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Rating Action:

Moody's downgrades HT Global to B1; places ratings on review for further downgrade

01 Apr 2020

Singapore, April 01, 2020 -- Moody's Investors Service has downgraded HT Global IT Solutions Holdings Limited's corporate family rating (CFR) and the senior unsecured rating on its $368 million 7% senior notes due 2021 to B1 from Ba3.

At the same time, Moody's has placed the ratings on review for further downgrade.

RATINGS RATIONALE

"The downgrade to B1 reflects the company's exposure to refinancing risk for its bond due in July 2021 as capital market access remains uncertain for speculative grade companies in the current economic environment ," says Sweta Patodia, a Moody's Analyst.

HT Global has a $368 million bond outstanding that is due for repayment in July 2021. The company does not yet have definitive funding sources in place to address the upcoming bond maturity.

A prolonged outbreak of the coronavirus combined with further deterioration in the global economic outlook could disrupt the company's access to capital markets and intensify its liquidity risk.

"The review for downgrade reflects the possibility that we could further downgrade HT Global's ratings, by at least one notch, if it fails to arrange for sufficient funds over the next three months to address its bond maturity," adds Patodia, who is also Moody's Lead Analyst for HT Global.

In addition to the refinancing risk described above, HT Global's B1 CFR reflects the medium-sized scale of Hexaware Technologies Limited -- its principal operating company - when compared with large, top-tier global IT and business process management service providers, as well as its high customer and geographic concentration.

At the same time, the rating also considers HT Global's dependence on dividends from Hexaware to service its interest obligations.

However, HT Global's B1 CFR is supported by its 62.4% controlling interest in Hexaware, and the latter's robust operating performance, as evidenced by strong revenue growth and high EBITDA-to-cash flow conversion.

Moody's also notes that the underlying business operations of Hexaware remain largely unaffected by the coronavirus outbreak given the ability of the company to deliver it services remotely.

Given the recent market sell-off, Hexaware's share price, as of 31 March 2020, has declined by around 32% compared to its share prices in December 2019. This has reduced the value of the HT Global's stake in Hexaware to around $561 million from around $866 million over the same period. While this has no direct impact HT Global's ratings, it does make it difficult for the company to monetize its stake in Hexaware to repay the bonds.

In terms of environmental, social and governance (ESG) considerations, the ratings consider HT Global's concentrated ownership structure as well as its aggressive financial policies, as reflected by high shareholder returns. This risk is partially mitigated by the company's bond indenture that limits additional debt at the holding and operating companies through dual incurrence tests.

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/research/Business-and-Consumer-Service-Industry--PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the ratings:

Given the review for downgrade, a ratings upgrade is unlikely. Moody's could confirm the ratings if the company arranges for definitive funding sources to refinance the bonds maturing in July 2021.

On the other hand, Moody's could downgrade the ratings by at least one notch if the company is unable to arrange for funds over the next three months to address its upcoming bond maturity.

HT Global IT Solutions Holdings Limited is a company incorporated under the laws of Mauritius. It was formed by Baring Private Equity Asia V Mauritius Holdings (4) Limited (BPEA) to invest in the IT and business process and management (BPM) service provider Hexaware Technologies Limited. HT Global IT Solutions has no other operations, employees or real investments.

Incorporated in India, Hexaware provides IT and BPM outsourced services largely to US-based multinational corporations. Hexaware listed on the Mumbai Stock Exchange in 2001.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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

Ian Lewis
Associate Managing Director
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

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