Moody's Investors Service on Wednesday said refinancing risk for Macrotech Developers Ltd (MDL) continues to remain high, even as it may be able to meet its near-term debt maturity.
The company's USD 324 million bonds are maturing on March 13, for which it needs USD 343 million to repay principal and interest, Moody's said.
Of this, MDL (formerly known as Lodha Group), has proposed to float an international bond issue of around USD 200 million to repay the debt.
"The proposed bond transaction is subject to significant execution and market risk, including the fulfilment of condition precedent, creating uncertainty around MDL's ability to complete the bond transaction as planned," Moody's Analyst Sweta Patodia said.
According to Moody's, of the USD 343 million funds required for repayment, USD 118 million amount relies on three factors including proceeds from an inventory financing facility, transfer of funds from its Indian operations and collections from existing sales.
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"Collection from sales also remains subject to market conditions. Any delays in receiving such proceeds will prevent the bond transaction from progressing, increasing thelikelihood of default," it said.
Moody's further noted that even if the company manages to complete repayment for the upcoming bond maturity, refinancing risk remains high with around an additional USD 1 billion of debt maturing by March 2021.
"The proposed bond will alleviate immediate refinancing needs, but that even if the bond goes ahead as planned, significant debt maturities and unfavourable industry conditions will keep refinancing risk high and liquidity weak," it said.
The agency further said the city-based developer currently does not have alternate financing arrangements in place to repay the maturing bond.
"Tepid consumer confidence, slowing economic growth and tight liquidity have hurt real estate demand in the MMR region where MDL has its projects. Project launches have consequently continued to exceed sales, leading to inventory build-up and price corrections. These subdued market conditions will likely continue to constrain MDL's earnings over the next 12 months," Moody's said.
Even if MDL addresses the upcoming bond maturity, Moody's sees limited upside for the rating over the next 12-18 months.
"In addition to significant refinancing risk, weak financial management as reflected by an inability to execute refinancing plans on a timely basis will continue to weigh on MDL's credit quality," it noted.
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