Moody's downgrades Macrotech Developers' CFR to Caa1, outlook negative

Moody's Investors Service has downgraded the corporate family rating (CFR) of Macrotech Developers Ltd (MDL) to Caa1 from B3.

At the same time, Moody's has downgraded to Caa1 from B3 the backed senior unsecured rating of US dollar-denominated bonds issued by Lodha Developers International Limited and guaranteed by MDL.

The outlook on all the ratings above is negative. "The downgrade to Caa1 reflects the continued uncertainty with respect to the refinancing of MDL's upcoming debt maturities," said Moody's Analyst Sweta Patodia.

"While the company has made some progress in its refinancing efforts, its measures to date do not completely alleviate the significant refinancing risks," she added.

MDL now has in place an executed loan agreement for 155 million dollars, secured against the unsold inventory at Lincoln Square, one of its London projects.

However, drawdowns under this facility remain subject to receiving the practical completion certificate for all units at the property which is expected by December.

As per management estimates, practical completion certificates have been received for about 75 per cent of the units in the development.

MDL expects to secure another credit facility of about 195 million dollars 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.

These two facilities constitute the company's primary source to refinance the upcoming bonds. However, given that the facilities cannot be drawn down immediately, and remain subject to the fulfilment of certain conditions, liquidity risk remains elevated.

In addition to the above, the company plans to set up a rupee-denominated facility which will be secured against the inventory at its Indian operations. It is also in the process of monetising one of its commercial assets in India.

Moody's said MDL's Caa1 CFR is primarily a reflection of its weak liquidity position. The rating also considers the company's position as the leading developer of residential properties in India, the large size of its land bank, the high quality of its projects under construction, as well as its strong execution capability.

The negative ratings outlook reflects Moody's expectation that there could be delays with respect to the company's ongoing initiatives to refinance its upcoming debt maturities.

MDL 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.

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