S&P Global Ratings and Moody’s Investors Service today said their ratings on Adani Transmission is unaffected by the company’s announcement to acquire Reliance Infrastructure’s (RInfra) operational transmission assets.
“We believe the current rating level can accommodate the acquisition although it would leave no headroom for any further material cash outflow,” S&P said in a statement.
RInfra had yesterday said it has signed a binding term sheet agreement to sell its power transmission assets to Adani group firm Adani Transmission (ATL) for over Rs 2,000 crore to cut debt.
In another statement, Moody’s said ATL’s announcement of acquisition of the transmission assets of RInfra(unrated) which is valued at around Rs 19.0 billion, is manageable within its rating, and as such the Baa3 rating is not affected by the transaction.
S&P said acquisition will only affect the obligor group (ATL and two of its operational subsidiaries) to the extent of equity value of about Rs five billion that will be paid to RInfra at the end of the transaction.
“It will not affect our business assessment or result in consolidation of additional debt from the acquired asset. This is because the acquired asset will remain outside the obligor group until the obligations under the common terms deed are met, including confirmation from two rating agencies that the transaction has no rating impact. We rate ATL based on the obligor group,” S&P said.
Moody’s said the transaction is however credit negative because the incremental debt that is associated with the acquired entity will weaken financial metrics and reduce the headroom within ATL’s rating, as well as reduce cash liquidity which is being used to fund the transaction.