Fitch maintains rating watch negative on Lodha Developers

Global ratings agency Fitch has maintained the Rating Watch Negative (RWN) placed on city- based Lodha Developers' B' Long-Term Issuer Default Rating (IDR) and the 'B' long-term rating on its outstanding USD200 million 12 per cent unsecured unsubordinated notes due 2020.
"The RWN reflects the possibility that Lodha may not be able to complete the refinancing of the GBP 225 million loan for its prime residential Mayfair development in London by end-September 2017," the agency said in a statement here today.
It, however, affirmed Lodha's ratings with a stable outlook if the company is able to secure timely refinancing of the loan and obtain the construction (or similar) financing it needs for the project.

"A stable outlook would also reflect the strong performance of Lodha's Indian operations, with healthy presales and cash collections in spite of challenging market conditions," Fitch said.
The agency also hinted that it may downgrade the ratings by more than one notch if the company is not able to secure timely refinancing for its London project.
The realty firm is currently in discussions with lenders to refinance its London project loan and to fund the project's estimated GBP197 million balance in construction cost, it said.

Lodha's ratings were placed on RWN on July 28 following the company's announcement that it was seeking the consent of the holders of its US dollar notes to amend certain covenants in indenture so that it can reorganise, and to waive a breach of covenants.

According to Fitch, on August 14, Lodha said it had received the requisite consent from its unsecured noteholders to waive the breach of the restricted payment covenant, and to reorganise its operations to make its London properties part of the restricted group.
Lodha had also informed that ownership of the London properties will also increase to at least 75 per cent and the company expects to conclude the reorganisation by January 15 next year, the statement said.
The US dollar notes are issued by Lodha's wholly owned subsidiary, Lodha Developers International, and guaranteed by Lodha and certain subsidiaries.
The company was able to secure 30-month construction financing of GBP290 million for another residential project in London earlier this year, with a bullet repayment of principal. Lodha launched sales of this project, the smaller of the two, in April 2016, and had sold around GBP120 million of properties by June 2017.

According to the rating agency, Lodha continued to report robust property presales and cash collections in India for the quarter ended June 30, 2017 compared with its full-year FY18 presales expectation of around Rs 7,000 crore and cash collection expectation of Rs 7,700 crore.
"The company's collections are speeding up due to a number of its large projects coming to a close this year. Strong sales in FY17 were also supported by the company's Palava project, which benefits from the Indian government's push on affordable housing including the announcement of its infrastructure status, and tax and interest-cost incentives to buyers," it said.

Fitch expects Lodha to sell around Rs 3,000 crore worth of properties in London annually, between FY18 and FY20.