India's power companies face cash crunch after PFC rating cut to junk

Electricity projects, already reeling under precarious finances, could see borrowing costs soar if Power Finance isn't able to access the dollar bond market or raises funds overseas

A downgrade to junk for a state-run lender to electricity projects risks worsening the cash crunch faced by the nation’s power firms.

Power Finance Corp, India’s top dollar bond issuer in 2019, was cut to BB+ from BBB- by S&P Global Ratings last week, becoming the latest so-called fallen angel that’s dropped below investment grade. Yield premiums on its 3.95 per cent dollar notes due April 2030 surged the most in two months following the downgrade, according to prices compiled by Bloomberg.

Electricity projects, already reeling under precarious finances, could see borrowing costs soar if Power Finance isn’t able to