S&P Global lowers Eros International rating to 'B-'

S&P Global Ratings has lowered the rating of Eros International to 'B-' and placed the same on credit watch negative owing to high refinancing risks.
"... Lowered to 'B-' from 'B+' its long-term corporate credit rating on Indian film production and distribution company Eros International Plc. We also lowered our issue rating on Eros' proposed notes to 'B-' from 'B+'," S&P Global Ratings said in a statement dated March 10.
"At the same time, we put our ratings on credit watch with negative implications."
The 'B' rating means the entity carries the capacity to meet its financial commitment though there is a heightened risk of vulnerability.

The agency attributed its action on Eros to "the increasing refinancing risks resulting from its inability to place the proposed notes and arrange other alternative facilities". The credit watch placement reflects the possibility that the company could fail to make timely payments on its banking facilities, it added.
"In our view, Eros' withdrawal of the notes raises the refinancing risk on its upcoming maturities while it continues to work on alternative means to refinance them. We understand from Eros that it is currently in advanced stages with its financiers to secure new facilities to refinance its maturities of about USD 95 million due March 31, 2017," it said further.

Nevertheless, "we believe there is a risk that securing alternative finance and timely disbursement to repay the revolving credit facility may take more time, potentially beyond the due date of the facility".

The rating agency also referred to the option for Eros to use its cash of USD 135.8 million as of December 31, 2016 to avert any potential missed payments. "However, we are not sure about the company's willingness to use most of its cash to repay the upcoming maturities in full and on a timely basis. Also, in the case of cash being applied for debt maturity, the company's ability to spend on content creation will be significantly curtailed, impeding its business position," it noted.

"We will resolve the credit watch depending on the progress on Eros' refinancing over the next week. We will likely downgrade Eros if it is does not make significant progress over the next week and thereby further increases the risk of potential missed payments," it said.
According to the statement, a timely payment of its March 31, 2017, maturities could result in S&P Global Ratings' affirmation or raising the rating after taking into account the company's risk management practice as well as future funding and liquidity position.