India Ratings and Research (Ind-Ra) has downgraded Mumbai International Airport Limited’s (MIAL) bank facility ratings to ‘IND D’ from ‘IND B,’ while placing it in the Rating Watch Evolving (RWE) category.

The downgrade of the loans reflects the persisting delays in debt servicing by MIAL as the relaxation for default recognition expired on December 31, 2020.

Following an inter-creditor agreement signed between most of the lenders, the management expects implementation of the restructuring plan by February 2021.

Also read: Adani Group moves application proposal to take over Mumbai International Airport

The financial profile of the GVK Group- promoted MIAL was severely impaired by the outbreak of Covid-19, the resultant lockdown and the continued restrictions on airline operations. The total number of passengers handled by the airport plummeted to 1.86 million in H1FY21, a sharp tumble of 91.9 per cent year-on-year.

According to the rating agency, MIAL’s liquidity crisis in FY21 was aggravated by Covid-19, resulting from a constrained operating cash flow. The defaults post the moratorium period are being recognised by the agency immediately after the expiry of the timeline for invoking the resolution under the RBI’s circular. Furthermore, MIAL’s real estate monetisation plan, which was in advanced stages prior to the outbreak of Covid-19, also got deferred.

It continues to factor in the support provided by MIAL to Navi Mumbai International Airport Private Limited (NMIAL) to arrive at the ratings. MIAL has undertaken to support NMIAL’s equity requirements and cost overruns, and agreed to provide a corporate guarantee for the replenishment of the latter’s debt service reserve account for four years from the commencement of operations.

SEBI, through a circular dated August 31, 2020, provided relaxation to credit rating agencies from default recognition due to restructuring. MIAL invoked debt restructuring ahead of its debt-servicing due date of September 30, 2020, by delineating the change in ownership clause under the Reserve Bank of India circular of June 7, 2019.

GVK Group has agreed to cooperate with Adani Group to take over the debt availed by the former, and thereafter, take ownership of MIAL upon receipt of approvals. This change in ownership, along with implementation of the restructuring plan, will have a positive impact on MIAL’s ratings.

The management has informed Ind-Ra that under the restructuring plan, MIAL has sought an additional funded interest term-loan for six months till March 31, 2021; an extension of moratorium on the repayment of facilities till March 31, 2022; an extension of tenure and revised repayment schedule, consequent to the funded interest term-loan and moratorium extensions and reduction in interest rate for all facilities. The ratings would be upgraded on the implementation of the resolution plan.

Also read: Adani takes over MIAL, Navi Mumbai airports after a 2-year tussle with GVK

MIAL is a joint-venture company held by a GVK group-led consortium, comprising GVK Airport Holdings Ltd. (50.5 per cent stake), South Africa-based Bid Services Division (Mauritius) Limited (13.5 per cent), ACSA Global Limited (10 per cent) and Airports Authority of India (26 per cent).

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