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Business News/ Companies / News/  Moody’s downgrades Macrotech Developers (Lodha ) to Caa1 over weak liquidity situation
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Moody’s downgrades Macrotech Developers (Lodha ) to Caa1 over weak liquidity situation

The Mumbai-based company has a loan agreement for $155 million, secured against its project at in London
  • Moody's has also downgraded the senior unsecured rating of the US dollar-denominated bonds issued by Lodha Developers International Limited
  • Photo: ReutersPremium
    Photo: Reuters

    MUMBAI : Moody's Investors Service has downgraded the corporate family rating of Macrotech Developers Limited (MDL), formerly called Lodha Group, to Caa1 from B3, with a negative outlook, over financial uncertainties and liquidity risks.

    The rating agency has also downgraded the senior unsecured rating of the US dollar-denominated bonds issued by Lodha Developers International Limited (LDIL) and guaranteed by MDL to Caa1 from B3.

    "The downgrade to Caa1 reflects the continued uncertainty with respect to the refinancing of MDL's upcoming debt maturities," says Sweta Patodia, a Moody's Analyst.

    The Mumbai-based company has a loan agreement for $155 million, secured against its project at in London. However, drawdowns under this facility remain subject to completion of the property, which is expected by December 2019.

    "While the company has made some progress in its refinancing efforts, its measures to date do not completely alleviate the significant refinancing risks," adds Patodia, who is also Moody's Lead Analyst for MDL.

    The company expects to secure another credit facility of around $195 million against the unsold inventory at Grosvenor Square, its second London project. However, documentation for this facility is currently in progress and will likely be completed over the next few weeks, said the rating agency.

    According to Moodys, these two projects are the primary source of refinancing the upcoming bonds. “However, given that the given that the facilities cannot be drawn down immediately, and remain subject to the fulfilment of certain conditions,liquidity risk remains elevated," it said.

    Besides, the company plans to set up an INR-denominated facility, which will be secured against the inventory at its Indian operations. It is also in the process of monetizing one of its commercial assets in India. The proceeds from these initiatives, if completed as planned, would provide alternate sources to refinance the balance of the USD bonds and the debt at its onshore operations.

    At the same time, the company also has a $100 million credit line secured against the pledge of MDL shares available from a related party, which can be used to repay a portion of its upcoming maturities.

    However, this is the company's last resort and will only be utilized should any of the measures outlined above not materialize.

    “Moody's does not have visibility on the credit quality of the related party providing such facility," the rating agency said.

    A Macrotech spokesperson said the company has in place arrangements for 100% repayment of its $325 million bond and the USD bonds are not related to its Indian business.

    "Moody’s has recognized that Macrotech has made substantial progress in relation to the refinancing/repayment of its $325 million bond. They would like to see further progress on some of the issues which in our opinion has already been done but not recognized yet by Moody’s, " the spokesperson said in an email response.

    According to the company, Moody's has chosen to downgrade the rating on this bond given given the recent negative view taken by the international rating agencies on the Indian economy and various Indian corporates.

    "This downgrade has no connection or impact with our Indian business and we continue to remain confident and optimistic on the future growth of our affordable housing, office and logistics businesses, " the spokesperson said.

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    Published: 12 Nov 2019, 06:14 PM IST
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