Singapore, February 27, 2020 -- Moody's Investors Service has assigned a Caa1 rating to the proposed USD
senior secured bonds to be issued by Lodha Developers International Limited,
a wholly owned subsidiary of Macrotech Developers Limited (MDL,
Caa1 negative).
At the time of issuance, the proposed bonds will be guaranteed by
MDL and Lodha Developers UK Limited -- the ultimate holding company
of its London assets. Proceeds from the proposed bond will be used
to partly refinance the company's $324 million backed senior unsecured
bond maturing on 13 March 2020.
The outlook is negative.
RATINGS RATIONALE
The Caa1 rating on the proposed bond is in line with MDL's Caa1
corporate family rating (CFR).
MDL's Caa1 CFR reflects the significant refinancing risk associated
with its $324 million backed senior unsecured bond maturing on
13 March 2020.
"In order to proceed with the bond transaction, as a condition
precedent, the company must first raise $118 million,
which will be deposited in an escrow account. This amount,
together with the proposed bond issuance, will be used to repay
the principal and interest associated with the maturing $324 million
bond," says Sweta Patodia, a Moody's Analyst.
The company already has access to a GBP86 million ($112 million)
inventory facility, secured against unsold apartments at Lincoln
Square, one of MDL's London projects. However,
around GBP60 million ($78 million) will be used to repay an existing
construction loan at the project, leaving just $34 million
for deposit into the escrow account.
The company plans to raise the balance amount for the escrow account out
of a portion of pending collections from existing sales at Lincoln Square
($55 million) and a transfer of funds from its India operations
($29 million).
"Any delays in receiving such proceeds will result in a shortfall
in the escrow account and prevent the bond transaction from progressing,
increasing the likelihood of default. MDL does not have alternate
financing arrangements in place to repay the maturing bond,"
adds Patodia, who is also Moody's Lead Analyst for MDL.
Even if the company is able to fulfill the conditions required to proceed
with the bond transaction, the bond execution -- of at least
$225 million - remains subject to market conditions.
In addition to the immediate liquidity risks faced by the company as outlined
above, MDL's CFR reflects significant refinancing risks with respect
to additional debt maturities over the next 12-18 months.
MDL has a GBP517 million ($672 million) construction loan outstanding
at Grosvenor Square - its second project in London - which
is due for repayment in March 2021. In addition, the company
also has about $323 million of debt maturing at its India operations
over the next 12 months.
The company plans to repay the construction loan at Grosvenor Square out
of collections from GBP263 million of existing sales made at the property
as well as the execution of a new credit facility which will be secured
against the unsold apartments at the project.
Slower than expected collections and/or delay in securing credit facilities
will delay the refinancing process and heighten liquidity concerns.
In terms of environmental, social and governance (ESG) factors,
the rating also incorporates governance risks arising from the company's
concentrated ownership structure and its aggressive financial policies.
The Caa1 CFR and negative outlook reflect the market risk and uncertainty
around MDL's near-term refinancing plans and a persistent
level of refinancing risk over the next 12 months.
Moody's could revise the ratings outlook to stable if the company refinances
the upcoming bond maturity as scheduled and addresses the additional upcoming
debt maturities over the next 12 months.
On the other hand, Moody's would downgrade the ratings if the company
is unlikely to repay its maturing $324 million bond in full by
13 March 2020.
The principal methodology used in this rating was Homebuilding And Property
Development Industry published in January 2018. Please see the
Rating Methodologies page on www.moodys.com for a copy of
this methodology.
Macrotech Developers Limited is the largest real estate developer in India
by sales of residential apartments. The company is focused on residential
developments in the Mumbai Metropolitan Region, with some projects
in nearby Pune.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Sweta Patodia
Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077