Bengaluru: Moody's Investors Service has downgraded Macrotech Developers Ltd (formerly known as Lodha Developers Ltd) and assigned it a ‘B3’ rating (from ‘B2’), with a negative outlook, over liquidity risks in the Mumbai-based real estate company.
It has also downgraded the senior unsecured rating of the US dollar-denominated bonds issued by Lodha Developers International Limited (LDIL) and guaranteed by MDL to ‘B3’ from B2.
"The downgrade reflects heightened liquidity risk at MDL, because of the company's lack of sufficient progress in refinancing its upcoming debt maturities," Sweta Patodia, a Moody's analyst said in a rating note on Friday.
MDL has a £250 million construction loan with respect to its Lincoln Square project in London, maturing in December 2019, $324 million in bonds maturing in March 2020 and another £517 million of construction loans maturing in March 2021.
The company intends to repay the Lincoln Square construction loan maturing in December 2019 out of collections from sales made at the property to date. As of 30 May 2019, the company sold units worth £270 million at Lincoln Square.
"MDL's initial plan to refinance the $324 million bonds through proceeds from equity stake sales in London projects is now uncertain, while progress on commercial asset sales in India has also been slower than what Moody's had expected and remains subject to further delays," said Patodia.
Although LDIL has received terms of offer from one of the existing lenders for refinancing the outstanding dollar bonds, the loan agreement is yet to be executed and remains subject to finalization of terms and due diligence.
As such, even though the company has made progress on its refinancing efforts, it needs to progress further to mitigate the near-term liquidity risk, Moody’s said.
Its India operations also have $381 million maturing over the next 12 months.
A Lodha spokesperson said the company is up to date on all the debt-servicing of interest as well as principal and some of its debt is pre-paid, ahead of scheduled repayment.
“…We continue to sell our apartments and continue to collect payment in line with our business plan. Our collection in 2018-19 was ₹9,200 crore, which is 54% of collections of the top ten real estate developers," the spokesperson said.
Moody's expects MDL's onshore debt to be rolled over, given the company's track record of rolling over these facilities in the past, and its large unencumbered land bank at Palava, in suburban Mumbai, which could be pledged to raise additional debt.
The negative outlook reflects the uncertainty over the refinancing of MDL's upcoming debt maturities.
“Our debt levels have to be seen in the context of the fact that our ready and near ready residential inventory and receivables in India ( ₹27,000 crore) and London ( ₹11,000 crore) and our ready commercial assets ( ₹2,000 crore) more than adequately cover the debt levels," a Lodha spokesperson said.