Moody's Investors Service has assigned a first-time provisional rating of (P)Baa2 to the proposed 30-year dollar-backed senior secured notes to be issued under the newly established Adani Transmission Ltd Restricted Group (ATL RG).
ATL RG -- which is Adani Transmission Ltd's new restricted group -- comprises seven wholly-owned subsidiaries: Raipur-Rajnandgaon-Warora Transmission, Sipat Transmission, Chhattisgarh-WR Transmission, Hadoti Power Transmission Service, Barmer Power Transmission Service, Thar Power Transmission Service and Adani Transmission (Rajasthan).
Moody's said the rating outlook is stable.
The proposed notes will be issued by six of the seven restricted subsidiaries except for ATRL. The issuers will then on-lend part of the proceeds to ATRL. The restricted subsidiaries will use the proceeds to repay its existing senior debt, subordinated debt, capital creditors and general corporate purpose.
All seven restricted subsidiaries will be guarantors to the proposed notes, and the noteholders will be beneficiaries to a security package that includes assets, a pledge of the restricted subsidiaries' shares held by Adani Transmission, and an assignment of key project documents.
Collectively, ATL RG owns and operates seven electricity transmission assets in India.
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"The (P)Baa2 rating of the proposed USD notes reflects the credit quality of ATL RG, which is in turn supported by its stable revenues from a diversified set of transmission assets in India, operating under long-term transmission service agreements with set tariffs," said Spencer Ng, a Moody's Vice President and Senior Analyst.
"The rating also benefits from the transmission assets' solid operating track record across ATL RG and the broader Adani Transmission portfolio as well as from the fully amortising fixed cost debt structure which further enhances the group's cash flow visibility," added Ng.
At the same time, the rating considers ATL RG's moderate financial leverage and its exposure to financially weak state-owned utility companies as well as residual exposure to rupee-dollar currency fluctuations.
Moody's projects that ATL RG's debt service coverage ratio will average around 1.4x over the term of the bond. The long-term projection assumes that on balance the RG will be able to renew its transmission licences upon the maturity of their initial 25-year term due to the on-going need for these assets as part of India's central transmission grid.
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