Fitch assigns Neerg Energy's USD notes B+, sees lower headroom

Fitch Ratings has assigned Neerg Energy Ltd's USD 475 million US dollar senior notes a final rating of 'B+' with a recovery rating of 'RR4', while it expects lower headroom under the current rating due to higher debt.
The agency has "assigned Neerg Energy Ltd's USD 475 million 6 per cent senior notes due 2022 a final rating of 'B+' with a Recovery Rating of 'RR4'", it said.
The rating on the notes reflects the credit profile of a restricted group of operating entities under ReNew Power Ventures Private Limited, a company involved in renewable power generation in India, Fitch Ratings said in statement.

Neerg Energy is a SPV held by a trust and its ownership is not linked to ReNew Group.
The SPV will use the issue proceeds to subscribe to proposed masala bonds (offshore bonds denominated in Indian rupee but settled in US dollars) to be issued by the entities in the restricted group. The SPV will not undertake any business activity other than investing in the proposed masala bonds, it added
The assignment of the final rating follows a review of final documentation that conforms to the draft documentation previously received.

The final rating is the same as the expected rating assigned on 23 January 2017. However, Fitch expects lower headroom under the current rating due to higher-than-expected debt at the restricted group, as Neerg Energy raised USD 475 mn against our previous expectation of USD 450 million.

This is likely to delay credit metrics improvements, with little cushion to absorb interim operational weakness, it said.
Fitch believes improvement in the restricted group's leverage, as measured by gross adjusted debt/EBITDAR, to below 5.0x and EBITDA fixed-charge cover to around 2x may now extend beyond the agency's earlier expectations of improvements in the financial year to end-March 2020 (FY20), it added.