Krishnapatnam Port acquisition in July 2020
S&P Global Ratings has assigned its ‘BBB-‘ long-term issue rating to the US$1.2 billion senior unsecured notes proposed by Adani Ports and Special Economic Zone Ltd, proceeds from which will cover debt at Krishnapatnam Port Co Ltd (KPCL) to be acquired in July 2020.
The issue rating is subject to review of the final issuance documentation, said S&P on 13 July 2020.
APSEZ intends to use the proceeds from the issuance to refinance debt at the company and its subsidiaries, including KPCL debt.
The size of the proposed issuance is within the S&P base case for the current rating level.
“In our view, APSEZ’s leverage will increase temporarily in fiscal 2020 (ending March 31, 2021), driven by lower trade volumes amid the COVID-19 pandemic and the completion of the KPCL acquisition.
“However, we believe APSEZ’s leverage will remain within our expectations for the current rating level over the next two to three years, given its good balance sheet flexibility,” said the global rating agency.
“We expect management to protect the company’s investment-grade credit profile by adjusting its capital expenditure, inorganic growth appetite, or dividend distributions to maintain a ratio of funds from operations to debt of more than 15% on a sustainable basis.”
APSEZ’s earnings profile is supported by its strategically located origin and destination ports, long-term contracted revenues, tariff flexibility, and good operating efficiency.
Nevertheless, these strengths are offset by the company’s high asset concentration risk to Mundra port and a less protected competitive market position relative to peers in Asia-Pacific.
In S&P view, APSEZ’s capital structure can accommodate operational softness, given the management’s ability to adjust its growth aspirations, shareholder distributions, and investments.
“We estimate APSEZ’s ratio of adjusted net debt to EBITDA will be well below 4.0x over the next three years. In addition, we expect APSEZ to refrain from significant related-party transactions outside the normal course of business,” said S&P. #SEZs, #Ports #Credit #finance #banks #assets #infrastructure /fiinews.com
