Moody's assigns Baa3 rating to Adani Transmission bonds

Global agency Moody's has assigned a provisional investment grade credit rating to Adani Transmission Ltd's proposed US dollar as well as the rupee denominated senior secured bonds.
It has assigned ATL's bonds (P)Baa3 -- an investment grade rating subject to moderate credit risk.
"The outlook on the ratings is stable. ATL will apply the proceeds of the proposed bond issuance to partially refinance existing bank loan facilities," Moody's said in a statement.
The rating is provisional, based on the proposed bond's draft documents which have been reviewed by Moody's Investors Service, the statement said.
It is expected that the provisional status of the rating will be removed and a definitive rating will be assigned upon the satisfactory review of the final documents.

The provisional rating of (P)Baa3, assigned in March 2016 to the Senior Secured notes denominated in Indian rupee, has been withdrawn, it said.

"The (P)Baa3 rating primarily reflects ATL's regulated business to operate transmission lines of about 5,000 circuit kilometers, mostly in Central and Western regions of India", says Abhishek Tyagi, a Moody's Vice President and Senior Analyst.
"The (P)Baa3 rating also reflects ATL's moderate financial leverage, combined with its active capex program to expand its transmission network," he said.
ATL's regulated transmission business is underpinned by stable and predictable cash flows that are generated based on pre-determined regulated returns. Such returns support ATL's (P)Baa3 rating and stable outlook.

The well-developed regulatory framework for power transmission in India allows for recovery of costs and returns and has periodic resets, which further enhances the credit profile of ATL.
While ATL has a short track record, Moody's said, the company has been outperforming regulatory expectation, with very high transmission line availability relative to regulatory norms.
It said the rating is challenged by the weak credit quality of its counterparties - state owned distribution companies which have weak financial profiles.