India Ratings, a part of the Fitch Group, has revised its outlook on Mumbai International Airport Pvt Ltd’s project bank loan facilities to “stable” from “negative”. The rated bank loans are Rs 4,231 crore long-term loans, Rs 100 crore fund-based limits (enhanced from Rs 42 crore) and Rs 355 crore non-fund-based limits (reduced from Rs 410 crore).

The revision in outlook reflects clarity on near-term issues highlighted during the last review, the ratings agency said. These include regulatory settlement of the final project cost, Airports Economic Regulatory Authority of India’s (AERA) orders on levy of the airport development fee (ADF) and the model to be followed for tariff fixation, as well as satisfactory progress on completion of the airport modernisation-cum-expansion project.

AERA, via an order issued in December 2012, has approved the project cost of Rs 12,000 crore, which is largely in line with management, the ratings agency added. The regulator has allowed levy of ADF up to April 2021, based on traffic forecasts provided in a consultation paper issued by AERA in October 2012, with the flexibility to reduce or increase the period based on actual passenger enplanements (the total number of passengers boarding an aircraft and the total revenue tons of freight and ail loaded on an aircraft).

The estimated amount of ADF that could be collected from January 2013 is Rs 2,515 crore, excluding an interest component of Rs 1,330 crore on ADF to be securitised in the near term by MIAL, India Ratings said. This is likely to improve debt service coverage ratio (DSCR), since previously the assumption in the financial model was for the interest to be expensed and passed through to be reflected in tariff, the ratings agency added.

However, the ability of users to absorb the increase in tariff, if passed down, could be a concern, India Ratings said. This is because of airlines’ weak financial positions and the possible impact on ticket prices and passenger demand.

A key element of MIAL’s financing plan and estimated revenue throughout the concession is monetisation of land parcels as part of the project. The rating also factors in the additional term debt that MIAL is expected to tie up to bridge a funding gap of Rs 1,560 crore, necessary for project completion. India Ratings believes that the existing bank syndicate is already evaluating MIAL’s application for the additional debt funding and a decision is likely in the next two months.

(This article was published on February 7, 2013)
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