Moody's downgrades rating for Adani Abbot Point Terminal

Downgrade reflects the increasing likelihood of material volatility in the firm's cash flows

Global ratings agency Moody's today downgraded the rating for Adani Abbot Point Terminal Pty Ltd's (AAPT) secured bank credit facility to “Ba2” from “Baa3” on material volatility in cash flows.

The outlook on the ratings is negative.

Adani Ports and Special Economic Zone Limited (Baa3 stable) is the ultimate holding company of the AAPT obligor group.

Moody's, in a statement, said that the ratings downgrade reflects the increasing likelihood of material volatility in AAPT's cash flows. This is due to the weakened position of AAPT's coal mining counterparties, the sole source of such cash flows.

“The ongoing severe pressure facing the coal sector translates into an increased likelihood of AAPT's counterparty contracts either not being renewed or subject to early termination,” said Mary Anne Low, a Moody's Analyst. 

The rating action concludes the review for downgrade initiated on 21 December 2015.

Given the material challenges facing the coal sector, Moody's considers that AAPT's financial leverage and debt coverage metrics are no longer consistent with the previous ratings.

The current coal market downturn is structural in nature, with weak conditions likely to persist.

Such conditions will continually erode the mine counterparties' financial capacity over time, increasing the likelihood of a default, Moody's said.

AAPT is part of an obligor group that has economic ownership of the Abbot Point Coal Terminal in North Queensland under a 99-year lease with state-owned lessor North Queensland Bulk Port Authority.