India Ratings (Ind-Ra) has downgraded ratings of Macrotech Developers Limited’s (MDL), earlier known as Lodha, debt instruments from “BBB-” to “BB” due to slower-than-expected progress on refinancing initiatives for US dollar-denominated bond maturing in March 2020 and timely refinancing of domestic term debt.
Timely creation of liquidity backup for the upcoming debt maturities in 2HFY20 and FY21 amid the funding challenges being faced by the sector remains the key rating monitorable. The rating action also factors in weaker-than-expected operating performance in domestic residential market during April-October 2019, Ind-Rsa said in a statement.
Meanwhile, Lodha group in statement said, "We have already made 100% arrangement for repayment/refinancing of the USD bond which is not related to our India business. However, since rating agencies have formed a negative view on Indian economy and Indian corporates, we have also been selected for downgrade. The rating agencies have not taken our strong festive sales performance of over Rs 750 crores into account".
Our Indian business continues to perform extremely strongly and we will continue to focus on delivery of our projects and ensuring that we contribute strongly to employment creation and growth in India, company added.
Rating agency has maintained ratings on Rating Watch Negative (RWN).
Its liquidity is stretched and there is elevated refinancing risk for Debt Maturities in 2HFY20 and FY21. MDL’s outstanding debt reduced to Rs 24,850 crore as on 31 October 2019 from Rs 25,640 crore in FYE19. The reduction in debt was led by repayment of construction finance debt from Lincoln Square (48CS) project.
Out of the outstanding debt, Rs 4,940 crore is due for repayment from November 2019 to March 2020. This includes construction finance debt of Rs 1,560 crore (GBP170 million due in December 2019) on its 48 CS project, dollar-denominated bonds of Rs 2,300 crore ($ 324 million) due in March 2020 and domestic debt of Rs 1,100 crore due for repayment from November 2019 to March 2020.
MDL is in the process of monetising its 0.6 million sq. ft. of leasable area at New Cuffe Parade commercial project in Mumbai for Rs 1,050 crore. The final sale agreement is likely to be concluded shortly. Proceeds from sale would be first used to retire debt against the property of Rs 650 crore and pending Rs 400 crore would be utilised for debt repayment, ratig agency added.