Moody’s Investors Service on Thursday said it has assigned a first-time provisional Baa3 rating to Adani International Container Terminal Private Limited’s (AICTPL) proposed senior secured bonds and the credit outlook is negative.
AICTPL will use the proceeds of the issuance to refinance existing debt, the global ratings agency said in a release.
“The (P) Baa3 rating on the proposed USD notes is underpinned by AICTPL’s strategic location, its large and diverse catchment area, and its strong operating track record.
“At the same time, the rating captures AICTPL’s exposure to volume risk, which is partially mitigated by the strong growth potential of India’s container market and importance of AICTPL to MSC and TIL,” Abhishek Tyagi, Moody’s Vice President and Senior Analyst, said.
The Baa3 refers to an investment-grade rating subject to moderate credit risk.
The provisional (P)Baa3 rating also benefits from AICTPL’s strong and committed shareholders as well as the bond’s fully amortising fixed-cost debt structure, the ratings agency said.
AICTPL operates two container terminals in Mundra, under a sub-concession agreement signed with Adani Ports and Special Economic Zone Limited (APSEZ, Baa3 negative), as per the release.
The terminals can handle container vessels of up to 14,000 TEUs, with a total berth length of 1,460 metres and handling capacity of 3.1 million twenty-foot equivalent units (TEUs).
APSEZ, in turn, has signed a concession agreement with Gujarat Maritime Board. Both the concession and sub-concession agreements are co-terminus and will end in February 2031, according to the release.
AICTPL is owned equally by its two shareholders, APSEZ and Terminal Investment Limited (TIL).
It has a long-term terminal service agreement with Mediterranean Shipping Company (MSC), which accounted for 73 per cent of AICTPL’s volumes in the fiscal ended March 31, 2020. MSC is also the majority shareholder of TIL, as per the release.
“In addition, the (P)Baa3 rating considers AICTPL’s moderate leverage levels, significant amortization in the last year of the bond tenor, and the strong structural features, including the reserving of cash during the last three years of the bond tenor,” the agency said.
Moody’s regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety, it said.
“AICTPL’s rating considers the fact that the company’s operations have been recovering from the coronavirus shock since the first quarter of fiscal 2021, and that the company’s solid market position, prudent financial management and strong liquidity have partially offset the breadth and severity of the shock on trade flows,” the release said.
The negative rating outlook over the next 12-18 months reflects the negative outlook on India’s sovereign rating and the fact that virtually all of AICTPL’s business operations are based in India, it stated.
“Given the negative outlook, the rating of senior secured bonds is unlikely to be upgraded in the near term.
“The outlook on the rating could return to stable if the negative outlook on India’s sovereign Baa3 rating is stabilised and AICTPL’s credit profile remains consistent with its Baa3 profile amid a stable operating environment,” the agency said.
The final rating is subject to Moody’s satisfactory review of the final transaction documents, it added.