Moody's assigns Ba3 to Cliffton's USD notes
Mar 08, 2021
Singapore, March 8 : Moody's Investors Service has assigned a Ba3 rating to the proposed 4.6-year USD senior secured notes to be issued by Cliffton Ltd.
The outlook on the rating is negative, it said on Monday.
Cliffton, a newly-formed special purpose vehicle for proposed transactions will use the proceeds to subscribe to Indian rupee senior secured non-convertible debentures (NCDs) to be issued by Delhi International Airport Ltd (DIAL).
DIAL in turn will use the proceeds of NCDs to fund its planned capital spending (up to USD165 million) and to refinance its USD288 million bond maturing in February 2022. DIAL will not have any ownership interest in or control over Cliffton.
Cliffton's USD noteholders will benefit from a first-ranking charge over its accounts and swap arrangements as well as a pledge over all of Cliffton's shares, but not the INR NCD issued by DIAL which will be held by an onshore custodian.
As the holder of the NCD issued by DIAL, Cliffton will benefit from a security package that includes DIAL's rights under certain project documents to the extent permitted by the concession agreement, and a charge on the airport's revenue and receivables as well as cash accounts.
Cliffton will share these securities with other senior secured lenders of DIAL on a pari passu (on equal footing) basis.
To manage its exposure to INR depreciation, Cliffton will use redemption premiums and enter into coupon-only swaps and credit spread options covering through to the call period of the proposed bond.
The Ba3 rating is predicated on the execution of the final transaction documentation including the currency hedging mechanism and issuance of the INR NCDs in line with the draft documentations reviewed by Moody's.
"The Ba3 rating assigned to the proposed notes reflects DIAL's underlying credit quality, given Cliffton's reliance on cash flow from the NCD repayments to meet the debt-servicing requirements of its USD notes and the limits on Cliffton's ability to undertake other activities beyond the proposed transaction," said Moody's Vice President and Senior Analyst Spencer Ng.
The negative outlook on the notes reflects downside risks in the next 12 to 18 months, given the uncertainty of airport's traffic recovery which will directly affect DIAL's revenue and cash flow, and potential negative impact from an adverse outcome in the arbitration process relating to DIAL's force majeure claims under its concession agreement or in the completion of its land monetisation transaction with Bharti Realty.
In addition, DIAL has sizable funding tasks in the coming months, given its planned capital spending and bond maturing in February 2022.
The proposed bond is one of the initiatives by DIAL's management to address the airport's near-term liquidity and funding requirements for its expansion.
