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Moody's affirm Ba2 rating to Hyderabad Airport bond issue

HIAL is a joint venture between GMR Airports Malaysia Airports Holdings Berhad, AAI, and the Government of TelanganaPremium
HIAL is a joint venture between GMR Airports Malaysia Airports Holdings Berhad, AAI, and the Government of Telangana

  • Moody's Investors Service assigned Ba2 rating to the airport's proposed bond issue
  • Successful completion of the proposed bond issuance will strengthen the airport's liquidity profile and will provide a substantial portion of the remaining funding needed for the expansion, the ratings agency said

New Delhi: Rating agency Moody's Investors Service on Friday assigned Ba2 rating to GMR Group-operated Hyderabad International Airport Limited's (HIAL) $300 million proposed bond issue, which is aimed at raising funds for capital expenditure, suggesting a substantial credit risk to the loan facility.

Proceeds from the bond sale will be used to meet the airport's capital expenditure requirements, a note by the rating agency said.

“As at the end of December, the airport had around Rs13 billion of available liquidity which is sufficient to meet its cash requirements through to the end of September 2021," the note said.

Successful completion of the proposed bond issuance will strengthen the airport's liquidity profile and will provide a substantial portion of the remaining funding needed for the expansion, it added.

The rating agency also affirmed HIAL's Ba2 corporate family rating while labeling its outlook as negative. Moody's, in June last year, downgraded HIAL's corporate family rating to Ba2 after placing the airport's Ba1 rating to review in March.

According to Moody's Investors Service, obligations rated Ba2 are judged to have speculative elements and are subject to substantial credit risk.

"The negative outlook reflects potential downside risk over the next 12-18 months, which could stem from a slower than expected recovery in the airport's traffic, an unfavorable or delayed tariff decision from the upcoming reset, or delays in securing the additional funding required to complete its expansion," it added.

Major airports across the country, including HIAL, have seen a fall in passenger demand and revenue due to the ongoing covid-19 pandemic.

Indian aviation sector, including airports, are expected to lose a combined $ 6-6.5 billion during 2020-21, according to data from aviation consultancy firm Capa India.

Further the total number of air passengers are expected to fall to 50-60 million, including less than 10 million international passengers, during 202-21, down from 205 million air passengers, including 65 million international passengers, during 2019-20.

"The rating affirmation reflects the expected improvement in HIAL's revenue over the next 12-18 months, on the back of a likely tariff increase in the next control period (CP3) and a gradual recovery in passenger traffic and non-aeronautical businesses under our base case," said Spencer Ng, Vice President and Senior Analyst at Moody's.

Moody's expects Hyderabad's airport tariffs to increase after April 2021.

"Moody's does not expect a full recovery of passenger traffic to pre-pandemic levels until 2023, and any recovery remains vulnerable to a potential resurgence in infections or a default in major airline counterparties," it added.

HIAL is a joint venture between GMR Airports (63%), Malaysia Airports Holdings Berhad (11%), the Airports Authority of India (13%), and the Government of Telangana (13%).

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