MIAL defers Rs 2,000-crore bond offering over unfavourable market

GVK group-backed Mumbai International Airport (MIAL) has postponed plans for its Rs 2,000-crore bond offering and also deferred refinancing of some of its loans. According to India Ratings (Ind-Ra), MIAL has deferred its bond issue owing to unfavourable market conditions. 

Ind-Ra has downgraded the rating assigned to term loans from ‘AA-’ to ‘A+’. Officials with bond arrangers said the bond market has been volatile. It is a tad unfriendly on credit issuance (bonds and loans). People have apprehensions and there is no clarity on how the environment is likely to be in the coming months.

Many players in the infrastructure sector are over leveraged. There is difficulty in terms of getting investors’ conviction in the environment where a lot of companies have not been able to meet their obligations. 

The market is unfavourable so far as credit is concerned. This has impacted plans for investment grade companies also, they added. The company is in the infrastructure space.  Ind-Ra said MIAL had planned to refinance a portion of the loan to meet cash requirements for both capex and Navi Mumbai International Airport equity. This plan, too, has been deferred, leading to compressed liquidity and weakening of forward-looking coverage ratios.

Earlier this week, the rating agency had cut the rating for MIAL’s term loans over erosion in built-up liquidity caused by factors like delays in real estate monetisation. The rating action also reflected higher-than-estimated capital expenditure and higher-than-projected equity injection in NMIAL. MIAL is the promoter of the upcoming New Mumbai International Airport.

The rating has been placed under rating watch with negative (RWN) implications. MIAL is yet to respond to queries sent by Business Standard.

Delay in refinancing a portion of the debt through a bond against the original plan also reduces the financial flexibility. The RWN reflects MIAL’s weakened liquidity position and dependence on real estate monetisation for future capex.

The downgrade on term loans against real estate deposits reflects significant risk on repayment of loans due in August and September. The RWN reflects MIAL’s weakened liquidity position to manage the repayment of Rs 284-crore real estate deposit loans in September 2019.

MIAL had to take on the extra burden of supporting work on the upcoming Navi Mumbai airport. Against the original plan (Rs 5,55 crore and capex of Rs 233 crore), an additional equity of Rs 350 crore was injected into NMIAL. It also incurred an additional capex of Rs 521 crore in FY19.

Partial closure of the runway for re-carpeting and overlay work in February and March 2019 combined with the shutting down of Jet Airways’ operations have exerted pressure on the cash flows of MIAL.