November
2020.
Operational and Servicing Risk Consistent with Market Standards:
Columbus Capital is a diversified non-bank financial institution
that commenced lending in 2006, with specialisations in Australian
residential mortgage lending, third-party loan servicing and trust
management. Fitch undertook an operational review and found that
the operations of the originator and servicer were comparable with
market standards and that there were no material changes that may
affect Columbus Capital's ongoing ability to undertake origination,
administration and collection activities. The collections and
servicing activities have not been disrupted by the pandemic, as
staff can work remotely and are able to access the disaster
recovery site, if needed.
Expected Economic Rebound Supports Outlook: Fitch expects near-term
mortgage performance to deteriorate, but to continue to support the
Stable Outlook on the notes. Fitch forecasts Australia's GDP to
contract by 2.8% in 2020, with an unemployment rate of 6.5%. This
will be partially offset by a low cash rate of 0.1% and the
application of both central bank and government stimulus measures.
GDP growth is forecast to bounce back to 3.8% in 2021, with the
unemployment rate falling to 6.2%.
RATING SENSITIVITIES
Unanticipated increases in the frequency of defaults and recovery
rates on defaulted receivables could produce loss levels higher
than Fitch's base case, and are likely to result in a decline in CE
and remaining loss-coverage levels available to the notes.
Decreased CE may make certain note ratings susceptible to negative
rating action, depending on the extent of the coverage decline.
Hence, Fitch conducts sensitivity analysis of the ratings by
stressing - upwards and downwards - the transaction's initial
base-case assumptions.
This section provides insight into the model-implied sensitivities
the transaction faces when one assumption - WAFF or WARR - is
stressed, while holding others equal. The modelling process uses
the estimation and stress of default and loss assumptions to
reflect asset performance in a stressed environment. The results
below should only be considered as one potential outcome, as the
transaction is exposed to multiple dynamic risk factors.
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Macroeconomic conditions, loan performance and credit losses
that are better than Fitch's baseline scenario or sufficient
build-up of CE that would fully compensate for the credit
losses and cash flow stresses commensurate with higher rating
scenarios, all else being equal.
-- Upgrade Sensitivity:
Class A / B / C / D / E / F
Current rating: AAAsf / AAsf / Asf / BBBsf / BB+sf / BB-sf
Decrease defaults by 15%; increase recoveries by 15%: AAAsf / AA+sf
/ AAsf / Asf / BBB+sf / BBBsf
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- A longer pandemic than Fitch expects that leads to
deterioration in macroeconomic fundamentals and consumers'
financial position in Australia beyond Fitch's baseline
scenario. Available CE is not sufficient to compensate for the
higher credit losses and cash flow stresses, all else being
equal.
-- Fitch conducted sensitivity analysis by increasing gross
default levels and decreasing recovery rates over the life of
the transaction.
Class A / B / C / D / E / F
Current rating: AAAsf / AAsf / Asf / BBBsf / BB+sf / BB-sf
Increase defaults by 15%: AAAsf / AA-sf / A-sf / BBBsf / BBsf /
B+sf
Increase defaults by 30%: AAAsf / A+sf / BBB+sf / BB+sf / BBsf /
B+sf
Decrease recoveries by 15%: AAAsf / AA-sf / BBB+sf / BBsf / B+sf /
less than Bsf
Decrease recoveries by 30%: AAAsf / Asf / BBB-sf / Bsf / less than
Bsf / less than Bsf
Increase defaults by 15%; decrease recoveries by 15%: AAAsf / Asf /
BBBsf / BB-sf / Bsf / less than Bsf
Increase defaults by 30%; decrease recoveries by 30%: AAsf / BBB+sf
/ BBsf/ less than Bsf / less than Bsf / less than Bsf
-- The rating of the class A notes is LMI independent and
therefore not sensitive to downgrades of the LMI providers'
ratings. The remaining rated notes are LMI dependent. Class B,
C, D, E and F notes can withstand one-, one-, three-, four-
and four-notch downgrades, respectively, of the LMI providers'
ratings.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Structured Finance
transactions have a best-case rating upgrade scenario (defined as
the 99th percentile of rating transitions, measured in a positive
direction) of seven notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of seven notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings
are based on historical performance.
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by,
Fitch in relation to this rating action.
DATA ADEQUACY
Prior to the transaction closing, Fitch sought to receive a
third-party assessment conducted on the asset portfolio
information, but none was available.
As part of its ongoing monitoring, Fitch reviewed a small targeted
sample of Columbus Capital's origination files and found the
information contained in the reviewed files to be adequately
consistent with the originator's policies and practices and the
other information provided to the agency about the asset
portfolio.
Overall, Fitch's assessment of the asset pool information relied
upon for the agency's rating analysis, according to its applicable
rating methodologies, indicates that it is adequately reliable.
The issuer has informed Fitch that not all relevant underlying
information used in the analysis of the rated notes is public.
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.
===================
B A N G L A D E S H
===================
BANGLADESH: Moody's Completes Review, Retains Ba3 Issuer Rating
---------------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has completed the periodic review of a group of issuers
that includes Bangladesh and may include related ratings. The
review did not involve a rating committee, and this publication
does not announce a credit rating action and is not an indication
of whether or not a credit rating action is likely in the near
future; credit ratings and/or outlook status cannot be changed in a
portfolio review and hence are not impacted by this announcement.
The credit profile of Bangladesh (issuer rating Ba3) reflects the
country's "baa3" economic strength, which balances robust growth
prospects against low per capita income, economic competitiveness,
and vulnerability to climate change risks, given its low-lying
nature with large coastal areas prone to flooding and seasonal
monsoon rains' influence over rural incomes and consumption; its
"b2" institutions and governance strength that balances effective
macroeconomic policies that are conducive to ongoing macroeconomic
stability against weaknesses in government effectiveness, control
of corruption, and weak credibility in its legal structures; its
"ba3" fiscal strength, which balances the government's low debt
burden against weak debt affordability due to its very narrow
revenue base; and "ba" susceptibility to event risk, driven by
vulnerabilities in the banking system, which incorporates financial
sector challenges given contingent liabilities posed by state-owned
banks that adversely affects lending to the real economy as banking
system liquidity is concentrated in this sector.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
===============
C A M B O D I A
===============
CAMBODIA: Moody's Completes Review, Retains B2 Issuer Rating
------------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has now completed the periodic review of a group of issuers
that includes Cambodia and may include related ratings. The review
did not involve a rating committee, and this publication does not
announce a credit rating action and is not an indication of whether
or not a credit rating action is likely in the near future; credit
ratings and/or outlook status cannot be changed in a portfolio
review and hence are not impacted by this announcement.
The credit profile of Cambodia (issuer rating B2) incorporates the
country's "b1" economic strength, considering its robust GDP growth
prospects, a narrow export base reliant on garments and tourism and
low per-capita incomes; the country's "b3" core for institutions
and governance strength, reflecting relatively weak executive and
judiciary systems and voice and accountability scores, as well as
constraints on monetary policy effectiveness because of high
dollarization levels, balanced by strengthening fiscal policy
effectiveness as evidenced by increasing government revenue
generation; its "baa2" fiscal strength, which balances the
government's moderate debt burden and highly concessional nature of
its borrowings, which limits interest costs and supports debt
affordability, against vulnerability to currency depreciation given
the high ratio of foreign currency-denominated debt; and its "ba"
susceptibility to event risk, driven by political risk and banking
sector risk, as the large financial sector is susceptible to
boom-bust credit cycles, posing an ongoing threat to macroeconomic
and financial stability.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
=========
C H I N A
=========
CHINA MINMETALS: Moody's Completes Review, Retains Ba3 BCA
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of China Minmetals Corporation and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
China Minmetals Corporation's Baa1 issuer rating incorporates its
Baseline Credit Assessment of ba3, and a five-notch uplift based on
our expectation of a very high level of extraordinary support from
and a high level of dependence on the Government of China (A1), in
times of need.
This very high support assessment is underpinned by China
Minmetals' strategic importance to China's metal resources
security, full ownership by the government, track record of
receiving government funding, and the Chinese government's strong
ability to provide support.
China Minmetals' BCA primarily reflects the company's large and
diversified metals and mining business portfolio, with leading
market positions in China; its strong market position and large
operating scale; and its track record of deleveraging.
These strengths are partially offset by the company's exposure to
volatile base metal prices and operations; the operational and
regulatory risks at its overseas mines; and its relatively high
leverage compared with that of its peers we rate.
The principal methodologies used for this review were Mining
published in September 2018.
CHINA NATIONAL: Moody's Completes Review, Retains B1 BCA
--------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of China National Gold Group Corporation and other ratings
that are associated with the same analytical unit. The review was
conducted through a portfolio review in which Moody's reassessed
the appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
China National Gold Group Corporation's Baa3 issuer rating reflects
its Baseline Credit Assessment of b1 and a four-notch uplift based
on our assessment of a high likelihood of support from and very
high level of dependence on the Government of China (A1) in times
of stress.
This support assessment is underpinned by the company's critical
role in executing China's gold strategy; its leading scale, with
the largest gold reserves in China; its important role in
consolidating and upgrading China's gold industry; the history of
financial support from the government; and the government's strong
ability to provide support.
CNG's BCA primarily reflects its leading market position in gold
reserves and production in China, integrated business model with
operations in multiple locations and strong access to domestic
funding as a central state-owned enterprise.
However, CNG's BCA is constrained by the company's improved, but
still-leveraged, credit metrics and its exposure to gold and copper
price volatilities.
The principal methodologies used for this review were Mining
published in September 2018.
FANTASIA HOLDINGS: Fitch Assigns 'B+' on Proposed USD Senior Notes
------------------------------------------------------------------
Fitch Ratings has assigned China-based homebuilder Fantasia
Holdings Group Co., Limited's (B+/Stable) proposed US dollar senior
unsecured notes a 'B+' rating with a Recovery Rating of 'RR4'.
The proposed notes are rated at the same level as Fantasia's senior
unsecured rating because they will constitute its direct and senior
unsecured obligations. The company plans to use the net proceeds
from the proposed issue for general corporate purposes.
Fantasia's ratings are supported by the company's moderate
leverage, quality land bank and healthy margin, though these are
somewhat offset by a low churn rate. The ratings are constrained by
Fantasia's small scale, with attributable contracted sales of
CNY26.8 billion in 2019.
KEY RATING DRIVERS
Stable Leverage: Fantasia's 1H20 leverage, measured by net
debt/adjusted inventory, was stable at 45%, and Fitch expects
leverage to remain at a similar level in 2020-2021. Fitch expects
the company to spend around 40% of its sales proceeds on land
acquisitions, higher than the 2017-2019 average of 35%, in order to
support contracted sales growth for the next two years before its
pipeline of urban redevelopment projects (URP) begins to contribute
significantly to sales from 2021-2022.
Quality Land Bank: Fantasia had a total land bank of 17.3 million
square metres (sqm), equivalent to saleable resources of around
CNY200 billion, at end-2019. This covered around four years of
development based on the company's sales target of CNY45 billion
for 2020. Fantasia had 46 URPs with total planned gross floor area
of 19.5 million sqm, equivalent to saleable resources of around
CNY380 billion. Tier 1 and 2 cities accounted for over 90% of its
land bank.
Fitch expects Fantasia's average selling price to rise, as it has
been increasingly participating in public auctions for land parcels
in prime locations in Tier 1 and 2 cities since 2019. This is a
change from its previous policy of acquiring land mainly through
M&A, which is a cheaper option, but requires a longer development
period and entails more complications. The land from M&A were
mostly large parcels in less prime areas of the same Tier 1 and 2
cities.
Healthy Margin, Low Churn Rate: Fantasia's gross profit margin
increased to 34% in 1H20 due to the booking of certain high-margin
projects, but Fitch expects the gross profit margin to remain at
around 28%-30% for the full year (2019: 28%). Fitch forecasts the
EBITDA margin to narrow slightly over the next few years due to a
lower gross profit margin of 25%-28% on land acquired from public
auctions in 2020. Thereafter, management believes there is room for
margin improvement, driven by URPs, which have higher margins of
over 50%.
Fitch expects Fantasia's churn rate to improve gradually, but
remain lower than that of peers. Fantasia had a low churn rate of
0.70x in 2019, as measured by attributable contracted sales/total
debt, even though it rose from 0.55x in 2018, because of its
involvement in URPs and its earlier strategy of acquiring large
plots of land through M&A, which typically require a longer
development time.
Colour Life Proportionally Consolidated: Fitch proportionally
consolidates Fantasia's 52% interest in Colour Life Services Group
Co., Limited, as the cash flow is not directly accessible to
Fantasia due to Colour Life's listed status. Fitch expects Fantasia
to receive CNY65 million in dividends declared in 2019 and most of
Fantasia's non-development property (DP) EBITDA is from Colour
Life. Fitch forecasts Colour Life's EBITDA will rise steadily,
driven by increasing revenue-bearing gross floor area. Fantasia had
a non-DP EBITDA interest coverage ratio of 0.19x at end-2019 (2018:
0.20x).
Ratings Constrained by Scale: Fantasia's total contracted sales
rose by 41% yoy in 11M20 to CNY43.2 billion, or 96% of its annual
target, and it is on track to exceed its full-year target. However,
with an attributable ratio of around 70%, Fitch expects Fantasia's
attributable contracted sales to remain lower than most 'B+' peers'
CNY40 billion-50 billion.
DERIVATION SUMMARY
Fantasia's 45% leverage at end-1H20 is similar to that of most 'B+'
rated peers. However, Fantasia's attributable contracted sales of
CNY27 billion in 2019 was lower than most peers' CNY40 billion-50
billion, except for Hong Yang Group Company Limited (B+/Stable),
which had similar attributable contracted sales of CNY30 billion.
Fantasia's EBITDA margin of 27% is within the 17%-32% range of
peers, but its churn rate, or contracted sales/gross debt, of 0.7x
was lower than the 0.9x-1.7x of peers due to its focus on
long-cycle URPs.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch’s rating case for the issuer
include:
-- Attributable contracted sales growth of 7% and 10% in 2020 and
2021, respectively
-- EBITDA margin (excluding capitalised interest) of around 27%
in 2020 and 2021 (2019: 27%)
-- Cash collection rate of 87% and 89% in 2020 and 2021,
respectively (2019: 86%; 2018: 91%)
-- Land purchase cost of 43% and 40% of sales proceeds in 2020
and 2021, respectively (2019: 35%)
-- Construction costs of 32% of sales proceeds in 2020 and 2021
(2019: 38%)
Key Recovery Rating Assumptions
-- The recovery analysis assumes that Fantasia would be
liquidated in a bankruptcy.
-- Fitch assumes 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 proceedings and
distributed to creditors.
-- 60% advance rate applied to excess cash
-- 100% advance rate applied to restricted cash
-- 75% advance rate applied to net inventory, given an EBITDA
margin of around 25%-30%
-- 70% advance rate applied to trade receivables
-- 60% advance rate applied to property, plant and equipment
-- 40% advance rate applied to financial investments
-- 30% advance rate applied to investment properties, given a 2%
rental yield on completed investment properties
The CNY1,522 million recovery value of Fantasia's stake in Colour
Life is based on the going-concern approach, which implies a 42%
discount to Colour Life's closing price on 6 July 2020.
The Recovery Rating is capped at 'RR4' because under Fitch's
Country-Specific Treatment of Recovery Ratings Rating Criteria,
China falls into Group D of creditor friendliness, and instrument
ratings of issuers with assets in the group are subject to a soft
cap at the issuer's Long-Term Issuer Default Rating and Recovery
Rating of 'RR4'.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Significant increase in attributable contracted sales
-- Leverage, measured by net debt/adjusted inventory, sustained
at below 40%
-- EBITDA margin (excluding capitalised interest) sustained at
above 25%
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Leverage, measured by net debt/adjusted inventory, at above
50% for a sustained period
-- EBITDA margin (excluding capitalised interest) at below 20%
for a sustained period
-- Sales efficiency, measured by attributable contracted
sales/gross debt, at below 0.6x for a sustained period
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Fantasia had CNY22.4 billion of available cash
and CNY8.8 billion of short-term capital market debt maturities at
end-June 2020, resulting in an available cash/short-term capital
market debt ratio of 2.5x. The company has also issued USD550
million of US dollar bonds since end-June 2020 for refinancing
upcoming maturities.
ESG CONSIDERATIONS
Fantasia has an ESG Relevance Score of 4 for Waste & Hazardous
Materials Management; Ecological Impacts due to its exposure to
redevelopment projects, which has a positive impact on the credit
profile, 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.
IDEANOMICS INC: Enters Into $25M Convertible Debenture with YA II
-----------------------------------------------------------------
Ideanomics, Inc. entered into a convertible debenture, dated Dec.
14, 2020, with YA II PN, Ltd. with a principal amount of
$25,000,000. The Note has a fixed conversion price of $1.93. The
Conversion Price is not subject to adjustment except for
subdivisions or combinations of common stock. The Principal and the
interest payable under the Note will mature on June 14, 2021,
unless earlier converted or redeemed by the Company. At any time
before the Maturity Date, the Investor may convert the Note at
their option into shares of Company common stock at a fixed
conversion price of $1.93. The Company has the right, but not the
obligation, to redeem a portion or all amounts outstanding under
this Note prior to the Maturity Date at a cash redemption price
equal to the Principal to be redeemed, plus accrued and unpaid
interest, if any; provided that the Company provides Investor with
at least 15 business days' prior written notice of its desire to
exercise an Optional Redemption and the volume weighted average
price of the Company's common stock over the 10 Business Days'
immediately prior to such redemption notice is less than the
Conversion Price. The Investor may convert all or any part of the
Note after receiving a redemption notice, in which case the
redemption amount shall be reduced by the amount so converted. No
public market currently exists for the Note, and the Company does
not intend to apply to list the Note on any securities exchange or
for quotation on any inter-dealer quotation system. The Note
contains customary events of default, indemnification obligations
of the Company and other obligations and rights of the parties.
The Note was offered pursuant to the Company's effective
registration statement on Form S-3 (Registration Statement No.
333-239371) previously filed with the Securities and Exchange
Commission and a prospectus supplement thereunder. A prospectus
supplement relating to the offering of the securities has been
filed with the SEC and is available on the SEC's website at
http://www.sec.gov.
About Ideanomics
Headquartered in New York, NY, with offices in Beijing and Qingdao,
China, Ideanomics is a global company focused on facilitating the
adoption of commercial electric vehicles and developing next
generation financial services and Fintech products. Its electric
vehicle division, Mobile Energy Global (MEG) provides group
purchasing discounts on commercial electric vehicles, EV batteries
and electricity as well as financing and charging solutions.
Ideanomics Capital includes DBOT ATS and Intelligenta which Provide
innovative financial services solutions powered by AI and
blockchain. MEG and Ideanomics Capital provide its global
customers and partners with better efficiencies and technologies
and greater access to global markets.
Ideanomics reported a net loss of $96.83 million for the year ended
Dec. 31, 2019, compared to a net loss of $28.42 million for the
year ended Dec. 31, 2018. As of Sept. 30, 2020, the Company had
$138.46 million in total assets, $49.33 million in total
liabilities, $1.26 million in convertible redeemable preferred
stock, $7.37 million in redeemable non-controlling interest, and
$80.50 million in total equity.
B F Borgers CPA PC, in Lakewood, Colorado, the Company's auditor
since 2018, issued a "going concern" qualification in its report
dated March 16, 2020, citing that the Company incurred recurring
losses from operations, has net current liabilities and an
accumulated deficit that raise substantial doubt about its ability
to continue as a going concern.
POWER BEST: Fitch Gives 'B+' Rating on Proposed USD Sr. Notes
-------------------------------------------------------------
Fitch Ratings has assigned Power Best Global Investments Limited's
proposed US dollar senior notes a rating of 'B+' with a Recovery
Rating of 'RR4'. The proposed issuance will be unconditionally and
irrevocably guaranteed by Hong Kong JunFa Property Company Limited
(Junfa) (B+/Stable). The notes are rated at the same level as
Junfa's senior unsecured rating because they constitute direct and
senior unsecured obligations of the company. Junfa intends to use
the net proceeds from the issue to refinance existing debt.
Junfa's leverage - measured by net debt/adjusted inventory - in
2019 was just below 50%, which is somewhat high for a 'B+' rating.
Fitch expects leverage to continue to be around 48% given the lower
rate of land replenishment but higher average cost of land
acquisition.
Junfa's rating is supported by its strong market position in Yunnan
province in south-west China, as well as its experience in old-town
redevelopment projects. The concentration of Junfa's land bank in
Kunming, the capital of Yunnan, constrains the rating. However, the
risks are mitigated by the high proportion of land that is located
in areas where the local government is focused on regeneration.
KEY RATING DRIVERS
Strong Position in Yunnan: Junfa has strong brand recognition in
Kunming and Yunnan province and was the top-selling developer in
Kunming from 2009 to 2019. Junfa is experienced in old-town
redevelopment projects in Kunming. These projects take much longer
than other primary development projects, but Junfa has a strong
record in relocation of residents, demolition, development and
phased project launches. It has also improved the infrastructure
and landscape surrounding its projects.
The company had CNY49.8 billion in attributable contracted sales in
2019, with an average selling price (ASP) of CNY14,747per sqm.
Fitch estimates Junfa's attributable contracted sales to increase
by 9% in 2020, driven mainly by increased gross floor area (GFA)
sold.
Quality Land Bank: Junfa had total saleable land bank GFA of 13.90
million sqm at end-June 2020. Much of the land bank is in areas
that are the focus of government redevelopment policies. The
company's strong experience in urban redevelopment gives it a
competitive advantage in obtaining such low-cost projects. Fitch
estimates Junfa will be able to maintain an EBITDA margin
(excluding capitalised interest) of around 30%.
Recurring Income to Increase: Junfa acquired a large-scale
wholesale trade centre in Kunming in 2018, called Luosiwan
International Trade Centre, which has a total leasable floor area
of 1.37 million sqm and has been in operation since 2009. The trade
centre has provided Junfa with increased stable rental income.
The trade centre is an important project for the local government,
which has plans to develop the area into a second central business
district in Kunming, which involves some old-town redevelopment. In
addition, Junfa will seek to increase recurring income with a
number of offices, malls and recreational facilities that will
gradually start operating in 2020 and 2021. Fitch expects Junfa's
recurring EBITDA/gross interest expense (including the acquisition)
to be about 0.5x in 2020, a similar level to 2019.
High but Manageable Leverage: Fitch estimates that leverage at
end-2020 would be around 48%. Junfa paid off part of the debt due
to the Luosiwan acquisition in 2018 and leverage at end-2018
decreased to 48%. Fitch expects Junfa will slow its land
acquisitions in 2020, but Fitch also expects the average
acquisition cost of land to increase, which will keep leverage
slightly below 50%. Fitch expects Junfa to continue its capex on
investment properties, as it maintains stable contracted sales.
ESG - Financial Transparency and Governance: Junfa has ESG
Relevance Scores of '4' for Financial Transparency and Governance
Structure, as it is not a listed company and full financial
information is not widely available, although holders of its US
dollar notes receive full financial information. Junfa's board does
not have independent directors and ownership is concentrated on one
individual. These factors constrain the rating.
DERIVATION SUMMARY
Junfa's closest peer is Times China Holdings Limited (BB-/Stable),
as the two companies focus on old-town redevelopment projects.
Junfa's land bank is less geographically diversified than that of
Times China, although Junfa's local market position is stronger.
Times China's leverage is lower than that of Junfa, which warrants
the one-notch rating gap between the two companies despite Junfa's
stronger recurring income.
Junfa has similar contracted sales scale to Fantasia Holdings Group
Co., Limited (B+/Stable) although Junfa's leverage is higher.
Junfa's contracted sales scale and leverage are in line with 'B+'
peers, such as Hong Yang Group Company Limited (B+/Stable).
Junfa's sales scale, land bank and recurring EBITDA coverage are
better than those of Modern Land (China) Co., Limited (B/Stable),
although their leverage ratios are similar.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch’s rating case for the issuer
include:
-- 2020 contracted sales and land bank in line with management
guidance;
-- Contracted sales to rise by 5% to 10% from 2020 to 2022 while
contracted ASP remains largely flat;
-- Saleable landbank life between three to four years in 2020
2022;
-- Land premium temporarily accounted for 47% of sales receipts
in 2019 due to Luosiwan acquisition;
-- Construction cash outflow to account for around 38% of sales
receipts in 2020-2022;
-- Capex of around CNY0.8 billion a year to expand investment
property business in 2020-2022.
Key Recovery Rating Assumptions:
-- The recovery analysis assumes that HK Junfa would be
liquidated in a bankruptcy because it is an asset-trading
company;
-- Fitch has assumed a 10% administrative claim;
-- The liquidation estimate reflects Fitch's view of the value of
balance-sheet assets that can be realised in sale or
liquidation processes conducted during a bankruptcy or
insolvency proceeding and distributed to creditors;
-- Cash balance is adjusted such that only cash in excess of the
higher of accounts payables and three months of contracted
sales is factored in;
-- Advance rate of 80% applied to on its adjusted inventory, as
HK Junfa has an EBITDA of around 30%;
-- Property, plant and equipment advance rate at 60%;
-- Advance rate of 70% applied to accounts receivable;
-- Advance rate of 100% applied to restricted cash, which were
mainly guaranteed deposits for construction and buyers'
mortgages for pre-sold properties.
-- Fitch estimates the recovery rate for the offshore senior
unsecured debt to be within the 'RR4' recovery range, based on
Fitch’s calculation of adjusted liquidation value after
administrative claims.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Net debt/adjusted inventory at 40% or below for a sustained
period;
-- EBITDA margin (excluding capitalised interest) at 30% or above
for a sustained period.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Net debt/adjusted inventory above 50% for a sustained period;
-- EBITDA margin (excluding capitalised interest) below 25% for a
sustained period;
-- Recurring EBITDA/interest coverage ratio below 0.4x.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Adequate Liquidity: Junfa had cash and cash equivalents of CNY11.1
billion at end-2019, as well as restricted cash of CNY856 million,
which were guaranteed deposits for construction and buyers'
mortgages for pre-sold properties. The restricted and unrestricted
cash are adequate to cover the CNY11.7 billion of maturities due in
the next 12 months.
ESG CONSIDERATIONS
Junfa has ESG Relevance Scores of '4' for Financial Transparency
and Governance Structure because it is not a listed company and
full financial information is not widely available, except to the
holders of its offshore bond. Junfa's ownership is concentrated on
one individual, and it has no independent directors on its board.
These factors have a negative impact on the credit profile, and are
relevant to the ratings 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.
RUGAO ECONOMIC: Fitch Affirms 'BB' LongTerm IDRs, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed China-based Rugao Economic and Trade
Development Company's (RETDC) Long-Term Foreign- and Local-Currency
Issuer Default Ratings (IDR) at 'BB'. The Outlook is Stable. Fitch
has also affirmed RETDC's USD160 million 5.95% senior unsecured
bonds due 2023 at 'BB'.
RETDC is the primary investment, financing and construction
platform for the urban-development business of the Rugao Economic
and Technological Development Zone (ETDZ) in Jiangsu province.
RETDC engages in primary-land development and the construction of
infrastructure, schools, resettlement housing and factories.
KEY RATING DRIVERS
'Very Strong' Status, Ownership and Control: RETDC is wholly owned,
controlled and supervised by the Rugao ETDZ administrative
committee. The company's senior management is appointed by and
reports to the committee, whose approval is required for major
investments and financing activities.
'Strong' Support Record: RETDC receives regular contracted payments
from the government for its primary-land development and
construction projects. A cost-plus business model, with a margin of
about 15%, ensures sufficient profitability. The government has
also provided transfers and grants that accounted for 15%-21% of
the company's total revenue for the past five years.
'Moderate' Socio-Political Implications of Default: RETDC relies on
access to debt funding to continue its projects, especially those
that can cause social problems if delayed, including resettlement
housing. Fitch believes that if RETDC were to default the
municipality would use administrative and fiscal measures to ensure
its operation was not disrupted over the long term, including using
other local government-related entities in the region as
substitutes.
'Very Strong' Financial Implications of Default: RETDC raises debt
to finance policy-driven construction projects and relies on
regular contracted revenue and equity injections from the public
sector to service this debt. RETDC is the largest urban-development
vehicle in Rugao ETDZ, with its total debt accounting for a
significant proportion of the zone's public-sector debt. It also
has diversified funding channels, including regular access to the
domestic bond market. A default by RETDC would have a considerable
impact on local financing costs.
'b-' Standalone Credit Profile: Fitch assesses RETDC's revenue
defensibility as 'Weaker' based on its business concentration and
low bargaining power over pricing. Fitch assesses operating risk at
'Midrange' after factoring in the company's predictable cost
structure. Fitch believes the financial profile is 'Weaker' due to
high leverage from a long payback period and low profitability for
urban-development projects. Fitch expects net leverage to remain
high at over 50x for the next five years.
DERIVATION SUMMARY
Fitch assessed RETDC under its Government-Related Entities Rating
Criteria, reflecting Rugao ETDZ's ultimate ownership and oversight
of RETDC, a record of financial support and the company's
functional role in Rugao ETDZ's development, a key strategic
initiative of the government. These factors indicate a strong
incentive by the sponsor to provide extraordinary support to RETDC,
if needed.
RETDC's IDR was derived from the four factors under Fitch's
Government-Related Entities Rating Criteria and the Standalone
Credit Profile of 'b-' from Fitch’s Public Sector,
Revenue-Supported Rating Criteria.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Upward revision of Fitch's credit view of Rugao ETDZ's ability
to provide subsidies, grants or other legitimate resources
allowed under China's policies and regulations.
-- An increase in Rugao ETDZ's incentive to support RETDC,
including stronger socio-political implications of a default
or a stronger support record and expectation.
-- An improvement of the Standalone Credit Profile.
-- An upgrade of RETDC's IDRs would result in an upgrade of the
rating on its bonds.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Downward revision in Fitch's credit view on Rugao ETDZ's
ability to provide subsidies, grants or other legitimate
resources allowed under China's policies and regulations
-- Significant weakening in the socio-political and financial
implications of a default by RETDC, a weaker government
support record and expectation or a dilution in the
government's shareholding.
-- A deterioration of the Standalone Credit Profile or liquidity
position.
-- A downgrade of RETDC's IDRs would result in a downgrade of the
rating on its bonds.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Sovereigns, Public Finance
and Infrastructure issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of three notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
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.
SEAZEN HOLDINGS: Fitch Corrects Dec. 7 Ratings Release
------------------------------------------------------
Fitch Ratings issued a correction of a release on Seazen Holdings
Co. published on December 7, 2020. It removes the incorrect ESG
Relevance Score for Governance Structure for Seazen Group Limited
and Seazen Holdings Co., Ltd.
The amended ratings release is as follows:
Fitch Ratings has assigned a 'BB+' rating to China-based
homebuilder Seazen Holdings Co., Ltd.'s (SHCL, BB+/Stable) proposed
US dollar senior notes. The notes are issued by Seazen Holdings'
indirect wholly owned subsidiary, New Metro Global Limited.
The proposed notes are unconditionally and irrevocably guaranteed
by SHCL and rated at the same level as its senior unsecured rating
because they constitute its direct and senior unsecured
obligations. SHCL intends to use the net proceeds to refinance
existing debt.
Fitch upgraded the Long-Term Foreign-Currency Issuer Default
Ratings (IDR) and senior unsecured ratings of SHCL and its parent,
Seazen Group Limited (SGL), to 'BB+' from 'BB' on 3 December 2020.
The rating upgrade reflects Fitch's view that SGL's large
attributable sales scale of CNY160 billion-180 billion in 2019-2020
is comparable with that of low investment-grade peers, and that it
will be able to keep its leverage below 40% after dropping to 32%
in 1H20. In addition, recurring rental income from the group's
shopping mall portfolio has increased. Fitch estimates recurring
EBITDA/interest of 0.5x in 2020, despite the coronavirus pandemic.
Fitch uses a consolidated approach to rate SHCL, which is 67% owned
by SGL, based on Fitch’s Parent and Subsidiary Linkage Rating
Criteria.
KEY RATING DRIVERS
Large Scale, Sales Recovering: SGL's monthly sales resumed positive
yoy growth of 10% in October and 20% in November 2020, although
total sales were down by 11% in 11M20 to CNY220 billion, with an
average selling price (ASP) of CNY10,840/sq m. Attributable and
consolidated sales accounted for around 70% and 60%, respectively,
of the group's total sales.
SGL reported satisfactory moving-average cash collection of around
90% and Fitch believes it remains on track to achieve its CNY250
billion total contracted sales target for 2020, which is 8% lower
than its 2019 sales. Fitch expects SGL to keep sales at CNY250
billion-270 billion in 2021-2022 to support its ranking as a top-20
property developer.
Lower Leverage Levels: Fitch expects SGL's year-end leverage to
remain below 40%, as Fitch believes it is committed to controlling
leverage at current levels, despite some fluctuation from land
replenishment to maintain its large scale. SGL's leverage,
including proportionate consolidation of joint ventures and
associates, dropped to 26% in 2019, from 44% in 2018, after it
suspended land acquisitions and asset disposals in 2H19. However,
leverage climbed back to 32% in 1H20 and Fitch estimates that it
reached 36% in September based on SHCL's 3Q20 reporting.
SGL spent CNY69 billion on attributable land premium in 10M20,
which Fitch estimates to be 60% of sales proceeds, up from CNY41
billion, or 25%, in 2019. It has budgeted CNY75 billion, or 40%-45%
of cash collection, for land purchases in 2020-2021. Fitch’s
estimates are more conservative, as Fitch expects the company to
spend 50%-55% of sales proceeds on land in the next two years,
although actual land payments may be delayed and lower than
publicly disclosed.
Recurring Income Supports Rating: Fitch expects recurring income of
CNY5.0 billion in 2020 and CNY8.0 billion in 2021 to boost SGL's
interest coverage to 0.5x and 0.6x, respectively. Fitch estimates
that CNY2.3 billion of recurring EBITDA from CNY4.0 billion in
rental and management fee income covered 0.4x of interest paid in
2019. SGL halved rents for two months in response to the pandemic,
but this should be offset by expanded leasable gross floor area
(LFA). SHCL's rental revenue reached CNY3.4 billion before tax in
3Q20, while LFA rose 13% from 2019 to four million sq m. SGL added
23 Wuyue Plazas in 2019 and is on track to add 30 each in 2020 and
2021.
Stabilised Operation: SGL's operational and financial risks, as
well as its access to liquidity, did not deteriorate significantly
after its former chairman was sentenced to gaol in June 2020. The
former chairman's son, previously a non-executive director, has
assumed the role of chairperson of SGL and SHCL. The former
chairman no longer has a role in the group, but retains a 68% stake
in SGL.
Focus on Yangtze River Delta: SGL's sales contribution was mainly
from the Yangtze River Delta (YRD) and tier three and four cities
and Fitch expects the group to benefit from strong demand in YRD as
well as in central and western China. The group's focus on the YRD
has driven its expansion and strong sales turnover, as measured by
consolidated contracted sales/gross debt, although SGL reduced its
reliance on the region to 55% of contracted sales in 1H20, from 80%
in 2017. SGL's successful fast-churn strategy is evident from its
high sales turnover of 1.8x in 2019.
Diversified and Sufficient Land Bank: SGL had total land bank of
137 million sq m at end-1H20. Fitch estimates its
available-for-sale portion of 124 million sq m will support sales
for three to four years. The group will continue to focus on YRD,
but has been increasing its land bank outside the region to buffer
against regional market uncertainty. YRD accounted for 46% of SGL's
land bank by gross floor area at end-2019 and 44% at end-1H20. New
land acquisitions in YRD still accounted for 37% of total land
premium in 2019 and 56% in 1H20.
Margin Decline Credit Neutral: Fitch expects SGL's full-year EBITDA
margin, without adjusting for capitalised interest, to recover to
16%, a level similar to SHCL's 3Q20 results, after dropping to 13%
in 1H20, from 21% in 2019. Fitch thinks the fall was in line with
industry trends. Land costs are stable, but unit construction cost
rose to CNY4,147/sq m in 1H20, from CNY3,919/sq m in 2019, as more
decoration costs are being embedded in construction expenses. The
company also attributes the margin drop to government-imposed price
ceilings to clamp down on speculative housing purchases.
DERIVATION SUMMARY
Fitch's consolidated approach to rating SGL and SHCL is based on
Fitch’s Parent and Subsidiary Linkage Rating Criteria due to
SGL's 67% stake in SHCL. The strong strategic and operational ties
are reflected by SGL representing SHCL's entire exposure to the
China homebuilding business, while SGL raises offshore capital to
fund the group's business expansion. The two entities share the
same chairman.
SGL's quick sales churn strategy contributed to the rapid expansion
of its contracted sales to a level that is higher than that of most
'BB' category peers. SGL's total sales and attributable sales
reached CNY270 billion and CNY180 billion, respectively, in 2019,
almost double the size of Logan Group Company Limited (BB/Stable)
and China Aoyuan Group Limited (BB/Stable), while the leverage of
32% at end-1H20 is similar to Logan's 32% and Aoyuan's 35% at
end-2019. SGL lowered its leverage - defined by net debt/adjusted
inventory after joint ventures and associate proportionate
consolidation - to 26% in 2019 due to fewer land acquisitions, but
leverage increased during 2020 after land acquisitions resumed,
although Fitch estimates the company will maintain its leverage
below 40%.
SGL has also rapidly expanded its investment properties, which
generated CNY3.9 billion of recurring income and had recurring
EBITDA/interest of 0.4x in 2019, a level higher than Sino-Ocean
Group Holding Limited's (BBB-/Stable) 0.3x and China Jinmao
Holdings Group Limited's (BBB-/Stable) 0.2x. SGL's
investment-property portfolio of around CNY66 billion at end-1H20
was much larger than that of all 'BB' rated peers, which helps
justify the one-notch difference.
Compared with investment-grade peers, SGL has a much shorter track
record of maintaining a stable financial profile as it aggressively
expanded and built up land bank in 2016-2019. Shimao Group Holdings
Limited (BBB-/Stable) had lower leverage of below 35% in 2016-2019
while also enjoying 55% CAGR growth in attributable sales to reach
CNY182 billion in 2019. Shimao also had an investment-property
portfolio that generates recurring income to cover 0.3x of cash
interest paid.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch’s rating case for the issuer
include:
-- total contracted sales of about CNY250 billion per year in
2020-2021 with around 70% attributable interest.
-- attributable land premium represents 55% and 50% of
attributable sales proceeds in 2020 and 2021, respectively,
based on actual attributable land premium from the company's
A-share financial disclosures.
-- attributable property development and Wuyue Plaza construction
costs equivalent to 35%-40% of attributable sales collection
in 2020-2021
-- Investment-property revenue to reach CNY5.0 billion and CNY8.0
billion in 2020 and 2021, respectively, with a stable gross
profit margin at 68%.
-- Overall EBITDA margin (excluding capitalised interest) to
remain above 25%
-- SGL maintains controlling shareholding in SHCL and no
weakening in the operational ties between the two entities
RATING SENSITIVITIES
For both SGL and SHCL:
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- Net debt/adjusted inventory (after proportionate consolidation
of joint ventures) sustained below 30%
-- Recurring EBITDA/interest paid sustained above 0.6x
-- Sustained neutral to positive cash flow from operations.
-- Longer track record of operational and financial stability
comparable with that of investment-grade peers.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Net debt/adjusted inventory (after proportionate consolidation
of joint ventures) above 40% for a sustained period
-- Recurring EBITDA/interest paid sustained below 0.3x
-- For SGL, a weakening of linkages between SGL and SHCL may lead
to negative rating action.
All ratios mentioned above are based on SGL's consolidated
financial data.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity: SGL had an unrestricted cash balance of
CNY59.8 billion at end-1H20, sufficient to cover short-term
borrowings of CNY45 billion. SHCL also showed sufficient liquidity
at end-September 2020, with CNY52 billion in available cash to
cover CNY33 billion in short-term debt. The group's funding cost
came back down to 6.8% in 1H20, after temporarily climbing to 7.0%
in 2H19, from 6.6% in 1H19. The company issued asset-based
securities totaling CNY2.9 billion at 4.8% in early 2020, backed by
four of its Wuyue malls. Fitch expects the group to gradually
monetise its malls to obtain low-cost funding.
Stable Funding Access Ensures Liquidity: The arrest of the former
chairman temporarily affected the group's funding access, but it
has managed to obtain financing from a large number of onshore and
offshore banks since August 2019. Funding access further improved
with multiple domestic and offshore issuance in 2020. The group's
continued growth in contracted sales, project disposals and its
decision to slow land acquisitions in 2H19 have helped maintain
adequate liquidity.
The group's onshore and offshore bonds have change of control
covenants, whereby the group has to make an offer to repurchase all
outstanding notes if a change of control is accompanied by negative
rating action, a Negative Outlook or a downgrade by an onshore
rating agency for its onshore bonds or an international rating
agency for its offshore bonds. The group has not breached its bond
covenants since the former chairperson's arrest.
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.
SHANDONG RUYI: Missed Notes Payment Factored in Moody's Caa3 CFR
----------------------------------------------------------------
Moody's Investors Service says that Shandong Ruyi Technology Group
Co., Ltd.'s missed payments under its RMB1.0 billion onshore
medium-term notes due December 14, 2020, which constitute a default
under Moody's definition, have already been factored in its Caa3
corporate family rating and the Ca senior unsecured rating on the
senior unsecured notes issued by Prime Bloom Holdings Limited and
guaranteed by Shandong Ruyi.
The ratings outlook remains negative.
On December 15, 2020, Shandong Ruyi announced that the company has
missed RMB1.0 billion principal and RMB75 million interest payments
under its RMB1.0 billion onshore MTNs due December 14, 2020. The
company is currently working with the bondholders of the MTNs to
agree on a three-year repayment plan.
The low ratings of Shandong Ruyi reflect Moody's expectation of
high economic loss for bondholders when compared with the original
payment promises.
Moody's expects that the default on the December 2020 onshore MTNs
will likely lead to a debt restructuring and the acceleration of
various payment obligations.
The negative outlook reflects the potential for losses
post-restructuring to exceed Moody's current expectation.
The principal methodology used in these ratings was Retail Industry
published in May 2018.
TAHOE GROUP: Subsidiaries Win Reprieve to Repay Mounting Debt
-------------------------------------------------------------
Caixin Global reports that two subsidiaries of Chinese property
developer Tahoe Group Co. Ltd. have been granted a more than 3-1/2
year extension to pay back CNY12 billion (US$1.8 billion) of debt,
as the parent company struggles with a mounting debt crisis.
The creditor, the Shenzhen unit of state-owned China Great Wall
Asset Management Co. Ltd., has agreed to extend the repayment
deadline from April this year to December 2023, Caixin relates
citing a stock exchange filing on Dec. 22. As part of the extension
agreement, Tahoe pledged to guarantee the liabilities of the
subsidiaries, Shenzhen Tahoe Property Development and Shenzhen
Zhongweijingshan Property Development, for no more than
CNY16 billion, it said in the filing to the Shenzhen bourse.
Tahoe has been caught in a crisis of mounting financial losses and
debt, according to Caixin. The company had already defaulted on six
bonds and missed repayments amounting to CNY48.7 billion in debt
and CNY6.5 billion of interest as of Oct. 24, as its business faced
headwinds amid the fallout of the Covid-19 pandemic and tightened
oversight on the property industry, according to its third-quarter
report, Caixin notes.
Fujian province-based Tahoe Group Co., Ltd operates real estate
development businesses. The Company provides house loans, housing
renovation, housing loans, real estate brokerage, property
management, and other services. Tahoe Group also operates hotel
management, investment management, and other businesses.
YANKUANG GROUP: Moody's Completes Review, Retains Ba1 CFR
---------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Yankuang Group Corporation Limited and other ratings
that are associated with the same analytical unit. The review was
conducted through a portfolio review in which Moody's reassessed
the appropriateness of the ratings in the context of the relevant
principal methodology(ies), recent developments, and a comparison
of the financial and operating profile to similarly rated peers.
The review did not involve a rating committee. Since January 1,
2019, Moody's practice has been to issue a press release following
each periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Yankuang Group Corporation Limited's Ba1 corporate family rating is
composed of the company's b1 Baseline Credit Assessment, and
Moody's assessment of a "strong" likelihood of extraordinary
support from and high dependency to the Government of China (A1) to
the company in times of need, which resulted in a 3-notch uplift
above the company's BCA.
Yankuang's BCA primarily reflects its large scale and diversified
coal mining assets; the strong performance of its subsidiary,
Yancoal Australia Ltd; and its low-cost mining operations in
Shandong Province and Australia.
However, Yankuang's BCA is constrained by the carbon transition
risk in the long term; the volatility in coal prices; the execution
and financial risks related to its investments in the financial
sector; and its moderately high debt leverage relative to rated
global and regional peers.
The support assessment reflects the continued support that the
company receives from the provincial government and the importance
of Yankuang's mining assets to Shandong Province, and ultimately
the government of China, in terms of economic contributions and
employment.
The principal methodologies used for this review were Mining
published in September 2018.
YANZHOU COAL: Moody's Completes Review, Retains Ba1 CFR
-------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Yanzhou Coal Mining Company Limited and other ratings
that are associated with the same analytical unit. The review was
conducted through a portfolio review in which Moody's reassessed
the appropriateness of the ratings in the context of the relevant
principal methodology(ies), recent developments, and a comparison
of the financial and operating profile to similarly rated peers.
The review did not involve a rating committee. Since January 1,
2019, Moody's practice has been to issue a press release following
each periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Yanzhou Coal's Ba1 corporate family rating incorporates its
standalone credit profile and a two-notch uplift based on expected
support from its parent Yankuang Group Company Limited (Ba1).
Yanzhou Coal's standalone credit profile is supported by its
diversified coal mining assets and related infrastructure; the good
quality of Australian coal under its subsidiary Yancoal Australia;
its low-cost mining operations in Shandong Province and Australia;
and its good liquidity.
At the same time, Yanzhou Coal's standalone credit profile is
constrained by the company's moderately high debt leverage relative
to its rated global and regional peers following years of expansion
and acquisitions; carbon transition risk in the long term; and the
execution and financial risks related to its investments in the
financial sector.
The principal methodology used for this review was Mining published
in September 2018.
ZIJIN MINING: Moody's Completes Review, Retains Ba1 CFR
-------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Zijin Mining Group Company Limited and other ratings
that are associated with the same analytical unit. The review was
conducted through a portfolio review in which Moody's reassessed
the appropriateness of the ratings in the context of the relevant
principal methodology(ies), recent developments, and a comparison
of the financial and operating profile to similarly rated peers.
The review did not involve a rating committee. Since January 1,
2019, Moody's practice has been to issue a press release following
each periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Zijin Mining Group Company Limited's Ba1 corporate family rating
reflects the company's leading scale and market position as a major
producer of gold, copper and zinc in China (A1); diversified
business portfolio; profitable mining operations with a competitive
cost advantage; and strong access to funding, and its importance to
China's metals and mining industry.
On the other hand, the rating is constrained by its increasing
leverage because of its aggressive financial policy, as illustrated
by frequent acquisitions; exposure to metal price volatility; and
growing project execution and geopolitical risks.
The principal methodology used for this review was Mining published
in September 2018.
=======
F I J I
=======
FIJI: Moody's Completes Review, Retains Ba3 Issuer Rating
---------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has completed the periodic review of a group of issuers
that includes Fiji and may include related ratings. The review did
not involve a rating committee, and this publication does not
announce a credit rating action and is not an indication of whether
or not a credit rating action is likely in the near future; credit
ratings and/or outlook status cannot be changed in a portfolio
review and hence are not impacted by this announcement.
The credit profile of Fiji (issuer rating Ba3) reflects the
country's "ba3" economic strength, which balances robust medium
term growth potential and moderate per capita incomes against the
economy's small scale, narrow diversification, and vulnerability to
climate change; its "ba2" institutions and governance strength,
which takes into account progress on structural reforms as well as
increased policy credibility and effectiveness that support
economic management, although voice and accountability remains
limited; the government's "ba3" fiscal strength, which reflects a
moderate government debt burden and improving debt affordability
that is supported by a large captive source of domestic financing
and increasing engagement with international finance institutions,
despite large financing needs to build resilience against climate
change; and "baa" susceptibility to event risks driven primarily by
domestic political risk, which incorporates a low probability, high
impact scenario of political instability, including through a
change of leadership, that would hinder the government's ability to
implement policies aimed at increasing the country's economic
resilience and consolidating its public finances, while material
government liquidity risk reflects limited financing options
outside of the national provident fund in long-term borrowing
domestically.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
=========
I N D I A
=========
AARTI SUITINGS: CARE Keeps D Debt Ratings in Not Cooperating
------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Aarti
Suitings Private Limited (ASPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 16.72 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Short Term Bank 0.55 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated November 27, 2019, placed
the rating(s) of ASPL under the ' issuer non-cooperating' category
as ASPL had failed to provide information for monitoring of the
rating as agreed to in its Rating Agreement. ASPL continues to be
non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and a letter/email dated
November 16, November 17, November 18, and November 19, 2020. In
line with the extant SEBI guidelines, CARE has reviewed the rating
based on the best available information which however, in CARE's
opinion is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
At the time of last rating on March 31, 2020, the following were
the rating strengths and weaknesses.
Key Rating Weaknesses
* Delay in the debt servicing: Account is currently NPA as per the
banker interaction.
Bhilwara based Aarti Sutings Private Limited (ASPL) was
incorporated in 1994 by Mr. Nand Kishore Jindal, Mr. Madhur Jindal
and Mrs. Nidhi Jindal. The company is engaged in the manufacturing
of grey fabrics and sells grey and finished fabrics in the market.
The company gets processing work done on job work basis from other
processing units. The company is also engaged in trading of grey
and finished fabrics.The group concern includes Adig Jemtex Private
Limited (AJPL), incorporated in 2010, which is engaged in the
business of seizing of yarns (mainly starching process) and
manufacturing and trading of grey and finished fabrics.
AMARAVATHI TOURISM: CARE Cuts Rating on INR7.90cr Loan to D
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Amaravathi Tourism Projects Limited (ATPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 7.90 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category and Revised from
CARE B; Stable
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated November 4, 2019, placed the
rating of ATPL under the 'issuer non-cooperating' category as
Amaravathi Tourism Projects Limited had failed to provide
information for monitoring of the rating. Amaravathi Tourism
Projects Limited continues to be non-cooperative despite repeated
requests for submission of information through e-mails, phone calls
and a letter/email dated January 2020 to December 7, 2020. In line
with the extant SEBI guidelines, CARE has reviewed the rating on
the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating. The
moratorium was not availed from March 2020 to August 2020.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s). (Updated information available from ROC)
The ratings have been revised on account of delays in servicing the
term loan installments.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Delays in servicing the term loan: There are delays in servicing
the installment in term loan facility due to delay in project
execution and commencement of business operations
Key Rating Strengths
* Vast experience of the key promoter in managing business: The
Managing Director, Mr. Akkineni Bhavani Prasad retired after
working as a Training Officer for Andhra Pradesh State & Sub-
ordinate Services for a period of 25 years. Later he worked in
different capacities as Administrative Manager at Nagarjuna
Hospitals Private Limited for 5 years, CEO of Srinivasa Minerals &
Traders Limited, Chennai for a few years, Deputy Director of
Gowtham Model Schools, Hyderabad for 4 years and he also served as
the Director of Admissions in Lingaya's Institute of Management &
Technology, Vijayawada for one year. The vast managerial experience
of the managing director across different sectors is to benefit
ATPL at large.
Amaravathi Tourism Projects Limited (ATPL) was incorporated as a
public limited company on October 20, 2015. In 2017, ATPL
registered with the Government of Andhra Pradesh, Department of
Tourism. Mr. Akkineni Bhavani Prasad, Ms. Jammula Radhikamani and
Ms. Sameera Banu are the directors of the company. The company
proposes to establish a convention centre with a seating capacity
of 2000 people and a restaurant to cater to 250 people in
Vijayawada, Andhra Pradesh. The registered office and the proposed
property is located in Nidamanuru, Vijayawada.
BALAGANESAN SPINNERS: CRISIL Cuts Ratings on INR5cr Loan to B
-------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Sri
Balaganesan Spinners (SBS) to 'CRISIL B/Stable Issuer Not
Cooperating' from 'CRISIL BB/Stable Issuer Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5 CRISIL B/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
Term Loan 1 CRISIL B/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up SBS for obtaining
information through letters and emails dated May 23, 2020 and
November 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 SBS, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on SBS is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the ratings on bank facilities of SBS
Revised to 'CRISIL B/Stable Issuer Not Cooperating' from 'CRISIL
BB/Stable Issuer Not Cooperating'.
SBS was set up as a partnership firm in March 2006. It spins cotton
to produce hank and cone yarn. The firm is based in Rajapalayam,
Tamil Nadu, and is held and managed by 5 partners.
CUCKU ENTERPRISES: CARE Lowers Rating on INR7.50cr Loan to C
------------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of
Cucku Enterprises Private Limited (CEPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 7.50 CARE C; Stable; ISSUER NOT
Facilities COOPERATING; Rating continues
to remain under ISSUER NOT
COOPERATING category and
Revised from CARE B; Stable
Long Term/ 6.50 CARE C; Stable/CARE A4;
Short Term ISSUER NOT COOPERATING
Bank Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category and Revised from
CARE B; Stable/CARE A4
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated October 17, 2019, placed the
rating(s) of CEPL under the 'issuer non-cooperating' category as
Cucku Enterprises Private Limited (CEPL) had failed to provide
information for monitoring of the rating. Cucku Enterprises Private
Limited (CEPL) continues to be non-cooperative despite repeated
requests for submission of information through e-mail
communications/letters dated Nov. 10, 2020, Nov. 9, 2020, Nov. 6,
2020, Nov. 4, 2020 and numerous phone calls. In line with the
extant SEBI guidelines, CARE has reviewed the rating on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating. Further, the banker
could not be contacted. The rating on the company's bank facilities
will now be denoted as CARE C; Stable; ISSUER NOT COOPERATING/CARE
A4; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings have been revised by taking into account
non-availability of information and no due-diligence conducted due
to non-cooperation by CEPL with CARE'S efforts to undertake a
review of the rating outstanding. CARE views information
availability risk as a key factor in its assessment of credit risk.
Further the rating is constrained by the company's modest scale of
operations, weak financial risk profile and intense competition.
The ratings, however, draw comfort from experienced promoters.
Detailed description of the key rating drivers
At the time of last rating on Oct. 17, 2019, the following were the
rating weaknesses and strengths:
Key Rating Weaknesses
* Modest scale of operations: CEPL's scale of operations remained
modest in FY17 at Rs 119.77 cr (FY16: Rs 98.23 cr). The modest
scale limits the company's financial flexibility in times of stress
and deprives it from scale benefits. Though, the risk is partially
mitigated by the fact that the scale of operation is growing
continuously owing to increase in the quantity sold.
* Weak financial risk profile: The profitability margins of the
company have remained on the lower side owing to limited value
addition and intense market competition given the highly fragmented
nature of the industry. Also, high financial charges and
depreciation cost restricted the net profitability of the company
below unity as on March 31, 2017; the capital structure of the
company stood leveraged mainly on account of low net worth base.
* Intense competition: The company is operating in a competitive
industry wherein there is presence of a large number of players in
the unorganized and organized sectors. The company is comparatively
a small players catering to the same market which has limits the
bargaining power of the company and restricts its margins.
Key Rating Strengths
* Experienced promoters: The operations of CEPL are currently
managed by Mr. Chirag Goel and Mrs Kajal Goel. Mr. Chirag Goel has
an experience of around two decade in the agro processing industry
through his association with CEPL. He looks after the procurement
and productions & packaging department. Mrs Kajal Goel has an
experience of around half a decade in the agriculture industry
through her association with CEPL. She looks after the overall
operations of the company.
Delhi-based CEPL was incorporated in 2008 and is currently being
managed by Mr. Chirag Goel and Mr. Chaman Goel. The company is
engaged in processing of spices such as whole, grounded and blended
spices at its processing unit in Delhi. Besides this, the company
is also engaged in trading of rice. The company procures the raw
material such as turmeric, coriander, chillies, black pepper,
ginger powder and mustard powder from suppliers located in Delhi
region and nearby areas and traded good i.e. rice is procured from
brokers in Haryana and Punjab. The company sells its products
domestically and also exports the products to UK, Australia,
Canada, USA and South Africa.
HCO INFRASTRUCTURE: CRISIL Keeps D Debt Ratings in Not Cooperating
------------------------------------------------------------------
CRISIL said the ratings on bank facilities of HCO Infrastructure
(HCOI) continue to be 'CRISIL D/CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 2.02 CRISIL D (ISSUER NOT
COOPERATING)
Cash Credit 1.30 CRISIL D (ISSUER NOT
COOPERATING)
Long Term Loan 3.80 CRISIL D (ISSUER NOT
COOPERATING)
Proposed Long Term .88 CRISIL D (ISSUER NOT
Bank Loan Facility COOPERATING)
CRISIL has been consistently following up with HCOI for obtaining
information through letters and emails dated May 23, 2020 and
November 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 HCOI, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on HCOI is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the ratings on bank facilities of HCOI
continues to be 'CRISIL D/CRISIL D Issuer not cooperating'.
Established in 1986, HCOI is a partnership firm by Ravi Hulkoti,
Shailaja Hulkoti and Nikunj Hilkoyi. Frim is engaged in road
construction constriction of buildings for private players. The day
to day affairs of the firm is managed by Ravi Hulkoti.
INTERJEWEL PRIVATE: CARE Keeps D Debt Ratings in Not Cooperating
----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of InterJewel
Private Ltd (IPL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 210.00 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Short Term Bank 1.60 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from IPL to monitor the rating(s)
vide e-mail communications/letters dated October 30, 2020, December
14, 2020 and December 15, 2020. However, despite our repeated
requests, the company has not provided the requisite information
for monitoring the ratings. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating. The rating on InterJewel's
bank facilities will now be denoted as CARE D; ISSUER NOT
COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
At the time of last rating on September 23, 2019, the following
were the rating strengths and weaknesses:
Key Rating Weaknesses
* On-going delays in debt servicing: Due to weakening of the
liquidity profile of IPL, there are on-going instances of
overdrawals in the working capital bank facilities.
InterJewel Private Ltd (IPL) was established as a partnership firm
in 1970, in the name of D. Navinchandra & Co. by Mr. Shantibhai
Mehta and Mr. Navinbhai Mehta. The partnership firm was converted
into a private limited company in April 2007, and subsequently
renamed to its current name IPL. The group as a part of its
restructuring process carried out a scheme of amalgamation and
de-merger exercise with effect from April 1, 2009. IPL, now
promoted by Mr. Rupen Kothari, Mr. Shrenik Choksi and Mr. Hemal
Choksi, is engaged in the business of importing and processing of
rough diamonds and exporting cut and polished diamonds (CPD) of
various sizes and shapes. The diamond processing activities of IPL
are undertaken at its own manufacturing facilities in Surat. IPL
has its sales offices at Mumbai, Delhi and Ahmedabad. Currently,
IPL has a 'Rio Tinto Select Diamantaire' status. Day to day
operations of the company is managed by Mr. Hemal Choksi - CEO.
KONARK SYNTHETIC: CARE Keeps D Debt Ratings in Not Cooperating
--------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Konark
Synthetic Limited (KSL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 19.25 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Short Term Bank 9.70 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated December 9, 2019, placed the
rating(s) of KSL under the 'issuer non-cooperating' category as KSL
had failed to provide information for monitoring of the rating. KSL
continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and a letter
dated December 3, 2020. In line with the extant SEBI guidelines,
CARE has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
The rating factors in ongoing delays in servicing of debt
obligations due to stretched liquidity position, moderate scale of
operations, fluctuating operating margin and net losses, leveraged
capital structure and weak debt coverage indicators, working
capital intensive nature of operations, presence in highly
fragmented and competitive textile industry, established track
record and strong promoter experience in the fabric trading
industry along with group support and location advantage.
Detailed description of the key rating drivers
At the time of last rating on December 8, 2019, the following were
the rating strengths and weaknesses (updated for the information
available from Bombay Stock Exchange and Registrar of Companies):
Key rating Weakness
* Ongoing delay in debt servicing: As per disclosure of defaults on
payment on interest/repayment of principal on loans from
banks/financials institution submitted by the company to Bombay
Stock Exchange as on December 10, 2020, there have been ongoing
delays in payment of interest/repayment of principal amount, which
were due for repayment beyond 30 days.
Poor liquidity: Poor liquidity marked by net cash losses incurred
by the company in FY20, when compared to repayment obligations
which has constrained the ability of the company to repay its debt
obligations on a timely basis. Further the payment have been
delayed due to overall impact and economic crises laid by COVID-19
pandemic.
Key rating Strengths
* Established track record and strong promoter experience in the
fabric trading industry along with group support: KSL was
established in 1984 and has a track record of more than three
decades in the manufacturing of specialty fancy yarns and Trading
of fabric industry. Mr. Prakash Dalmia, the key promoter (Chairman
& MD), has an extensive experience in this domain of more than
three decade and looks after the overall management of the company.
On account of long track record of operations and experience of the
promoters, the company has established its own brand as konark
specialty yarn.
Konark, incorporated in 1984, is primarily engaged in the
manufacturing specialty yarn and fabric. Apart from the
manufacturing activities the company is also involved in job work
for ready-made garments and trading of processed fabrics. The
company has three units namely Yarn unit in Silvaasa, Fabric unit
in Sarigram (Gujarat) and the Garment manufacturing unit in
Bangalore and has been certified as an ISO 9001:2000 company. The
Company's product range includes yarn dyed and piece dyed polyester
fabrics and its blends with cotton, linen, rayon and silk. It
provides texturized and air-texturized yarn in India. Its apparel
product range includes trousers, shirts and shorts.
MOTILAL DHOOT: CRISIL Keeps D Debt Ratings in Not Cooperating
-------------------------------------------------------------
CRISIL said the ratings on bank facilities of Motilal Dhoot
Infrastructure Private Limited (MDIPL) continue to be 'CRISIL
D/CRISIL D Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 3.25 CRISIL D (ISSUER NOT
COOPERATING)
Cash Credit 4.15 CRISIL D (ISSUER NOT
COOPERATING)
Term Loan 1.60 CRISIL D (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with MDIPL for obtaining
information through letters and emails dated May 23, 2020 and
November 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 MDIPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on MDIPL is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the ratings on bank facilities of MDIPL
continues to be 'CRISIL D/CRISIL D Issuer not cooperating'.
MDIPL, based in Pune (Maharashtra) was incorporated in 2006 and was
acquired by its current promoters, Mr. Sushil Dhoot and family, in
fiscal 2010. MDIPL manufactures ready-mix concrete and supplies
aggregates such as crushed stone and dust obtained from stone
crushing. It also undertakes civil construction activities.
N.V. KHAROTE: CARE Keeps D on INR13cr Loans in Not Cooperating
--------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of N.V.
Kharote Constructions Private Limited (NVKCPL) continues to remain
in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 6.00 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Short Term Bank 7.83 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE has been seeking information from NVKCPL to monitor the
ratings vide email communications dated May 27, 2020, June 9, 2020,
July 3, 2020, August 1, 2020, September 30, 2020, October 19, 2020,
November 3, 2020, November 17, 2020 and numerous phone calls.
However, despite our repeated requests, the company has not
provided the requisite information for monitoring the ratings. In
line with the extant SEBI guidelines, CARE has reviewed the rating
on the basis of the best available information which however, in
CARE's opinion is not sufficient to arrive at a fair rating. The
rating on NVKCPL's bank facilities will now be denoted as CARE
D/CARE D; ISSUER NOT COOPERATING.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above ratings.
The ratings take into account delays in servicing of debt
obligations.
Detailed Rationale & Key rating drivers
At the time of last rating on October 3, 2019, the following were
the rating weaknesses (updated for the information available from
Registrar of Companies):
Key Rating Weaknesses
* Delays in debt servicing obligations: As per interaction with the
banker during last review dated September 24, 2019, there were
continuous overdrawals in cash credit account for more than 90 days
and the account had been classified as NPA. The same was on account
of delay in receiving payments from the customers, resulting in
stretched liquidity position of the company. Further, as per the
management during latest review, the asset reconstruction of NVKCPL
is under process.
Pune (Maharashtra) based NVKCPL, incorporated in 1997 was promoted
by Mr. Ratnakar Narhar Kharote and Mr. Sanjay Narhar Kharote. The
company is engaged in construction of canals and other irrigation
projects for various government departments like Water Resources
Department and Municipal Corporations. NVKCPL is a registered
government contractor {Class- I-A (Without Limit)} with Public
Works Department.
NEW ERA: CRISIL Reaffirms B Rating on INR2cr Cash Loan
------------------------------------------------------
CRISIL has reaffirmed its ratings on the bank facilities of New Era
Industries (NEI; part of the New Era group) at 'CRISIL
B/Stable/CRISIL A4.'
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 4.5 CRISIL A4 (Reaffirmed)
Cash Credit 2 CRISIL B/Stable (Reaffirmed)
Import Letter of 3.5 CRISIL A4 (Reaffirmed)
Credit Limit
Proposed Long Term 2 CRISIL B/Stable (Reaffirmed)
Bank Loan Facility
The ratings continue to reflect the group's working
capital-intensive and modest scale of operations amid intense
competition. These weaknesses are partially offset by the extensive
experience of its promoters in the exterior decor industry.
Analytical Approach
For arriving at its ratings, CRISIL has combined the business and
financial risk profiles of NEI and its wholly owned subsidiary, New
Era Living Deco FZE (NEL). This is because both these firms,
together referred to as the New Era group, have common management
and promoters, and significant business synergies.
Unsecured loans of INR3.25 crore as on March 31, 2020, from the
promoters have been treated as neither debt nor equity as these are
likely to remain in the business.
Key Rating Drivers & Detailed Description
Weaknesses:
* Working capital-intensive operations: Gross current assets were
estimated at 364 days as on March 31, 2020, because of sizeable
inventory of 117 days and stretched receivables of 120 days.
* Modest scale of operations amid intense competition: The exterior
decor industry is highly fragmented with many organised players
offering various substitutes to ceramic cladding. Availability of
cheaper substitutes (such as architectural wall panels, glass, and
low-quality wooden flooring) reduce the group's bargaining power
with customers. Hence, revenue was subdued at INR6.58 crore for
fiscal 2020 against INR11.24 crore in fiscal 2019 and INR18.27
crore in fiscal 2017. This restricts the firm's ability to bid for
large projects.
Strength:
* Extensive experience of the promoters: The group has been in the
exterior decor business for more than 15 years and provides
solutions to corporates as well as high-networth individuals. Over
the years, the promoters have established a strong clientele.
Liquidity Poor
Liquidity is marked with low bank line utilisation averaging 20%
for the 12 months ended October 2020. The group doesn't have any
long term debt obligation over the medium term. The net cash
accruals are estimated at over INR0.4 crore annually for fiscal
2021 and 2022. Although, would be sufficient against nil debt
obligation. It will act as cushion in working capital requirement.
Company didn't avail COVID related moratorium allowed by RBI.
Outlook: Stable
CRISIL believes the New Era group will continue to benefit from the
extensive experience of its promoters.
Rating sensitivity factors:
Upgrade factors
* Growth in revenue by 15%
* Higher profitability resulting in positive operating profit of
over INR0.5 crore and positive net cash accrual of over INR0.3
crore
Downgrade factors
* Decline in revenue by 5% and lower profitability exerting
pressure on working capital management
* Any large, debt-based capital expenditure or higher bank limit
utilisation weakening liquidity
* Any further withdrawal of capital or unsecured loans or
diversification of funds
NEI was set up as a partnership firm of Mr. Anil Khanna and Ms
Manju Khanna in the early 1980s. The firm imports and installs
exterior cladding, surfacing, and finishes.
NEL, based in Dubai, was established by Mr. Aman Khanna. The firm
buys terracotta, wooden, and metal cladding from suppliers and
resells to customers in South Asia and India.
PALLAVI CONSTRUCTIONS: CRISIL Keeps C Debt Rating in NonCooperating
-------------------------------------------------------------------
CRISIL said the ratings on bank facilities of Pallavi
Constructions-Hyderabad (PC) continue to be 'CRISIL C/CRISIL A4
Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 7 CRISIL A4 (ISSUER NOT
COOPERATING)
Secured Overdraft 7 CRISIL C (ISSUER NOT
Facility COOPERATING)
CRISIL has been consistently following up PC for obtaining
information through letters and emails dated May 23, 2020 and
November 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 PC, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on PC is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the ratings on bank facilities of PC
continues to be 'CRISIL C/CRISIL A4 Issuer not cooperating'.
Established in 1996 as a partnership firm, Pallavi Constructions
(PC) in engaged in civil construction activities mainly
construction of railway over bridges (ROB) and excavation work
related activities. Based in Hyderabad, Telangana, the firm is
promoted by Mr. P Chandrashekhra Reddy, Mr. K Madhusudhan Reddy,
Mr. K Ashok Reddy, Ms.P Yamuna, Mr. P Pavan Kumar Reddy and Ms. P
Pallavi.
PARA ENTERPRISES: CRISIL Keeps D Debt Ratings in Not Cooperating
----------------------------------------------------------------
CRISIL said the ratings on bank facilities of Para Enterprises
Private Limited (PEPL) continue to be 'CRISIL D/CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 28 CRISIL D (ISSUER NOT
COOPERATING)
Letter of Credit 10 CRISIL D (ISSUER NOT
COOPERATING)
Proposed Long Term 8.1 CRISIL D (ISSUER NOT
Bank Loan Facility COOPERATING)
Working Capital 13.9 CRISIL D (ISSUER NOT
Term Loan COOPERATING)
CRISIL has been consistently following up with PEPL for obtaining
information through letters and emails dated May 23, 2020 and
November 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 PEPL, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on PEPL is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the ratings on bank facilities of PEPL
continues to be 'CRISIL D/CRISIL D Issuer not cooperating'.
Incorporated in December 1996, PEPL is a Chennai based company
engaged in undertaking wind EPC contracts in the 250 Kw and 750 Kw
windmills segment (around 70 percent of revenue) and manufacturing
and export of match sticks and skillets (around 30 percent of
revenue).
PATIL CONSTRUCTION: CARE Keeps D on INR24 Loan in Not Cooperating
-----------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Patil
Construction and Infrastructure Limited (PCIL) continues to remain
in the 'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 24.58 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated March 26, 2019, placed the
rating of PCIL under the 'issuer non-cooperating' category as PCIL
had failed to provide information for monitoring of the rating as
agreed to in its Rating Agreement. PCIL continues to be
non-cooperative despite repeated requests for submission of
information through e-mails, phone calls and a letter/email dated
December 1, December 7 and December 10, 2020. In line with the
extant SEBI guidelines, CARE has reviewed the rating on the basis
of the best available information which however, in CARE's opinion
is not sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on November 8, 2019 the following were
the rating weaknesses (updated with latest available information).
Key Rating Weaknesses
* Delays in debt servicing: The ratings assigned to the bank
facilities of Patil Construction and Infrastructure Limited
continue to factor in the ongoing delays in debt servicing by
PCIL.
Patil Construction and Infrastructure Limited (PCIL) is the
flagship company of the Patil Group. PCIL is engaged in execution
of construction contracts for infrastructure and commercial
segments, with specialization in asphalt and concrete roads along
with maintenance of bridges, buildings and storm water drainage
etc.
RUHATIYA COTTON: CRISIL Lowers Rating on INR7cr Cash Loan to B
--------------------------------------------------------------
CRISIL has revised the ratings on bank facilities of Ruhatiya
Cotton and Metal Private Limited (RCM: part of Ruhatiya group) to
'CRISIL B/Stable Issuer Not Cooperating' from 'CRISIL BB/Stable
Issuer Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 7 CRISIL B/Stable (ISSUER NOT
COOPERATING; Revised from
'CRISIL BB/Stable ISSUER NOT
COOPERATING')
CRISIL has been consistently following up with RCM for obtaining
information through letters and emails dated May 23, 2020 and
November 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 RCM, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on RCM is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the ratings on bank facilities of RCM
Revised to 'CRISIL B/Stable Issuer Not Cooperating' from 'CRISIL
BB/Stable Issuer Not Cooperating'.
RCM was incorporated in 1984 and is engaged in ginning, pressing
and trading of cotton.
OS was set up in 1952 by Mr. Kaluramji Ruhatiya and his family
members. OS is into cotton yarn ginning & pressing along with
trading of cotton and is also engaged in processing and trading of
toor dal. The firm has a ginning and pressing unit in Adilabad, AP
and dal processing unit in Akola, Maharashtra.
RSPL was incorporated in 1996 and is engaged in manufacturing of
cotton yarn. The company has a spinning capacity of 2 lac Kg per
annum.
SAI PRIYA: CARE Withdraws D Rating on Bank Loans
------------------------------------------------
CARE has reaffirmed and withdrawn the outstanding ratings of 'CARE
D; ISSUER NOT COOPERATING' assigned to the bank facilities of Shri
Sai Priya Sugars Limited (SSPSL) with immediate effect. The above
action has been taken at the request of SSPSL and 'No Objection
Certificate' received from the banks that have extended the
facilities rated by CARE.
Detailed description of the key rating drivers:
Key Rating Weaknesses:
* Ongoing delays in debt servicing: During banker interaction with
one of the lender, it was informed that currently the repayments
are regular and the company has availed moratorium under RBI's
Covid-19 regulatory package. However, details regarding to period
for which account has been regular is not informed. CARE has been
unable to reach other lenders and auditors. Further, the client has
also not submitted the No Default Statement and bank statements to
ascertain delay free track record period, if any.
SSPSL is a Public Limited Company (closely held) incorporated in
January 17, 2002, by Mr. Murugesh R Nirani, an ex-cabinet minister
and the chairman of MRN (Nirani) Group, with well diversified
presence across agro-based industries, cement industries, credit &
banking, educational and automobile fields, etc. SSPSL acquired
defunct SPR Sugars Private Limited located at Bidadi at Ramnagaram
district, with sugar capacity of a 2500 TCD in 2010 for a
consideration of INR37 crore. SSPSL now has 10,000 TCD plant, Cogen
unit of 63 MW Cogen power and a distillery unit of capacity 120
KLP.
SHIRAGUPPI SUGAR: CARE Keeps D Debt Ratings in Not Cooperating
--------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Shiraguppi
Sugar Works Ltd. (SSWL) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 196.16 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Short Term Bank 0.37 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated October 29, 2019 placed the
ratings of SSWL under the 'issuer non-cooperating' category as SSWL
had failed to provide information for monitoring of the rating.
SSWL continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and a letter
dated October 12, 2020. In line with the extant SEBI guidelines,
CARE has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on October 29, 2019 the following were
the rating strengths and weaknesses:
Key Rating Weaknesses
* Delays in debt servicing: The company had been delaying the
repayments on its debt facilities due to cash flow mismatch leading
to liquidity issues. CARE is unable to ascertain the current status
of debt repayment.
Shiraguppi Sugar Works Limited (SSWL) was incorporated in May 1995
by Mr. Kallappa Parisa Magennavar. The company had obtained the
license to establish sugar factory in the year 1998 itself, however
the project remained dormant till year 2005 due to delay in
financial closure and lack of sufficient funds towards land
acquisition. In year March 2006, Doddanvar Brothers had over 95%
shareholding in the company. Post financial closure and land
acquisition in year 2010, SSWL commenced project implementation
activities and commenced operations at 5000 TCD sugar mill and 20
MW co-generation unit from October 2012 onwards (i.e. sugar season
(SS) 2012-13) at Athani, Dist Belgaum, Karnataka.
SHUBHAM INDUSTRIES: CRISIL Keeps D Debt Rating in Not Cooperating
-----------------------------------------------------------------
CRISIL said the rating on bank facilities of Shubham
Industries-Hyderabad (SI) continues to be 'CRISIL B+/Stable Issuer
Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 6.05 CRISIL B+/Stable (ISSUER NOT
COOPERATING)
CRISIL has been consistently following up with SI for obtaining
information through letters and emails dated May 23, 2020 and
November 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 SI, which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes that rating action on SI is consistent
with 'Assessing Information Adequacy Risk'. Based on the last
available information, the ratings on bank facilities of SI
continues to be 'CRISIL B+/Stable Issuer Not Cooperating'.
SI was established as a partnership firm in 2013 by Mr.Rajesh Soni
and Mr. Krishnakumar Partani. The firm gins and presses raw cotton
(kapas) to make cotton bales, and sells cotton seed. SI's
manufacturing facility in Tandur (Andhra Pradesh) has capacity of
45,000 bales per annum. SI commenced its commercial operations from
December 2013.
SPM WEAVING: CARE Keeps C on INR15cr Loans in Not Cooperating
-------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Sri SPM
Weaving Mills (SPM) continues to remain in the 'Issuer Not
Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 15.00 CARE C; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated October 14, 2019, placed the
rating(s) of SPM under the 'issuer non-cooperating' category as SPM
had failed to provide information for monitoring of the rating. SPM
continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and email
dated December 4, 2020. In line with the extant SEBI guidelines,
CARE has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
At the time of last rating on October 14, 2019 the following were
the rating strengths and weaknesses:
Key Rating Weaknesses
* Small Scale of operations and short track record of business: The
firm's scale of operations was small in nature as marked by a TOI
of INR26.23 crore in FY18 (CA certified Prov). Furthermore, the
firm had short track record of business operations, which is
partially offset by the more than two decades experience of the
partners in textile industry.
* Moderate capital structure: The capital structure of the firm
remained moderate. The debt equity and overall gearing ratio of the
firm was marked at 0.99x and 1.46x respectively as on March 31st,
2018 (CA Certified Prov.). The debt profile of the firm comprises
of ~68% term loan, ~20% interest free unsecured loans from friends
and relatives and ~12% working capital bank borrowings.
* Intense competition from several other players and material price
volatility: SPM faces stiff competition in the textile business
from large number of established and unorganized players in the
market. Competition gets strong with the presence of unorganized
players leading to pricing pressures. Further, the profitability
margins of the firm are susceptible due to fluctuation in yarn
prices.
* Partnership nature of constitution with inherent risk of
withdrawal of capital: The firm being a partnership firm is exposed
to inherent risk of capital withdrawal by partners due its nature
of constitution. Any substantial withdrawals from capital account
would impact the net worth and thereby the gearing levels.
* Working capital intensive operations: The firm operates in
working capital intensive nature of operations. However, the
operating cycle of the firm remained moderate. The firm collects
the payments from its customers generally within 60 days from the
date of billing and in some cases it will extend further 30 days
i.e. up to 90 days. The firm majorly purchases on cash basis and
occasionally it avails a credit period of 15-30 days from the
suppliers. Further the firm's inventory holding period is 30-40
days due to easy availability of raw material the firm places the
order as and when required. The average utilization of working
capital facility stood at 78% for the last 12 months ended June 30,
2018.
* Ongoing project implementation and stabilization risk: Out of the
total project cost of INR 13.08 crore, SPM has incurred INR 1.50
crore as on July 18, 2018. The expected date of commercial
operation date (COD) is November, 2018. The ability of the firm to
execute the ongoing project in timely manner and stabilize the
operations thereon would be critical from credit perspective.
Key rating Strengths
* Experience of the managing partners for more than two decades in
textile industry: SPM was established in 2015, by Mr. E. Palanisamy
(Managing Partner-MP) and Mr. M. Kandasamy (Managing Partner-MP)
along with their family members. Mr.E. Palanisamy (MP) and Mr. M.
Kandasamy(MP) are having more than two decades of experience in
textile business through "Erode Sri Palanimurgan Spinning Mills
Private Limited (CRISIL B+;Stable/ CRISIL A4: reaffirmed on March
13, 2018), Sree Palanimurgan Cones and Sri Muthu Kumaran silks. The
established regional presence of the Partners and their long
standing industry experience has enabled SPM to establish healthy
relationship with suppliers and customers.
* Satisfactory profitability margins: The profitability margins of
the firm were satisfactory in FY18 (CA certified Prov.). The PBILDT
and PAT margins of the firm are at 13.67% and 4.05% in FY18 (CA
certified Prov.) due to better sales realization. The firm started
its first year of commercial operations from April 2017.
* Comfortable debt coverage indicators: The debt coverage
indicators of the firm remained comfortable. The debt coverage
indictors marked by interest coverage and TD/GCA have been
comfortable marked at 4.59x and 5.56x respectively in FY18 (CA
certified Prov.) due to satisfactory PBILDT and cash accruals
coupled with low interest cost.
* Location advantage with easy availability of yarn: SPM is located
in one of the major yarn supplying areas of Tamil Nadu. The firm
procures raw material (warp yarn and weft yarn) from the spinning
millers located in and around Erode District resulting in lower
transportation cost and easy availability of raw material.
Tamil Nadu based, Sri SPM Weaving Mills (SPM) was established in
the year 2015 as a partnership firm. SPM has its registered office
and plant located at M.S. Mangalam (Village), Erode, Tamilnadu with
the area covering 3.75 acres. The firm is engaged in manufacturing
of grey fabric.
SUBA PLASTICS: CARE Keeps C on INR6cr Loans in Not Cooperating
--------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Suba
Plastics Private Limited (SPPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 6.00 CARE C; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated October 16, 2019, placed the
rating(s) SPPL under the 'issuer non-cooperating' category as SPPL
had failed to provide information for monitoring of the rating.
SPPL continues to be non-cooperative despite repeated requests for
submission of information through e-mails, phone calls and email
dated December 4, 2020. In line with the extant SEBI guidelines,
CARE has reviewed the rating on the basis of the best available
information which however, in CARE's opinion is not sufficient to
arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating.
Detailed description of the key rating drivers
The rating assigned to the bank facilities of Suba Plastics Private
Limited (SPPL) continues to be tempered by Small size of
operations, leveraged capital structure and working capital
intensive nature of operations. The rating also factors in with
increase in TOI and PBILDT margin in FY19 and satisfactory debt
coverage indicators. The rating however, continues to derive
strength from experience of the promoters with long track record of
operations.
Key Rating Weaknesses
* Small size of operations: The company continues to operate in
small scale of operations marked by total operating income which
grew marginally by 14% and stood at INR44.87 crore in FY19 as
against INR39.30 crore in FY18 and low net worth base of INR 6.61
crore as of March 31, 2019.
* Leveraged capital structure: The capital structure marked overall
gearing has improved marginally however remained leveraged at 3.67x
as on March 31, 2019 as against 4.32x as on March 31, 2018.
* Working capital intensive nature of operations: The nature of
operations of the company continued to be working capital intensive
in nature however improved in FY19 marked by its operating cycle of
58 days from 66 days in FY18. The inventory days has improved and
stood at 61 days in FY19 as against 69 days in FY18. Further
creditor's and collection period stood at 81 days and 77 days
respectively in FY19.
Key rating strengths
* Experience of the promoters with long track record of operations:
SPPL started its operation of manufacturing of plastic injection
molded components in 1983 and therefore, SPPL has more
than three decades of operational track record in this industry.
The promoters of the company also have more than three decades of
experience in the same industry.
* Increase in total operating income and PBILDT margin in FY19:
Total operating income of the company has grew by 14% in FY19 and
stood at INR 44.87 Crore viz a viz INR 39.30 Crore in FY18. PBILDT
margin has improved by 455 bps and stood at 17.77% in FY19 as
against 12.21% in FY18.
* Satisfactory debt coverage indicators: Debt coverage indicators
marked by TD/GCA has improved to 4.97x in FY19 as against 10.36x in
FY18 on account of improvement in cash accruals. Further interest
coverage ratio also improved and stood satisfactory at 2.81x in
FY19 as against 1.90x in FY18 on account increase in operating
profit.
Coimbatore based Suba Plastics Private Ltd (SPPL), incorporated on
July 13, 2005 was promoted by Mr. V.Baskaran, Mrs. Geetha Baskaran
(Spouse of Mr. Baskaran) and Mr. V. Sudhakaran (Brother of Mr.
Baskaran). Initially, the company was established as a
proprietorship concern in the name of “Suba Plastics” in 1983.
Subsequently, it was reconstituted as a private limited company in
2006 with its name changed to SPPL. Since its inception, the
company has been engaged in manufacturing of plastic injection
moulded components which finds application in automotive and
textile industries. The lender confirmed that the entity has
availed moratorium on COVID-19 for its bank facilities.
VENTA REALTECH: CARE Keeps D on INR90cr Loan in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of Venta
Realtech Private Limited (VRPL) continues to remain in the 'Issuer
Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 90.00 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated April 14, 2017, placed the
rating of VRPL under the 'issuer non-cooperating' category as VRPL
had failed to provide information for monitoring of the rating.
VRPL continues to be non-cooperative despite repeated requests for
submission of information through e-mails dated November 3, 2020;
November 11, 2020 and November 27, 2020. In line with the extant
SEBI guidelines, CARE has reviewed the rating on the basis of the
best available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
Detailed description of the key rating drivers
At the time of last rating on October 15, 2019 the following were
the rating strengths and weaknesses (updated for the information
available from Registrar of Companies):
Key Rating Weaknesses
* Delays in debt servicing: There have been on-going delays by VRPL
in servicing of its debt obligations. This could be attributed to
the tight liquidity position of the company owning to slowdown in
real estate market leading to slow sales and collection from
customers.
* Limited experience of Promoters in the Industry: VRPL is promoted
by Mr. Amit Katyal and his family members. The group is present in
liquor business for over three decades and it entered the real
estate business in 2011 by launching its first ultra-luxury project
in Gurgaon. Though, the promoter group has been involved in the
development of more than 5 residential/commercial projects in and
around Delhi/NCR. However, the experience of the promoters in real
estate development has been limited with the absence of any real
estate project completed so far.
* Subdued Real Estate Scenario: As per market sentiments the India
Real Estate Market may not witness a sharp reversal, but in long
term the growth prospects remain strong. While the sector continues
to remain troubled with issues of high unsold inventory, delayed
delivery of projects and financial stress on developers, the only
segment that showed some signs of a rebound was the
affordable housing category in the peripheries of the major
markets. The broader market opinion is that while the long-term
story for residential market remains strong; the short term is
expected to be sluggish.
Key Rating Strengths
* Locational Advantage: The project under VRPL enjoys location
advantage on account of being situated in prominent location of
Gurgaon having easy accessibility and good connectivity Monde De
Provence (MDP) is located on Gurgaon-Faridabad Expressway with
proximity to South Delhi. Apart from proximity to Delhi, the
project has favorable location in terms of close proximity from the
International Airport, being in the neighbourhood of established
areas like DLF phase I & V and also well-connected through road and
metro network.
Venta Realtech Private Limited was incorporated in June 5, 2010 as
Krrish Realtynirman Pvt Ltd (KRPL) was engaged in the development
of residential/group housing project in Gurgaon (Haryana). Company
was engaged in the construction and development of the project viz.
Monde De Provence (MDP). The project is a residential (group
housing) project on a land area measuring 12.36 acres situated at
Sector 2, Gwal Pahari, Gurgaon, Haryana and comprises of 174
residential units. Effective from March 8, 2018, the name of the
company has been changed to Venta Realtech Private Limited.
WEST COAST FINE: CARE Lowers Rating on INR24cr LT Loan to D
-----------------------------------------------------------
CARE Ratings revised the ratings on certain bank facilities of West
Coast Fine Foods India Private Limited (WCFFIPL), as:
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 24.00 CARE D; ISSUER NOT COOPERATING;
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category and Revised from
CARE B; Stable
Long Term/ 15.00 CARE D; ISSUER NOT COOPERATING;
Short Term Rating continues to remain
Bank Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category and Revised from
CARE B; Stable/CARE A
Short Term Bank 1.11 CARE D; ISSUER NOT COOPERATING;
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category and Revised from
CARE A4
Detailed Rationale & Key Rating Drivers
CARE had, vide its press release dated October 15, 2019, placed the
rating(s) of WCFFIPL under the 'issuer non-cooperating' category as
WCFFIPL had failed to provide information for monitoring of the
rating. West Coast Fine Foods India Private Limited continues to be
non-cooperative despite repeated requests for submission of
information through phone calls and email dated December 14, 2020,
December 4, 2020 and November 4, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The ratings have been revised on account of the company facing
severe liquidity issues and delays/default in debt servicing.
Detailed description of the key rating drivers
Key Rating Weaknesses
* Delays in debt servicing: The weak liquidity position has
constrained the company's ability to service its debt in a timely
manner and there have been delays in servicing of debt obligations
to the lenders.
Analytical approach: Combined
CARE has combined the business and financial risk profile of West
Coast Fine Foods (India) Pvt. Ltd and West Coast Frozen Foods Pvt.
Ltd. on account of common management and financial linkages amongst
the entities. The above companies combined are referred to as West
Coast Group (WCG).
West Coast Group (WCG) promoted by Mr. Kamlesh Gupta, is an
integrated aquaculture enterprise operating in the West Coast of
India and in the Gulf of Cambay in Gujarat State. The Group is
engaged in the business of prawn hatching, farming, processing,
freezing, trading and exporting of prawns, distribution of frozen
food products, trading/distribution of aquatic feed and feed
supplement products and running quick service restaurants to serve
seafood products. West Coast Fine Foods is into the supply of farm
bred shrimps and prawns in the domestic market. The trading,
distribution and Quick Service Restaurants (under the brand name
Fisheteria) are operated through this entity. In the
trading/distribution business, the company is the sole dealer of
aquatic feed and feed supplement products of CP Aqua (a part of
Charoen Pokphand Group, Thailand - one of the leading conglomerates
of the seafood and aquaculture industry in the world), for the
states of Gujarat and Maharashtra.
WEST COAST FROZEN: CARE Keeps D Debt Ratings in Not Cooperating
---------------------------------------------------------------
CARE Ratings said the rating for the bank facilities of West Coast
Frozen Foods Private Limited (WCFFPL) continues to remain in the
'Issuer Not Cooperating' category.
Amount
Facilities (INR crore) Ratings
---------- ----------- -------
Long Term Bank 5.75 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Short Term Bank 106.25 CARE D; ISSUER NOT COOPERATING
Facilities Rating continues to remain
under ISSUER NOT COOPERATING
category
Detailed Rationale & Key Rating Drivers
CARE had, vide its press releases dated October 15, 2019 and
November 19, 2019, placed the ratings of WCFFPL under the 'issuer
non-cooperating' category as WCFFPL had failed to provide
information for monitoring of the rating. WCFFPL continues to be
non-cooperative despite repeated requests for submission of
information through e-mails dated November 4, 2020, December 2,
2020, and December 14, 2020. In line with the extant SEBI
guidelines, CARE has reviewed the rating on the basis of the best
available information which however, in CARE's opinion is not
sufficient to arrive at a fair rating.
Users of this rating (including investors, lenders and the public
at large) are hence requested to exercise caution while using the
above rating(s).
The rating takes into account the continuing delays in the debt
servicing.
Detailed description of the key rating drivers
Key Rating Weaknesses
At the time of last rating on November 19, 2019, the following was
the rating weaknesses:
* Delays in debt servicing: The weak liquidity position has
constrained the company's ability to service its debt in a timely
manner and there have been continuing delays in servicing of debt
obligations to the lenders.
Analytical approach: Combined
CARE has combined the business and financial risk profile of West
Coast Frozen Foods Pvt. Ltd. and West Coast Fine Foods (India) Pvt.
Ltd. on account of common management and financial linkages amongst
the entities. The above companies combined are referred to as West
Coast Group (WCG).
West Coast Group (WCG) promoted by Mr. Kamlesh Gupta, is an
integrated aquaculture enterprise operating in the West Coast of
India and in the Gulf of Cambay in Gujarat State. The Group is
engaged in the business of prawn hatching, farming, processing,
freezing, trading and exporting of prawns, distribution of frozen
food products, trading/distribution of aquatic feed and feed
supplement products and running quick service restaurants to serve
seafood products. West Coast Fine Foods is into the supply of farm
bred shrimps and prawns in the domestic market. The trading,
distribution and Quick Service Restaurants (under the brand name
Fisheteria) are operated through this entity. In the
trading/distribution business, the company is the sole dealer of
aquatic feed and feed supplement products of CP Aqua (a part of
Charoen Pokphand Group, Thailand - one of the leading conglomerates
of the seafood and aquaculture industry in the world), for the
states of Gujarat and Maharashtra.
=================
I N D O N E S I A
=================
ABM INVESTAMA: Moody's Completes Review, Retains B1 CFR
-------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of ABM Investama Tbk (P.T.) and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
ABM Investama Tbk (P.T.)'s B1 corporate family rating considers the
company's integrated operations with cost synergies; track record
of proactive capital management during downturns in coal prices;
and adequate liquidity, with no material near-term debt maturities
until August 2022.
However, ABM's B1 rating is constrained by its weakening business
profile, with declining coal reserves at its PT Tunas Inti Abadi
mine; the uncertainty surrounding its acquisition strategy; and its
small scale and exposure to cyclical thermal coal prices.
The principal methodology used for this review was Mining published
in September 2018.
ADARO INDONESIA: Moody's Completes Review, Retains Ba1 CFR
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Adaro Indonesia (P.T.) and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Adaro Indonesia (P.T.)'s Ba1 corporate family rating reflects its
position as one of the largest single-location coal producers in
the southern hemisphere with substantial reserves; track record of
profitability, supported by vertically integrated operations;
diversified customer base; and track record of commitment to
prudent financial policies.
Adaro's rating also incorporates its limited operational and
geographic diversity as thermal coal sales will remain a key
contributor to the group's revenue and earnings over the next few
years; and the elevated environmental risks associated with the
thermal coal sector.
The rating reflects the credit quality of its parent Adaro Energy
Tbk (P.T.), given the strong operational links between the
companies, including Adaro Energy's 88.5% ownership in AI; AI
benefiting from Adaro Energy's vertically integrated operations
across the coal supply chain; and Adaro Energy guaranteeing all of
AI's debt.
The principal methodology used for this review was Mining published
in September 2018.
BAYAN RESOURCES: Moody's Completes Review, Retains Ba3 CFR
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Bayan Resources Tbk (P.T.) and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Bayan Resources Tbk (P.T.)'s Ba3 corporate family rating considers
the company's increasing thermal coal production; long reserve life
of its mines; solid profitability supported by its competitive cost
structure; and its adherence to prudent financial policies.
Bayan's Ba3 rating is constrained by of its limited product and
geographic diversity, given its single-commodity exposure to
thermal coal with mining operations located in Kalimantan,
Indonesia.
The principal methodology used for this review was Mining published
in September 2018.
BUKIT MAKMUR: Moody's Completes Review, Retains Ba3 Rating
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Bukit Makmur Mandiri Utama (P.T.) and other ratings that
are associated with the same analytical unit. The review was
conducted through a portfolio review on Day Month 2021 in which
Moody's reassessed the appropriateness of the ratings in the
context of the relevant principal methodology, recent developments,
and a comparison of the financial and operating profile to
similarly rated peers. The review did not involve a rating
committee. Since January 1, 2019, Moody's practice has been to
issue a press release following each periodic review to announce
its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Bukit Makmur Mandiri Utama (P.T.)'s Ba3 rating reflects its
position as Indonesia's second-largest coal mining services
contractor by overburden volume, with a well-recognized franchise
and established relationships with Indonesia's largest coal miners;
the long-term contracts which provide revenue visibility; and
Moody's expectation that BUMA will maintain a prudent capital
structure with conservative financial policies.
At the same time, the rating is constrained by its high degree of
customer concentration risk, namely to Berau Coal (P.T.);
geographic concentration in Indonesia; exposure to the cyclicality
in the thermal coal sector; and near-term refinancing risk relating
to its US dollar bond maturity in February 2022.
The principal methodology used for this review was Business and
Consumer Service Industry published in October 2016.
BUMI RESOURCES: Moody's Completes Review, Retains Caa1 Rating
-------------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Bumi Resources Tbk (P.T.) and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Bumi Resources Tbk (P.T.)'s Caa1 rating reflects its rising debt
burden because of the slow pace of its principal repayments and the
compounding effect of payment-in-kind interest for most of its
debt, contributing to an increasingly unsustainable capital
structure; its reliance on cash dividends from PT Kaltim Prima Coal
for its debt-servicing requirements; and its exposure to thermal
coal price volatility.
Nonetheless, Bumi's rating benefits from its majority shareholding
in two of Indonesia's largest coal producers, KPC and PT Arutmin
Indonesia (Arutmin); and manageable cash interest payments on its
debt, with no material debt maturities until December 2022.
The principal methodology used for this review was Mining published
in September 2018.
INDIKA ENERGY: Moody's Completes Review, Retains Ba3 CFR
--------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Indika Energy Tbk (P.T.) and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Indika Energy Tbk (P.T.)'s Ba3 corporate family rating reflect the
company's long operating track record; the cash flow generation
from its 91%-owned coal mining subsidiary, PT Kideco Jaya Agung
(Kideko); good liquidity; and adherence to prudent financial
policies.
However, the rating is constrained by volatile earnings and
operating cash flow from Kideco, PT Petrosea Tbk (Petrosea) and PT
Mitrabahtera Segara Sejati Tbk (MBSS), caused by the cyclical
nature of the coal industry; the modest contract order book at
Petrosea and PT Tripatra Multi Energi (Tripatra); and the execution
risk surrounding its strategy to further diversity earnings away
from thermal coal.
The principal methodology used for this review was Mining published
in September 2018.
JASA MARGA: S&P Withdraws 'BB-' LongTerm Issuer Credit Rating
-------------------------------------------------------------
S&P Global Ratings withdrew its 'BB-' long-term issuer credit
rating on PT Jasa Marga (Persero) Tbk. at the company's request.
The outlook on the Indonesia-based toll-road developer and operator
was negative at the time of the withdrawal.
REJEKI ISMAN: Fitch Alters Outlook on BB- LongTerm IDR to Negative
------------------------------------------------------------------
Fitch Ratings has revised the Outlook on Indonesia-based textile
manufacturer PT Sri Rejeki Isman Tbk's (Sritex) Long-Term Issuer
Default Rating (IDR) to Negative, from Stable, and has affirmed the
rating at 'BB-'. Fitch has also affirmed Sritex's senior unsecured
debt class rating and outstanding senior unsecured US-dollar notes
at 'BB-'. At the same time, Fitch Ratings Indonesia has revised the
Outlook on Sritex's National Long-Term Rating to Negative, from
Stable, and has affirmed the rating at 'A+(idn)'.
Fitch estimates that Sritex's leverage, measured as net debt/EBITDA
will rise to 3.4x by end-2020, following increased investment in
working capital throughout 2020. The Negative Outlook reflects the
risk in the company's deleveraging capacity, which depends on its
ability to maintain stable working capital, could be constrained,
such that leverage does not decline to 3.0x by 2022, the level
where Fitch would consider a possible downgrade.
Despite the weak global economic environment, Fitch believes that
Sritex's revenue will increase by at least 5% in 2020, but EBITDA
margin will weaken by 100-150bp in 2020. Fitch believes revenue and
EBITDA margin will be stable in 2021-2022, but a longer
working-capital cycle will depress cash flow from operations and
slow the deleveraging pace. The Outlook revision also captures the
potential risk that the weak funding environment might persist due
to prolonged negative sentiment, especially towards the textile
sector, hampering Sritex's refinancing efforts.
'A' National Ratings denote expectations of a low level of default
risk relative to other issuers or obligations in the same country
or monetary union.
KEY RATING DRIVERS
Deleveraging Risk: The Negative Outlook captures the downside risk
of a slower decline in leverage compared with Fitch’s
expectation. Fitch estimates Sritex's net debt/EBITDA will remain
above Fitch’s negative sensitivity of 3.0x in the medium term.
Leverage will be at 3.4x in 2020 and 3.2x in 2021, only improving
to 3.0x in 2022. Total net debt rose to around USD840 million in
3Q20 (2019: USD716 million) due to higher working capital loans, as
the company invested in inventory in anticipation of improving 4Q20
sales. This resulted in net debt/last 12 months EBITDA of 3.7x.
Working Capital Management: Sritex's deleveraging capacity will
depend on its ability to manage its working capital cycle. Fitch
estimates neutral cash from operation at end-2020 (9M20: negative
USD49 million), with its 3Q20 inventory investment translating into
higher sales in 4Q20. Cash from operations should turn positive at
around USD100 million in 2021 and 2022 under Fitch’s assumption
of stable working capital days of around 260-270 days and flat
revenue growth.
Sritex's working capital days lengthened in 9M20 to around 272 days
(2019: 226 days) due to the impact of the coronavirus pandemic.
Sritex extended its payment terms for some customers amid the
pandemic and invested in inventory due to raw-material scarcity and
in anticipation of a sales recovery. Accordingly, inventory days,
including advances for inventory purchases, rose above 180 days
(2019: around 160 days) and receivable days to around 100 days
(2019: 82 days).
Refinancing Plan Clarity, Funding Access: Sritex has demonstrated
access to both bank funding and capital markets. Sritex issued
USD375 million in the offshore bond market and USD65 million in the
domestic market during 2017-2019. It was also able to secure IDR960
billion and USD15 million new bilateral facilities from banks
during 2020. However, a weaker funding environment, compounded by
negative sentiment towards the sector, might pressure its
liquidity, especially given its lumpy debt maturity profile. The
company has kicked off its refinancing plans.
Healthy Revenue and Profitability, Despite COVID: Fitch expects
stable revenue growth and profitability in the medium term, despite
the impact of the pandemic in 2020. This is supported by Sritex's
position as one of the leading domestic textile and garment
manufacturers and established relationships with export buyers.
Fitch estimates revenue will be up by 5%-6% in 2020 on a strong
2H20, after a weak 2Q20, and stay flat at USD1.2 billion in 2021
and 2022 in the absence of capacity expansion. The EBITDA margin is
forecast to fall to 18% in 2020 (2019: 20%), then recover to 19% in
2021 and 2022.
Deferred Capex: Fitch expects limited annual capex of around USD55
million-65 million in 2020-2022 for maintenance after the company
deferred its capacity expansion plan due to the pandemic. This will
ease free cash flow and leverage pressure, but there is downside
risk to Fitch’s forecast should Sritex pursue major debt-funded
capacity expansion over this period.
DERIVATION SUMMARY
Sritex's rating is comparable with that of PT Japfa Comfeed Tbk
(BB-/A+(idn)/Negative) on the international and national rating
scales. Both companies are exposed to raw material price
volatility, but have the ability to pass through cost fluctuations
to customers. Japfa's margin of less than 12% is weaker and more
volatile than Sritex's above 17%. However, this is counterbalanced
by Japfa's lower working capital requirements, which result in
higher cash flow from operations. Fitch’s Negative Outlook for
both companies reflect the downside risk that deleveraging might be
slower than Fitch expects.
Sritex's rating is higher than that of 361 Degrees International
Limited (B/Negative), as 361 Degrees faces mounting liquidity
pressure due to a lack of progress in transferring onshore cash
offshore ahead of the maturity of its US-dollar bond in June 2021.
On the other hand, Sritex's upcoming large maturity is only due in
January 2022. Both companies face longer working capital days that
will result in working capital outflow in 2020 due to longer
receivable days during the pandemic.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch’s rating case for the issuer
include:
-- 6% revenue growth in 2020 and revenue growth of around 1.5% in
2021 and 2022
-- EBITDA margin of around 18% in 2020 and around 19% in 2021 and
2022
-- Stable working capital days from Fitch’s 2020 estimate of
Around 260-270 days
-- Annual capex of around USD55 million-65 million through to
2022, mostly for maintenance purposes
RATING SENSITIVITIES
Factor that could, individually or collectively, lead to positive
rating action/upgrade:
-- Fitch may revise the Outlook to Stable should net debt/EBITDA
decline to below 3.0x by 2022.
Factors that Could, Individually or Collectively, Lead to Negative
Rating Action/Downgrade
-- Delay in deleveraging such that net debt/EBITDA it is not
below 3.0x by 2022
-- Lack of refinancing progress with regards to addressing the
syndicated loan maturity by 1Q21
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Sufficient Liquidity, Concentrated Maturities: Sritex had around
USD158 million in cash and USD170 million in unutilised committed
facilities at end-September 2020, against USD80 million of maturing
long-term debt and USD173 million of short-term bank loans that can
be rolled over. Sritex's debt maturity is concentrated, with USD350
million maturing in 2022, USD155 million of bonds maturing in 2024
and USD225 million of bonds maturing in 2025.
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.
SOECHI LINES: Fitch Lowers Rating on US Dollar Notes to B-
----------------------------------------------------------
Fitch Ratings has downgraded the rating on the US dollar notes
guaranteed by Indonesia-based tanker operator PT Soechi Lines Tbk
(Soechi) to 'B-' from 'B', and revised the Recovery Rating to 'RR5'
from 'RR4'. The Rating Watch Negative (RWN) on the notes has been
removed. At the same time, Fitch has affirmed Soechi's Long-Term
Issuer Default Rating (IDR) at 'B'. The Outlook is Stable.
The downgrade of the US dollar bonds follows the expiration of
Soechi's cash tender offer to buy back a portion of the notes using
proceeds from a secured loan facility, and it reflects Fitch’s
estimate of below-average recoveries (less than 31%) for the
outstanding bonds as Soechi will replace the majority of the
unsecured notes with proceeds from the new secured loan in its
capital structure. The rating was placed on RWN on 1 December 2020
after the launch of the tender offer. The notes are issued by
Soechi's wholly owned subsidiary Soechi Capital Pte. Ltd., and
guaranteed by Soechi and all its operating subsidiaries.
Bondholders of USD122.5 million of the USD200 million 8.375% senior
unsecured notes due 2023 took up Soechi's offer, which expired on 8
December 2020. Soechi will draw from a new USD180 million secured
term loan facility to pay 70 cents per dollar of the tendered notes
later in December. It will also pay accrued interest from its cash
balance.
The new loan facility will also provide USD77 million to Soechi to
refinance its syndicated loan maturity in 2021. Following the buy
back, Fitch thinks Soechi should be able to meet most of its debt
maturities over the next three years and risk related to
refinancing a portion of the remaining USD77.5 million of notes due
in early 2023 is limited. A healthy shipping business profile
characterised by protection from foreign competition and steady
demand from key customer PT Pertamina (Persero) (BBB/Stable) lends
revenue visibility and should support the company's refinancing
efforts.
KEY RATING DRIVERS
Strong Shipping Business Fundamentals: Soechi's fleet capacity
under time-charter contracts was sustained at a high level of 98%
at end-June 2020 (end-September 2019: 97%). The average duration of
the time-charter contracts, weighted by capacity, was less than 2
years, but contracts are often renewed.
Soechi is the one of the largest independent tanker operators in a
fragmented domestic shipping industry with many small players.
Industry participants enjoy protection from foreign competition
through cabotage laws for domestic transportation - which mandate
the use of Indonesia-flagged vessels and limit foreign ownership to
49% in joint ventures - and domestic tanker demand is likely to
continue growing over the longer term driven by increasing fuel
consumption. These market characteristics also result in relatively
stable day-rates.
Shipyard Remains a Drag: Soechi has invested around USD200 million
in its shipyard, which began operations in 2012. Weak newbuilding
order flow and construction delays have affected shipyard
performance and Fitch estimates that the shipyard incurred an
EBITDA loss of around USD2 million in 2019. Revenue fell by 61% to
USD3 million in 9M20 and Fitch expects the EBITDA loss to widen
this year.
The shipyard has two shipbuilding orders worth USD5 million in
total scheduled to be delivered by end-2020 and 2021. Fitch has
assumed more shipbuilding orders from 2021, likely to be granted by
the government, and a gradual increase in ship-repair revenue.
However, the shipyard may continue to be unprofitable for the next
two to three years without substantial revenue growth.
Old Fleet, Small Size: The average age of Soechi's fleet (weighted
by capacity) is around 20 years, against a typical useful ship life
of 30 years. The company's fleet age matches its strategy of
operating older ships, which is the norm in Indonesia's market.
However, older vessels usually earn shorter time-charter contracts
than more recently constructed vessels, are generally more costly
to maintain and are subject to lower utilisation rates due to more
maintenance required and more operational issues. Soechi's fleet of
31 ships as of September 2020 is also small relative to global
peers.
Customer Concentration, but Low Risk: Pertamina and its shipping
subsidiary are Soechi's largest customers and accounted for 71% of
revenue in 9M20. This exposes Soechi to the risk of Pertamina not
renewing or granting contracts, or defaulting on its payments.
However, Fitch believes these risks are significantly alleviated by
Soechi's longstanding relationship with Pertamina (Soechi's
predecessor companies have been contracted by Pertamina since
1981), Pertamina's robust credit profile, and Soechi's strong
market position and capex policy, which is tied to the likelihood
of new contracts.
Higher Leverage, Negative FCF Likely: Soechi has not acquired any
vessels in 2020 and focused on using free cash flow (FCF) to
increase its cash balance and cut net debt. The buyback of the US
dollar notes at a discount has also allowed the company to reduce
outstanding debt and Fitch estimates its 2020 FFO-adjusted net
leverage ratio to fall to 3.6x (2019: 4.4x). However, Fitch expects
Soechi to resume fleet growth from 2021 after three years of
contraction, which is likely to result in negative FCF and push
leverage up to 4x.
Parent-Subsidiary Linkage Assessment: Fitch assesses overall
linkages between Soechi and its parent PT Soechi Group (PT SG),
which holds a 79.9% stake, as weak based on weak legal and moderate
operational ties. Fitch therefore assesses Soechi based on its
standalone credit profile. Fitch assesses the parent, which has a
much smaller shipping fleet and EBITDA than Soechi, to have a
weaker credit profile. There are no guarantees from Soechi to PT SG
or cross-default clauses covering debt at the parent. There are no
loans to the parent, and dividends and related-party transactions
are relatively small. There are also some checks on related-party
transactions under the local listing regulations and the US dollar
bond indenture.
Potential Rating Constraint: Soechi's rating may be affected if PT
SG's standalone credit profile deteriorates significantly, as
Soechi's rating will be constrained to two notches above the
consolidated credit profile, including PT SG, as per Fitch's
criteria.
DERIVATION SUMMARY
Soechi's rating can be compared with PT Buana Lintas Lautan Tbk
(BULL, B+/Negative), which is a very close peer focusing on oil
transportation business in Indonesia. BULL had a fleet of 33 ships
as of end-1H20, with an average age (weighted by capacity) of
around 17 years. BULL's fleet capacity with exposure to spot rates
was around 25% as of end-1H20 and Pertamina is the largest
customer. Soechi's fleet size is now smaller than BULL's, and Fitch
estimates its leverage to also be weaker in 2020 compared with
BULL's FFO adjusted net leverage of around 3x.
Soechi can also be compared with PAO Sovcomflot (BB+/Stable), whose
rating benefits from a one-notch uplift from its standalone credit
profile of 'bb' due to strong support from the Russian government
(BBB/Stable). Sovcomflot is one of the global leaders in maritime
transportation of hydrocarbons and in servicing of offshore
exploration and oil and gas majors. The company owns and operates
140 vessels, which are fairly young with an average age of 11
years. Its customer base is diversified and consists of large
international and Russian oil and gas companies. In addition to a
significantly stronger business profile, Sovcomflot's FFO adjusted
net leverage of 3.8x in 2019 was lower than Soechi's.
KEY ASSUMPTIONS
Fitch's key assumptions within Fitch’s rating case for the issuer
include:
-- Soechi's deadweight tonnage to increase at a CAGR of 6% over
2021-2023
-- Tanker day rates to stay flat over 2021-2023
-- Average EBITDA margin for shipping segment of 51% over 2021
2023 (2020E: 55%)
-- Average annual revenue from shipyard of USD8 million over
2021-2023 (2020E: USD7 million), EBITDA loss to narrow to USD4
million in 2021 from USD7 million in 2020
-- Average annual capex, including upfront docking charges, of
around USD70 million over 2021-2023 (2020E: USD15 million)
-- The recovery analysis assumes that Soechi would be liquidated
in case of bankruptcy. Fitch has also assumed a 10%
administration claim.
Liquidation Approach
-- Fitch’s liquidation value of around USD275 million includes
Fitch’s estimate of recoveries from Soechi's current assets
related to working capital and fixed assets related to the
shipyard, in addition to its shipping fleet. The overall
liquidation value is broadly in line with the extrapolated
appraisal value of the fleet, based on the latest appraised
value of USD208 million for selected ships contributing 73% of
the fleet capacity as of end-June 2020.
-- Soechi had secured bank loans of USD131 million as of 30 June
2020, of which around USD80 million was under the syndicated
loan facility. It also had USD200 million of senior unsecured
notes, of which USD77.5 million will remain outstanding
following the tender offer. However, Soechi will draw over 90%
of the USD180 million new secured loan facility to refinance
the syndicated loan and buy back the bonds. The facility will
remain available for six months.
-- Fitch’s pro-forma debt numbers as of end-June 2020 are
USD231
million for secured debt, assuming full drawdown of the USD180
million new loan facility, and USD77.5 million for unsecured
notes. The debt waterfall results in a recovery of around 25%
for the note holders, corresponding to a Recovery Rating of
'RR5'. Therefore, the US dollar notes have been notched downby
one notch from Soechi's IDR.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- FFO adjusted net leverage below 3.8x on a sustained basis
-- FFO fixed-charge cover remaining above 3x
-- No material deterioration of the operating environment
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Weakening of the liquidity position or a substantial
deterioration of the operating environment
-- FFO adjusted net leverage above 4.8x on a sustained basis
-- FFO fixed-charge cover below 2x on a sustained basis
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Manageable Liquidity, Some Risk: Soechi had total debt of USD326
million as of end-September 2020, compared with cash (included cash
reported as restricted) of USD57 million. Of the total debt, USD89
million is due in 2021 and USD77 million of the repayments are due
under a syndicated loan facility. Soechi's new term loan facility
will allow it to address the syndicated loan facility's
repayments.
Following the buyback of a majority of the issued US dollar notes,
Fitch thinks the company should be able to address most of its debt
maturities over the next three years. Fitch’s estimates assume no
discretionary capex and include the remaining portion of the bonds.
Soechi is likely to need some refinancing to repay its remaining US
dollar notes in January 2023. However, Fitch thinks risk is limited
due to revenue visibility from a high share of time-charter
contracts and the company's domestic operating environment.
Nonetheless, Fitch expects Soechi to finalise its plan to address
the bond maturity in the next 12-18 months.
SUMMARY OF FINANCIAL ADJUSTMENTS
Material Non-Standard Financial Statement Adjustments include:
-- Cash kept as collateral for loan facilities and for US dollar
bonds' interest reserve account, but reported as "restricted",
has been classified as readily available as it can be used for
debt servicing (2019: USD17.5 million).
-- Docking expenses, which are amortised after incurrence, have
been added back to EBITDA (2019: USD7.1 million). Cash expense
for docking has been deducted from capex and added to
operating cash flow (2019: USD5.6 million).
-- "Unbilled revenues" and "estimated earnings in excess of
billings on contracts" have been included in working capital
–
given their conceptual similarity to trade receivables.
Advances and prepaid expenses have also been included in
working capital. However, interest-related accrued expenses
have been excluded from working capital.
-- Unamortised debt transaction costs have been added back to
debt (2019: USD4.2 million).
ESG CONSIDERATIONS
Soechi has an ESG Relevance Score of 4 for Management Strategy. The
company made a large investment in its shipyard business but
earnings generation has been significantly weaker than Fitch’s
and management's expectations. This indicates some weakness in
management strategy development and implementation, which has a
negative impact on the credit profile, and is relevant to the
rating in conjunction with other factors. Further aggressive growth
spending remains a risk to Soechi's credit profile.
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.
WASKITA BETON: Fitch Withdraws 'CC(idn)' National LongTerm Rating
-----------------------------------------------------------------
Fitch Ratings Indonesia has withdrawn Indonesian precast concrete
manufacturer PT Waskita Beton Precast Tbk's (WSBP) National
Long-Term Rating of 'CC(idn)'. At the same time, Fitch has
withdrawn the National Long-Term Rating of 'CC(idn)' on WSBP's IDR2
trillion unsecured bond programme and the bonds issued under the
programme.
'CC' National Ratings denote the level of default risk is among the
highest relative to other issuers or obligations in the same
country or monetary union.
Fitch has withdrawn the ratings as the issuer has chosen to stop
participating in the rating process. Therefore, Fitch will no
longer have sufficient information to maintain the ratings.
Accordingly, Fitch will no longer provide ratings or analytical
coverage for WSBP.
=========
J A P A N
=========
TOSHIBA CORP: Moody's Withdraws B1 Corp. Family Rating
------------------------------------------------------
Moody's Japan K.K. has withdrawn the B1 corporate family rating,
Not Prime commercial paper rating and stable outlook of Toshiba
Corporation.
RATINGS RATIONALE
Moody's has decided to withdraw the ratings for its own business
reasons.
Headquartered in Tokyo, Toshiba Corporation is one of the largest
diversified manufacturers in Japan.
===============
M O N G O L I A
===============
MONGOLIA: Moody's Completes Review, Retains B3 Issuer Rating
------------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has completed the periodic review of a group of issuers
that includes Mongolia and may include related ratings. The review
did not involve a rating committee, and this publication does not
announce a credit rating action and is not an indication of whether
or not a credit rating action is likely in the near future; credit
ratings and/or outlook status cannot be changed in a portfolio
review and hence are not impacted by this announcement.
The credit profile of Mongolia (issuer rating B3) incorporates its
"ba3" economic strength, supported by strong growth potential
balanced by a moderate per capita income and a highly concentrated
economic structure; its "b2" institutions and governance strength,
which balances weak executive institutions and policy effectiveness
against ongoing structural reforms; the country's "b3" fiscal
strength, reflecting wider fiscal deficit and debt levels owing to
the coronavirus-related fiscal stimulus and a reliance on foreign
currency denominated debt; and its "b" susceptibility to event
risk, driven by external vulnerability risk and government
liquidity risk. A fractious political environment is a common
feature, with a high rate of change among ruling parties. This has
some repercussions for policy decisions.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
=====================
N E W Z E A L A N D
=====================
TRADE ME GROUP: S&P Alters Outlook to Stable & Affirms 'B-' ICR
---------------------------------------------------------------
S&P Global Ratings revised its outlook on New Zealand-based online
classifieds company Trade Me Group to stable from negative and
affirmed its 'B-' issuer credit and debt ratings on the company.
The stable outlook reflects S&P's view that Trade Me will maintain
its leading market position in the online classifieds and online
marketplace in New Zealand, underpinning its revenues and cash
generation as the New Zealand economy recovers.
S&P said, "Trade Me Group Ltd.'s (Titan Acquisition Co. New Zealand
Ltd.) operating performance and cash flows through the COVID-19
pandemic have been better than we expected. This is supported by
the gradual economic recovery currently underway in New Zealand,
following a sustained period of Level 1 restrictions with no major
outbreaks since April 2020.
"Trade Me's credit metrics reported were better than forecast. The
company's fiscal 2020 S&P adjusted debt-to-EBITDA ratio was 8.5x,
despite cash outflows during March and April 2020, compared to our
previous expectations of above 12x. EBITDA interest cash coverage
ratio was 1.9x, higher than our initial expectations of 1.5x. We
forecast an adjusted debt-to-EBITDA ratio to be in the mid 8x range
(inclusive of the company's shareholder loan) with EBITDA interest
cash coverage ratio above 2x over the next 12 months. Excluding the
shareholder loan, we expect the company's debt-to-EBITDA ratio to
be in the low-to-mid 6x range. Still, we believe Trade Me's highly
leveraged capital structure exposes it to a sudden earnings shock
and limits its ability to reduce debt."
Trade Me's first quarter fiscal 2021 results revealed a solid
improvement in operating and trading conditions. In particular, the
company's Property and Marketplace divisions posted solid revenue
growth of 27% and 18%, respectively, as consumers took advantage of
low interest rates, and supportive lending policies to refinance
and to buy property. In addition, returning expatriate New
Zealanders have bolstered the demand for property. Further,
consumers have opted to purchase more goods and services through
Trade Me's online marketplace platform, with general bricks and
mortar retail remaining subdued despite the easement of
restrictions to Alert Level 1 on June 8, 2020. S&P said, "We note
that the Jobs division remains weak, and new job listings are lower
following the COVID-19 pandemic. The Motors division's revenue is
relatively flat with 1% growth on previous comparable periods."
S&P said, "In our view, management's liquidity and cash
preservation initiatives have supported Trade Me's resiliency and
margins through the COVID-19 pandemic. The company reduced
operating costs by 9% driven by lower promotion expenses, low
company travel and office expenses, and reduced employee expenses
by about 8% following the group's restructure. As a result, the
company reported an S&P adjusted EBITDA margin of about 67% in
fiscal 2020. We expect margins to remain in the mid to high 60%
range over the next 12 months, following an improvement in trading
conditions.
"In our view, Trade Me remains exposed to fickle discretionary
consumer spending patterns. We anticipate discretionary consumer
spend to slowly pick up as the economy gradually returns to
normalized levels across 2021 and 2022. We forecast a real GDP
growth decline in New Zealand of 4.9% in calendar 2020, followed by
growth of 4.3% in 2021, and 2.9% in 2022 and 2023.
"Our analysis does not incorporate parental support during periods
of financial stress. Our rating analysis focuses on the ongoing
sustainability of the stand-alone business. We believe Trade Me's
shareholder APAX Partners continues to be supportive given that the
parent purchased the business early last year. However, we do not
ascribe any equity support into the rating."
S&P Global Ratings believes there remains a high degree of
uncertainty about the evolution of the coronavirus pandemic.
Reports that at least one experimental vaccine is highly effective
and might gain initial approval by the end of the year are
promising, but this is merely the first step toward a return to
social and economic normality; equally critical is the widespread
availability of effective immunization, which could come by the
middle of next year. S&P said, "We use this assumption in assessing
the economic and credit implications associated with the pandemic.
As the situation evolves, we will update our assumptions and
estimates accordingly."
S&P said, "The stable outlook reflects our view that Trade Me will
maintain its leading market position in the online classifieds and
online marketplace in New Zealand, underpinning its revenue and
cash generation as the New Zealand economy recovers.
"We could upgrade the company if Trade Me can successfully navigate
the ongoing operating challenges associated with the COVID-19
pandemic and continue to grow revenue and earnings commensurate
with credit metrics that are supportive at the 'B' rating level.
Specifically, adjusted debt to EBITDA sustained below 8.5x
including the shareholder loan (debt to EBITDA sustained below 6.5x
excluding the shareholder loan) and positive free operating cash
flows."
S&P could lower the rating if it viewed the company's capital
structure as unsustainable or if the company faced heightened
liquidity and covenant pressures. This could occur if there is a:
-- Weaker earnings recovery than it expects, without a
commensurate reduction in operating expenses, such that the company
faced liquidity and debt covenant pressures;
-- A material acceleration in customer churn or reduction in new
sales due to a deterioration in the company's market position such
that free cash flow was impaired; or a
-- Prolonged reinstatement of COVID-19 restrictions impairing
revenues and cash generation.
===============
P A K I S T A N
===============
PAKISTAN: Moody's Completes Review, Retains B3 Issuer Rating
------------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has completed the periodic review of a group of issuers
that includes Pakistan and may include related ratings. The review
did not involve a rating committee, and this publication does not
announce a credit rating action and is not an indication of whether
or not a credit rating action is likely in the near future; credit
ratings and/or outlook status cannot be changed in a portfolio
review and hence are not impacted by this announcement.
The credit profile of Pakistan (issuer rating B3) reflects the
country's "baa2" economic strength, which is underpinned by the
robust long-term GDP growth potential and large scale of the
economy, balanced against low per capita incomes and global
competitiveness; its "b2" institutions and governance strength that
balances still weak executive institutions and fiscal policy
credibility and effectiveness against a lengthening track record of
effective checks and balances and judicial independence, as well as
increasing monetary and macroprudential policy effectiveness; the
government's "ca" fiscal strength driven by its high government
debt burden and narrow revenue base which hinders debt
affordability and reduces fiscal flexibility given ongoing
infrastructure and social spending needs; and its "b"
susceptibility to event risk driven by external vulnerability, as
foreign-exchange reserve adequacy, though improving, remains low.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
===============================
P A P U A N E W G U I N E A
===============================
PAPUA NEW GUINEA: Moody's Completes Review, Retains B2 Rating
-------------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has completed the periodic review of a group of issuers
that includes Papua New Guinea and may include related ratings. The
review did not involve a rating committee, and this publication
does not announce a credit rating action and is not an indication
of whether or not a credit rating action is likely in the near
future; credit ratings and/or outlook status cannot be changed in a
portfolio review and hence are not impacted by this announcement.
The credit profile of Papua New Guinea (PNG, issuer rating B2)
incorporates the country's "b2" economic strength, balancing its
small, commodity-dependent economy and low per-capita income levels
against high-medium term growth prospects supported by investment
in PNG's natural resources wealth; the country's "b3" institutions
and governance strength, which considers its weak rankings in
governance indicators and moderate policy effectiveness, the latter
of which is supported by technical assistance from development
partners; and its "ba3" fiscal strength, which balances the
government's moderate debt burden and debt affordability against
increasing reliance on external and foreign-currency borrowings
that renders the debt burden and debt-servicing costs more
vulnerable to a potential local currency depreciation. PNG's "ba"
susceptibility to event risk is driven by government liquidity risk
and political risk, reflecting large annual gross borrowing
requirements, an increasing reliance on external funding that
raises exchange-rate risk and some constraints on domestic funding,
as well as political leadership challenges and frequent disruptive
politics, which could potentially precipitate a breakdown in fiscal
negotiations between the government and major energy companies
which could inhibit progress on resource developments.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
=====================
P H I L I P P I N E S
=====================
CHINA BANKING: Fitch Withdraws BB+ Issuer Default Rating
--------------------------------------------------------
Fitch Ratings has affirmed the Long-Term Issuer Default Ratings
(IDR) of China Banking Corporation (CBC) at 'BB+', and its
Viability Rating at 'bb+'. The Outlook is Negative. Concurrently,
Fitch has chosen to withdraw the ratings of CBC for commercial
reasons.
Fitch has chosen to withdraw the ratings of CBC for commercial
reasons.
KEY RATING DRIVERS
There has been no material change in CBC's credit profile since the
previous rating action on 12 October 2020.
RATING SENSITIVITIES
Rating sensitivities are not applicable as ratings have been
withdrawn.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Financial Institutions and
Covered Bond issuers have a best-case rating upgrade scenario
(defined as the 99th percentile of rating transitions, measured in
a positive direction) of three notches over a three-year rating
horizon; and a worst-case rating downgrade scenario (defined as the
99th percentile of rating transitions, measured in a negative
direction) of four notches over three years. The complete span of
best- and worst-case scenario credit ratings for all rating
categories ranges from 'AAA' to 'D'. Best- and worst-case scenario
credit ratings are based on historical performance.
ESG CONSIDERATIONS
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
=================
EZION HOLDINGS: Net Loss Widens to US$224.5MM in Q3 Ended Sept. 30
------------------------------------------------------------------
Leila Lai at The Business Times reports that Ezion Holdings posted
a net loss of US$224.5 million for the third quarter ended Sept.
30, widening from a net loss of US$71 million a year ago.
According to BT, the struggling offshore and marine player's
revenue shrank 79 per cent to US$5.2 million from US$24.7 million
in the corresponding quarter of the previous year. Loss per share
increased to 5.98 US cents from 1.91 US cents.
BT relates that Ezion Holdings attributed the revenue drop to a
decrease in the units owned, utilised and chartered for its jack-up
rigs, and a decrease in utilisation rates for its liftboats.
It has been unable to re-deploy its assets because of the Covid-19
pandemic and the plunge in oil prices, both of which have impacted
demand for its vessels and rigs, the group said.
In addition, the group's secured lenders have indicated that they
would prefer for the group to focus on vessel management with an
asset-light structure, and divest its vessels, BT relays.
BT says the updated impairment assessment in Q3 2020 resulted in
the recognition of net impairment losses of US$214.4 million.
For the nine months ended Sept. 30, net loss was US$462.6 million,
increasing by 3.3 per cent from US$447.8 million in the previous
year, BT discloses.
Revenue decreased by 68.7 per cent to US$24.1 million, and loss per
share was 12.36 US cents, compared to loss per share of 12.02 US
cents in the first nine months of the previous year.
According to BT, Ezion Holdings said its ability to maintain as a
going concern is highly dependent upon the successful restructuring
of its business and capital structure to focus on vessel management
and operating services with an asset light structure, as well as
the continued support of the group's lenders for a potential
restructuring plan that would involve a debt to equity conversion
of outstanding loans after the group disposes of its assets.
The Covid-19 pandemic's impact on the marine and offshore oil and
gas sector and travel restrictions has caused delays in projects
and maintenance programmes and hampered Ezion Holdings' efforts to
obtain new business streams.
The group added: "The global slowdown in the industry will further
impact the group's future utilisation and charter rates, and impede
the transition of the group into a vessel and project management
company," BT relays.
Trading in Ezion shares has been voluntarily suspended since March
2019, the report notes.
About Ezion Holdings
Based in Singapore, Ezion Holdings Limited
--http://www.ezionholdings.com/-- an investment holding company,
develops, owns, and charters offshore assets to support the
offshore energy markets in Singapore, India, Brunei, Thailand, the
Middle East, Nigeria, and internationally. The company operates
through Liftboats, Jack-Up Rigs, Offshore Support Logistics
Services, and Others segments. It owns, charters, and manages rigs
and vessels involved in the production, maintenance, and
exploration phases of the oil and gas, and offshore windfarm
industries. The company also provides shipping agency and
management services, as well as undertakes engineering works;
financing services; and cargo transportation services. In addition,
it holds assets or investments involved in renewable energy, and
other oil and gas related industries.
As reported in the Troubled Company Reporter-Asia Pacific on Oct.
21, 2020, Ezion Holdings on Oct. 19 announced its restructuring
plan to refocus its business on the provision of vessel-management
services, following a strategic review of its options in
consultation with major lenders. According to The Business Times,
the company said that it will take steps to realise value by
disposing of its vessels in an orderly manner over a period of
time; this will enable it to better manage its cashflow constraints
by reducing the holding costs of the vessels as well as the amount
of liabilities. It will also implement further cost-cutting
measures in line with business requirements and continue the search
for potential investors to recapitalise the group and realise the
value of the listed status of the company, on the basis of a
vessel-management company.
The company has appointed RSM Corporate Advisory as corporate
restructuring advisor to oversee the implementation of the
restructuring plan over the course of the next year and will in due
course hold an informal meeting for securities holders.
GEO ENERGY: Moody's Completes Review, Retains Caa1 Rating
---------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Geo Energy Resources Limited and other ratings that are
associated with the same analytical unit. The review was conducted
through a portfolio review in which Moody's reassessed the
appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Geo Energy Resources Limited's Caa1 rating reflect its small scale
of operations, with a high degree of operational and geographic
concentration; and limited financial flexibility, including a low
cash buffer, which hinders its ability to make acquisitions in
order to grow and replenish its declining coal reserves.
At the same time, Geo Energy's rating also factors in low near-term
refinancing risk as the company has met the conditions required to
prevent the put option on its notes from triggering in April 2021;
and improved credit metrics on lower debt levels and operating
costs.
The principal methodology used for this review was Mining published
in September 2018.
GOLDEN ENERGY: Moody's Completes Review, Retains B1 Rating
----------------------------------------------------------
Moody's Investors Service has completed a periodic review of the
ratings of Golden Energy And Resources Ltd and other ratings that
are associated with the same analytical unit. The review was
conducted through a portfolio review in which Moody's reassessed
the appropriateness of the ratings in the context of the relevant
principal methodology, recent developments, and a comparison of the
financial and operating profile to similarly rated peers. The
review did not involve a rating committee. Since January 1, 2019,
Moody's practice has been to issue a press release following each
periodic review to announce its completion.
This publication does not announce a credit rating action and is
not an indication of whether or not a credit rating action is
likely in the near future. Credit ratings and outlook/review status
cannot be changed in a portfolio review and hence are not impacted
by this announcement.
KEY RATING CONSIDERATIONS
Golden Energy And Resources Ltd's B1 rating is supported by its 67%
effective ownership of PT Golden Energy Mines Tbk, an Indonesian
thermal coal producer with growing production volumes and a long
reserve life, supported by its integrated operations; and the
group's track record of prudent capital management and performance
through the coal price cycle.
The rating is constrained by its dependence on cash dividends from
subsidiaries, in particular from GEMS, to service its debt; the
execution risks associated with its investment strategy; and its
exposure to the cyclical thermal coal sector, with reliance on one
mine for most of its cash flow.
The principal methodology used for this review was Mining published
in September 2018.
PUMA ENERGY: Fitch Puts BB- LongTerm IDR on Watch Negative
----------------------------------------------------------
Fitch Ratings has placed Puma Energy Holdings Pte. Ltd's (Puma
Energy) Long-Term Issuer Default Rating (IDR) and Puma
International Financing S.A.'s senior unsecured notes - all 'BB-' -
on Rating Watch Negative (RWN).
The RWN reflects increased refinancing risk and weaker liquidity
position, but the prospect of shareholder support has prevented an
immediate downgrade. This follows a pulled bond issue in September
2020 to refinance a USD550 million term loan due in May 2021.
Puma Energy cannot repay upcoming debt maturities from available
cash and committed undrawn facilities as demonstrated by its
one-year liquidity ratio below 1x. Fitch expects management to
continue delivering on its deleveraging strategy through asset
disposals and cost discipline. Fitch also believes Puma Energy has
options to return to debt capital markets or use shareholder
support through committed and uncommitted facilities to refinance
its upcoming debt maturities.
The ratings of Puma Energy reflect its geographical and business
diversification, and its high leverage, high cash flow volatility
due to currency fluctuations and rebased profitability that remains
below 2015-2017 levels. The pandemic has had limited impact on
profitability amid shareholder support and swift demand recovery.
Despite higher expected working capital outflows, it is offset by
forecast stronger earnings for 2020, and Fitch expects its
deleveraging path to remain unchanged.
KEY RATING DRIVERS
Increased Refinancing Risk: Fitch believes refinancing risk has
increased, after Puma Energy pulled its bond issue in September
2020 due to unfavourable market conditions. Proceeds were expected
to be used towards the repayment of outstanding TLB (USD550
million) due in May 2021. Its maturity coincides with that of two
revolving credit facilities (RCFs, total USD596 million), which are
also exposed to increased refinancing risk given their tight
tangible net worth covenant. Puma Energy does not have enough
available liquidity to repay the loan, but it has other options
like partial repayment via disposals, accessing debt markets,
USD1.5 billion shareholder facilities or requesting lenders'
approval under its two one-year extension options for the TLB.
Limited Pandemic Impact on Earnings: Fitch has upgraded its 2020
EBITDA forecast by USD75 million to around USD500 million, on the
back of limited pandemic impact and strong performance in 3Q20.
Impact of the pandemic on fuel demand in 2Q20 (-18%) was largely
offset by USD82 million of shareholder support through an interim
price adjustment on fuel supply. 3Q20 benefited from a swift
recovery in volumes (10% q-o-q; except aviation) as lockdown
measures started to ease in May and June 2020, and from strong
gross profit unit margins. Demand from the aviation sector,
representing 14% of EBITDA on average in 2017-2019, has remained
low due to continued travel restrictions.
Support for EBITDA Margins: Fitch continues to expect EBITDA to
trend above USD500 million over the next three years (pre-IFRS 16).
A regulated price structure and leading positions in some
deregulated markets support profit margins, while foreign-exchange
volatility (as seen in the sharp depreciation of kwanza in Angola
against the US dollar since 2018, combined with fuel-price freeze)
can reduce profitability.
Larger Working Capital Outflows: Fitch expects USD300 million
larger working capital outflows in 2020 than under Fitch’s
previous rating case, having observed no inflows in 3Q20, when
volumes recovered against 2Q20. An USD500 million outflow in 2Q20
was driven by a drop in demand volumes amid the pandemic and lower
oil prices, both leading to a large reduction in trade payables,
terms of which have normalised in 3Q20. Fitch expects funds from
operations (FFO) readily marketable inventory (RMI)- and
lease-adjusted net leverage to be 0.3x lower than Fitch’s
previous rating case at 5.5x in 2020 as higher working capital
outflow is more than offset by higher expected earnings. Fitch
assumes working capital to normalise after 2020 with fairly neutral
cash impact, assuming no new disruptions amid lockdowns.
Deleveraging in Progress: Puma Energy is continuing to implement
its deleveraging strategy towards its target net debt (minus
inventory)/EBITDA of 2.5x (versus 3.14x at end-3Q20) through
portfolio management and disposals, working capital and capex
discipline. Fitch expects FFO RMI- and lease-adjusted net leverage
to remain stable in 2020 versus 2019 before decreasing to around
5x, with sufficient headroom against Fitch’s negative sensitivity
of 5.4x. Application of the new lease treatment within Fitch's
Corporate Rating Criteria (to adjust for IFRS 16) has increased
leverage by 0.5x in 2019 and 0.3x-0.4x over the forecast period as
well as leverage sensitivities.
Proceeds from Disposals: In 2020, Puma Energy has prepaid USD300
million of its TLB due May 2021 from disposal proceeds, using
USD150 million of its Australia disposal (USD285 million) proceeds.
Puma Energy is expecting a further USD120 million from the sale of
non-strategic assets in 1Q21, of which USD46 million is deferred
payment relating to the sale of assets in Paraguay.
Limited Oil Price Risk: Puma Energy hedges its physical fuel
supply. All of its supply stock is either pre-sold or hedged
against price fluctuations. Therefore, in evaluating leverage and
interest coverage ratios, Fitch excludes debt associated with
financing RMI and reclassifies the related interest costs as cost
of goods sold. The difference between RMI lease-adjusted and
RMI-unadjusted lease-adjusted FFO net leverage is 0.5x-1.0x.
Potential PSL Considerations: Fitch would use its Parent and
Subsidiary Linkage (PSL) Rating Criteria, if direct ownership by
Trafigura exceeds 50%, on the basis that Puma Energy would be
consolidated in Trafigura's accounts and of its control. Trafigura
holds around 49% of equity and has three seats on Puma Energy's
board, while its second largest shareholder Sonangol is looking to
sell its stake (31%). Management would expect its operations in
Angola to remain unchanged as Sonangol is the national fuel
supplier and fuel retail margins are regulated by the government.
Trafigura's Support: Trafigura has provided shareholder support
during the pandemic via price adjustment on supplies, in addition
to undrawn USD500 million committed and USD1 billion uncommitted
facilities. In June 2020, Trafigura provided a USD390 million
subordinated shareholder loan to Puma Energy, treated as non-debt
under Fitch’s Corporate Rating Criteria, to reduce Cochan's
shareholding in Puma Energy to less than 5% from 15%.
DERIVATION SUMMARY
Puma Energy's closest peer is Vivo Energy plc (BB+/Stable), which
operates on a smaller scale with limited midstream activities and
high concentration in Africa (23 countries post-Engen transaction).
Vivo Energy's capital intensity is lower than that of Puma Energy,
whose significant investments in midstream infrastructure over the
past few years have not yielded sufficient cash flows. This, in
turn, materially increased leverage. Vivo Energy's rating is
supported by a cash-generative and conservative financial profile,
with RMI lease-adjusted net leverage below 1x.
Puma Energy's retail operations can be compared, to some extent,
with those of EG Group Limited (B-/Stable), a UK-based independent
petrol retailer. EG's overall scale and diversification have
improved through acquisitions and the group is present in the
mature European, US and Australian markets. EG has a higher
exposure to more profitable convenience and food-to-go retail than
Puma Energy. EG's rating reflects a weaker financial profile
following a period of mainly debt-funded acquisitions with FFO
lease-adjusted gross leverage at 12.0x in 2019, and forecast
deleveraging to 8.6x by 2021.
KEY ASSUMPTIONS
-- Sales volumes to decline 9% in 2020, followed by a progressive
recovery towards 2019 levels by 2023
-- Fairly stable gross profit unit margins at or close to
USD60/m3 in 2020-2023
-- Working capital outflow of USD450 million in 2020, followed by
modest inflows until 2023
-- Capex to be reduced to USD130 million in 2020, increasing to
USD200 million in 2021-2023
-- Distribution to minority shareholders in JV partnerships of
USD20 million annually in 2020-2023
-- Further foreign-exchange cash impact, with USD100 million
inflow in 2020 and outflows in 2021-2023 of USD35 million
USD50 million
-- Remaining proceeds of USD46 million from the sale of the
Paraguay business and around USD80 million from the sale of
non-core assets. In 2022, around USD20 million from further
non-core asset disposals
-- Refinancing or extension of the TLB of USD550 million before
maturity in May 2021
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive
rating action/upgrade:
-- As the ratings are on RWN, positive rating action is unlikely
in the short term. However, successful repayment or
refinancing of upcoming debt maturities, and refinancing of
RCFs at broadly unchanged levels while continuing to assess
the company on a standalone basis would likely result in
rating affirmation with an assignment of a Stable Outlook.
-- Improved headroom under financial metrics with FFO RMI- and
lease-adjusted net leverage sustained below 4.4x could lead to
an upgrade.
-- Improved competitive position, with either operational
improvements or favourable changes in regulatory frameworks
leading to a material and sustained improvement in unit
margins and free cash flow (FCF) generation would be also
positive for the rating.
Factors that could, individually or collectively, lead to negative
rating action/downgrade:
-- Lack of progress on refinancing of upcoming debt maturities
and RCFs by end-1Q21
-- Re-assessment of the ties between Puma and Trafigura leading
to a consolidated approach with a simultaneous view of the
consolidated profile being weaker than 'BB-' may be negative
for the rating.
-- Deteriorating competitive position or adverse changes in
regulatory frameworks, with material and sustained weakening
in unit margins.
-- FFO RMI- and lease-adjusted net leverage sustained above 5.4x.
-- FCF/EBITDAR excluding expansionary capex (cash conversion)
decreasing to 15% or below on a sustained basis.
BEST/WORST CASE RATING SCENARIO
International scale credit ratings of Non-Financial Corporate
issuers have a best-case rating upgrade scenario (defined as the
99th percentile of rating transitions, measured in a positive
direction) of three notches over a three-year rating horizon; and a
worst-case rating downgrade scenario (defined as the 99th
percentile of rating transitions, measured in a negative direction)
of four notches over three years. The complete span of best- and
worst-case scenario credit ratings for all rating categories ranges
from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are
based on historical performance.
LIQUIDITY AND DEBT STRUCTURE
Tight Liquidity: At end-September 2020, Puma Energy's liquidity
ratio over one year was below 1x. Liquidity was not sufficient to
cover USD1.1 billion of short-term debt (after USD100 million
prepayment made in November on its TLB due in May 2021, now
amounting to USD550 million). Puma Energy's liquidity included
USD349 million of available cash (after exclusion of USD88 million
of restricted cash composed of bank guarantees to cover legal and
environmental liabilities relating to retail stations sold in
Australia in June 2020), and an USD500 million shareholder loan
from Trafigura maturing in September 2023.
Under Fitch's methodology, Fitch excluded from Puma Energy's
liquidity two RCFs due in May 2021 totalling USD0.6 billion. Their
utilisation was not material at end-September 2020 (USD50 million).
Fitch also excluded an USD1 billion undrawn facility from Trafigura
as it is uncommitted, but which could help Puma Energy to service
its debt obligations.
ESG Considerations
The highest level of ESG credit relevance, if present, is a score
of 3. This means ESG issues are credit-neutral or have only a
minimal credit impact on the entity(ies), either due to their
nature or to the way in which they are being managed by the
entity(ies).
=================
S R I L A N K A
=================
SRI LANKA: Moody's Completes Review, Retains Caa1 Issuer Rating
---------------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has completed the periodic review of a group of issuers
that includes Sri Lanka and may include related ratings. The review
did not involve a rating committee, and this publication does not
announce a credit rating action and is not an indication of whether
or not a credit rating action is likely in the near future; credit
ratings and/or outlook status cannot be changed in a portfolio
review and hence are not impacted by this announcement.
The credit profile of Sri Lanka (issuer rating Caa1) is supported
by the country's "baa3" economic strength, incorporating its modest
growth potential, large economy and high per-capita income levels
compared to similarly-rated sovereigns, as well as vulnerability to
climate change risk; Sri Lanka's "b1" institutions and governance
strength incorporates a mixed track record of implementation of
important fiscal, monetary and economic reforms, particularly given
the often disruptive political and policymaking environment and
contentious nature of some structural reforms; its "ca" fiscal
strength, considering its large government debt burden, very weak
debt affordability and vulnerability to local currency
depreciation, combined with contingent liability risks from
state-owned enterprises; and its "b" susceptibility to event risk,
driven by a combination of political, government liquidity and
external vulnerability risks, reflecting Sri Lanka's vulnerability
to sudden shifts in investor sentiment, tightening in financing
conditions and political and policy uncertainty that can pose risks
the sovereign's ability to refinance large amounts of maturing
government debt.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
=============
V I E T N A M
=============
VIETNAM: Moody's Completes Review, Retains Ba3 Issuer Rating
------------------------------------------------------------
Moody's Investors Service reviews all of its ratings periodically
in accordance with regulations -- either annually or, in the case
of governments and certain EU-based supranational organisations,
semi-annually. This periodic review is unrelated to the requirement
to specify calendar dates on which EU and certain other sovereign
and sub-sovereign rating actions may take place.
Moody's conducts these periodic reviews through portfolio reviews
in which Moody's reassesses the appropriateness of each outstanding
rating in the context of the relevant principal methodology(ies),
recent developments, and a comparison of the financial and
operating profile to similarly rated peers. Since January 1, 2019,
Moody's issues a press release following each periodic review
announcing its completion.
Moody's has completed the periodic review of a group of issuers
that includes Vietnam and may include related ratings. The review
did not involve a rating committee, and this publication does not
announce a credit rating action and is not an indication of whether
or not a credit rating action is likely in the near future; credit
ratings and/or outlook status cannot be changed in a portfolio
review and hence are not impacted by this announcement.
The credit profile of Vietnam (issuer rating Ba3) incorporates the
country's "a3" economic strength that balances the country's strong
growth performance and large size against low GDP per capita, and
is also supported by rising competitiveness and a deepening
transition to higher value-added industrial activity; its "b2"
institutions and governance strength, reflecting administrative
deficiencies revealed in previous instances of delayed debt
payments against a lengthening track record of maintaining
macroeconomic stability amid robust growth; its "baa3" fiscal
strength, resulting from a relatively high, albeit stabilizing debt
burden, moderate debt affordability, the continued sensitivity of
the debt burden and debt servicing to exchange rate depreciation,
as well as the potential materialization of contingent liabilities
from state-owned enterprises; and its susceptibility to event risk
at "ba", driven by a weak, albeit improving, banking system.
The principal methodology used for this review was Sovereign
Ratings Methodology published in November 2019.
*********
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,
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Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2020. All rights reserved. ISSN: 1520-9482.
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