Moody’s assigns stable outlook on Ola’s proposed $500-million debt fundraise

Ola is aiming to raise a $500-million term loan, though the investors were not identified in Moody’s note released on Monday. CFR ratings are assigned by agencies after analysing all categories of debt issued by the company and its subsidiaries.

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Additional acquisitions or investment plans that further deplete liquidity would also add negative ratings pressure, it added.

Moody’s Investors Service has assigned a first-time stable B3 corporate family rating (CFR) to mobility start-up Ola’s parent company ANI Technologies and its Netherland and US subsidiaries for its proposed debt fundraise structured as a secured term loan.

Ola is aiming to raise a $500-million term loan, though the investors were not identified in Moody’s note released on Monday. CFR ratings are assigned by agencies after analysing all categories of debt issued by the company and its subsidiaries.

“Ola’s wholly-owned subsidiaries — Ola Netherlands B.V. and Ola USA Inc. — are the borrowers. The loan is guaranteed by Ola and its subsidiaries engaged in ride-hailing services. The outlook is stable,” Moody’s said in a note on Monday.

Ola also has ambitions of expanding its ride-hailing presence in the UK, Australia and New Zealand, where it currently has small market shares. In these markets, the company competes against ride-hailing incumbents Uber and Didi, who have much larger scale and stronger balance sheets, Moody’s pointed out in its note.

Given these factors, Moody’s said that the payoff from expansions in international markets would be uncertain, given that the company’s intention to fund its business partially with debt.

The rating firm also pointed out that Ola may have to heavily step up its level of spending to support its growth plans. The company’s annual cash burn (cash flow from operations less capital expenditures) will double to $140 million for at least the next two years, from $73 million in the year ending March 31, 2021 (FY21).

Moreover, Ola’s cash and cash equivalents of $279 million as of March 31, 2021, will just cover the company’s expected cash burn and scheduled debt maturities through December 2022, Moody’ added. It also estimated that Ola’s tax-related contingent liabilities in India amount to around $160 million as of March 31, 2021.

However, Moody’s added that Ola’s ratings will likely face “downward pressure” if the proposed debt transaction is delayed or if the funds raised are lower than the company’s target of $500 million. Additional acquisitions or investment plans that further deplete liquidity would also add negative ratings pressure, it added.

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