Rating agency Moody’s Investor Service has placed Mumbai-based real estate development company Lodha Developers’ B2 corporate rating on review for a downgrade.
Rating agency Moody’s Investor Service has placed Mumbai-based real estate development company Lodha Developers’ B2 corporate rating on review for a downgrade. Simultaneously, it has also put B2 backed unsecured rating of the USD denominated bonds issued by the company under the scanner. Earlier this year, the financials of Lodha were downgraded. In January, Lodha’s rating was revised from B1 to B2. “The review follows the consent solicitation from bondholders in relation to the waiver of breach of restricted payment covenant on thebonds due in 2020, amendments to the indenture, as well as a proposed reorganisation in which properties located in London will become part of the restricted group,” says Saranga Ranasinghe, a Moody’s assistant vice president and analyst.
At June 30 2017, the company and certain of its subsidiaries had made restricted payments in the form of loans to the London entities, whichare not part of the restricted group, the report stated. Also it provided guarantees of indebtedness at London entities by Palava Dwellers Private Limited; these entities were all in breach of the restricted payment covenant.
Lodha is seeking consent from the bondholders to waive the breach of the restricted payments. Whether the bondholders will give their consent will be known by August 9, further scrutiny of Lodha’s documents revealed. The company is also seeking consent to reorganise, such that its London properties will now become part of the parent company. The review will focus on whether Lodha will receive the required consent.
As such, Moody’s views the proposed reorganisation of the London properties as credit neutral, because despite the increase in debt, there will be an increase in cash flow, as the company develops and sells the two London properties. In the absence of consent from bondholders, the company will need to redeem the $200 million bond.
Meanwhile, the company said that during the April to June quarter, it has beaten the industry wide demand slowdown and recorded salesworth Rs 2300 crore. It’s quarterly collection also was robust at Rs 2,600 crore, according to its top management. At the moment, sales bookings has crossed 200 million pounds until the June quarter, a PTI report said. Lodha’s MD recently pegged a sales revenue of 1.5 billion pounds (over Rs 12,000 crore) in the next three years from two ongoing housing projects in central London, the report enumerated.
The company forayed into the London realty market in 2013 with the acquisition of the landmark MacDonald House at 1 Grosvenor Square for overGBP 300 million (Rs 3,100 crore). The group acquired another site in central London, New Court at 48 Carey Street for 90 million pounds in 2014.