Trump Tower developer Lodha battles bond slump amid cash crunch

Property companies face debt woes as funding stresses deepen

India’s property tycoon Mangal Prabhat Lodha’s company just can’t catch a break in the bond market as liquidity risk has roared back amid stress in the sector.

Lodha Developers International Ltd.’s 2020 dollar-denominated notes have fallen to a record low this month, according to Bloomberg prices going back to August 2016. That reflects deepening problems in the country’s real-estate sector which is facing a funding crunch on top of lackluster home sales, climbing inventories and declining prices.

The developer’s 12 per cent notes have slumped more than 14 cents to 82.9 cents on the dollar since May 2, when Moody’s Investors Service revised parent company Lodha Developers Ltd.’s outlook to negative, citing weakening liquidity. Fitch Ratings also changed its outlook to negative last month.

The debt problems may rein in founder Lodha’s attempts to take his company public and hurt his leading position in the South Asian nation’s real-estate market. His wealth was estimated at about Rs 271.5 billion ($3.91 billion), according to the GROHE Hurun India Real Estate Rich List released last year, making him India’s richest developer at the time.

There was no immediate reply from Lodha Developers to an emailed request for comment.

Indian property companies, which have been increasingly relying on shadow banks for borrowing, are struggling to roll over debt as the lenders themselves are facing a cash squeeze, raising prospects of a wave of defaults. The problems have worsened in recent weeks as non-bank financier Dewan Housing Finance Corp. had its rating cut to default.

Lodha Developers’ cash and operating cash flow will be “insufficient” to meet Rs 69 billion of debt repayments due this financial year, Fitch wrote in its May note. “A failure to execute its refinancing plan may result in the rating being downgraded by one or more notches.”

The real-estate company is developing the Trump Tower in India’s commercial capital Mumbai.

Shadow lender Piramal Capital & Housing Finance Ltd. said last month that it planned to cut its exposure to Lodha Developers by 12 billion rupees even after the Mumbai-based developer sold 28 per cent of its London arm earlier this year to pare debt and planned further stake sale. The firm is also trying to monetize projects in India to meet refinancing needs.