Rating agency Moody’s Investors Service on Tuesday downgraded the corporate family rating (CFR) of Macrotech Developers (MDL), erstwhile Lodha Developers, to Caa1 from B3. Moody’s has also downgraded rating of the US dollar-denominated bonds issued by MDL arm Lodha Developers International and guaranteed by MDL to Caa1 from B3. The outlook on all the ratings above is negative. Data from Capitaline showed that total debt of MDL stood at Rs. 25,641 crore as on March 2019.
“The downgrade to Caa1 reflects the continued uncertainty with respect to the refinancing of MDL’s upcoming debt maturities,” says Moody’s analyst Sweta Patodia. MDL now has in place an executed loan agreement for $155 million, secured against the unsold inventory at Lincoln Square, one of its London projects. However, drawdowns under this facility remain subject to receiving the practical completion certificate for all units at the property, which is expected by December 2019. As per management estimates, practical completion certificates have been received for about 75% of the units in the development.
“While the company has made some progress in its refinancing efforts, its measures to date do not completely alleviate the significant refinancing risks,”said Patodia, who is also Moody’s lead analyst for MDL. MDL expects to secure another credit facility of around $195 million against the unsold inventory at Grosvenor Square, its second London project. However, documentation for this facility is currently in progress and will likely be completed over the next few weeks.
Moody’s in its rating rationale also said that these two facilities constitute the company’s primary source to refinance the upcoming bonds. However, given that the facilities cannot be drawn down immediately, and remain subject to the fulfilment of certain conditions, liquidity risk remains elevated. “MDL’s Caa1 CFR is primarily a reflection of its weak liquidity position,” the rating agency said in its report.
In August this year, Moody’s had downgraded MDL’s CFR to B3 from B2. At the same time, it had also downgraded the senior unsecured rating of the US dollar-denominated bonds issued by Lodha Developers International and guaranteed by MDL to B3 from B2.