Fitch assigns 'BBB-' rating to Adani Ports' USD 500 mn bonds

Ratings agency Fitch today assigned 'BBB-' rating to USD 500 million notes of Adani Ports and Special Economic Zone (APSEZ).

"Fitch Ratings has assigned India-based Adani Ports and Special Economic Zone Limited's (APSEZ, BBB-/Stable) USD 500 million 3.95 per cent senior unsecured notes due 2022 a final rating of 'BBB-'," the ratings agency said in a statement.

BBB ratings indicate low default risk. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

The notes are rated at the same level as APSEZ's senior unsecured debt rating as they will constitute direct, unconditional, unsubordinated and unsecured obligations of APSEZ, it said.
 

The assignment of the final rating follows a review of final documentation that conforms to the draft documentation previously received, it said. The final rating is the same as the expected rating assigned on November 10, 2016.

Fitch said it continues to see APSEZ as being well-positioned to benefit from India's growth and related cargo opportunities.

The company has significantly better flexibility in infrastructure renewal and expansion capex than some other rated peers in the region, which gives it the ability to generate strong free cash flows, it said.

The main risk to the rating is management's commitment to contain outflows in terms of capex, mergers and acquisition and advances.

"The management recovered Rs 10.4 billion of related-party loans and Rs 5 billion of deposits with related parties in the first half of the financial year ending March 31, 2017. The terms of the US dollar notes also limit any related-party transactions to the company's normal course of business. The Stable outlook on the rating reflects management's commitment to reduce related-party loans," it said.

It added that APSEZ operates 10 ports across the Indian coast line. Its largest port, Mundra, accounted for around 64 per cent of revenue and 70 per cent of profit in FY16, and is the largest port in India by cargo volumes handled.