MUMBAI :
The first Indian manufacturer markets a complex debt offer which it must carry out to avoid a default.
The new obligation of Lodha Developers International Ltd. will be essential to refinance its existing $ 324 million note due March 13. The business must also meet cash setting conditions before it can draw the proceeds from the bond.
“We are very pleased with the level of interest and commitments that we have so far,” said Abhishek Lodha, President and CEO of Macrotech Developers Ltd., which is the flagship company of the Lodha group. He was referring to the group’s ability to complete the sale of bonds in a difficult market that is facing the fallout from the coronavirus epidemic.
Even before the virus spread, Indian property developers had struggled with slowing demand as the country’s economic growth fell to a decade-low and a lingering credit crunch limited spending. At least ₹According to India Ratings, a local Fitch unit, $ 10.5 trillion ($ 143 billion) in debt is likely to default over the next three years.
Lodha could push back its maturity on short-term debt, but the risks of refinancing remain high, according to Moody’s Investors Service. Selling the new ticket is essential because Macrotech has no other funding agreement, and if the new problem derails or if Lodha does not meet the conditions, it would likely default, said Moody’s. Some of these conditions were not met as of February 28, the statement said.
The proposed new note is “subject to significant execution and market risk, creating uncertainty as to Macrotech’s ability to complete the bond transaction,” said Sweta Patodia, analyst at Moody’s.
Under the proposed bond conditions, Lodha must set aside $ 118 million in cash before she can sell the new bond. He still had to find around $ 32 million as of February 28, according to Moody’s calculations.
Lodha says the structure of the deal should reassure investors. “The comfort is that we will put the money first, then the new bondholders will put their money,” said Abhishek Lodha. “It is a comfort as strong as it can be given.”
Lodha’s 12% tickets maturing next week were shown at a discount of about 10% of face value on Wednesday, according to two Hong Kong-based traders who asked not to be identified as they are not not allowed to speak to the media.
Moody’s is evaluating the Caa1 bond offered by Lodha, seven steps below the investment category, with a negative outlook. He cited market risk and uncertainty over Macrotech’s refinancing plans over the next 12 months in the face of approximately $ 1 billion in debt maturing through March 2021.
Abhishek Lodha said the group had a solid history of paying down debt, citing positive cash flows in the past two quarters, which helped it repay $ 355 million to Macrotech over the period.
The Lodha group is the country’s largest residential real estate developer with sales of around 119 billion rupees during the twelve-month period ended in March of last year, according to a report by Grohe Hurun.
