Rolta India downgraded on missed interest payment

S&P downgraded Rolta India Ltd. to CCC- from B+ as the company missed a $6.8m interest payment on its 10.75% 2018 unsecured notes. Rolta India was the guarantor of the note.

The payment was due on 16 May 2016.

Further, ratings on the subsidiaries of the India-based IT solutions firm, Rolta Americas LLC and Rolta LLC were also downgraded to the same level as Rolta India Ltd.

As per S&P, it appears that there is uncertainty on the company’s ability to meet its interest payment within the 30-day grace period ending on 15 June 2016.

However, company CEO K.K. Singh stated that the company was confident in making the interest payment before the end of the grace period. 

The company’s receivables had increased from 120-125 days to 180-190 days, leading to a cash crunch.

A credit ratings change, in future, would hinge on the company’s ability to make the above mentioned interest payment.

Source: Business Standard

S&P downgrades CMA CGM

Credit ratings agency Standard & Poor’s (S&P) downgraded container shipping operator CMA CGM to ‘B’ from ‘B+’.

Further, S&P lowered the rating on the company’s senior unsecured debt to ‘CCC+’ from ‘B-’.

S&P expects CMA CGM to witness a period of constrained earnings due to the challenging conditions in the container shipping industry and low freight rates in 2016 and 2017.

S&P added that it would further lower the rating in the next few quarters if it believed the carrier was experiencing a larger fall in freight rates than expected.

The company had previously stated that container liners were experiencing severe freight-rate volatility and downward pressure on primary and secondary routes, which it expected to continue in the next 12-18 months.

Source: Container Mag

S&P lowers outlook on China; says domestic-led economic growth moving “slower than expected”

Ratings agency S&P lowered its outlook on China’s credit rating of ‘AA-‘ to negative from stable, citing the Mainland’s attempts to overhaul its economy from an investment-led and export-oriented one toward domestic-led growth was proceeding at a slower pace than expected.

The move follows that by Moody’s, which lowered its outlook on China to negative earlier in March 2016 for its credit rating of Aa3. Fitch Ratings rated China as ‘A+’ with a stable outlook.

As part of its rationale on the lower outlook on China, S&P outlined the following reasons:

  • gradual increase in economic & financial risk to the government’s creditworthiness
  • weakening of sovereign and corporate credit metrics
  • increased reliance on credit to push the sluggish economy

Source: WSJ

Moody’s downgrades PEMEX to Baa3; outlook negative

Ratings agency Moody’s downgraded Mexican state-owned company Petroleos Mexicanos’ (PEMEX) by two notches from Baa1 to Baa3 with a negative outlook. The downgrade was attributed to lower oil prices, poor financial results and the possibility of the Mexican government providing financial support to the firm, all of which has negatively impacted Pemex.

Previously, Moody’s had downgraded Pemex to Baa1 from A3 in November 2015 and in January 2016, put it on review for a second downgrade.

On the earnings front, Pemex reported 13 consecutive quarterly losses since 2012 and generated losses amounting to $32bn across the FY 2015 period. Debt on the company’s books at the end of December 2015 was c.$8bn.

Further, the company announced in February 2016 that it would trim its 2016 budget by $5.8bn (MXP 100bn) to mitigate losses caused by falling crude oil prices.

Separately, Moody’s also lowered its outlook on the sovereign debt of Mexico (rated A3) amid subdued economic growth in the country. Oil, a key source of revenue for the country, has fallen sharply on lower demand globally, leading to the Finance Ministry of Mexico announcing budget cuts.

Moody’s expects the Mexican government to step in should Pemex face further financial difficulty.

Source: Bloomberg

Fitch Ratings downgrades Tata Steel and its UK arm

Ratings agency Fitch downgraded India-based steel manufacturing company Tata Steel Ltd. and its wholly-owned subsidiary Tata Steel UK Holdings on declining profitability and a spike in leverage during FY 2016. It has placed the credit ratings of both entities on Rating Watch Evolving (RWE).

The downgrade reflects uncertainty regarding Tata Steel’s announcement of restructuring its portfolio which includes a potential partial / complete divestment of its UK operations. A partial or a complete exit from the UK operations would be a credit positive for the company, Fitch stated.

Weak demand and overcapacity, along with softening of commodity prices globally, has affected the company. Demand growth in India for nine months ending December 2015 was at 4.7%, met largely by rising imports. However, recent moves by the Indian government to implement a minimum import price followed by a 20% duty on imports has provided some relief to domestic steel producers, but prices have still remained 20% lower than the average for FY-15.

Softening steel prices were evident in Tata Steel’s earnings for the 9M-15 period which saw consolidated EBITDA per tonne decline 35% to about INR 7,400 per tonne from Rs 11,400 per tonne in FY15, hit by a Rs 7,150 per tonne fall in realisation.

Source: Business Standard

Moody’s downgrades Samarco Mineracao; outlook negative

Moody’s downgraded Brazil-based mining firm Samarco Mineracao’s CFR to Caa2 from Caa1, with a negative outlook on the company. Ratings on the following debt instruments were also downgraded (outlook: negative):

  • $1bn Senior Unsecured Notes due 2022: from Caa1 to Caa2
  • $700m Senior Unsecured Notes due 2022: from Caa1 to Caa2
  • $500m Senior Unsecured Notes due 2022: from Caa1 to Caa2

Moody’s attributed the downgrade to the continued uncertainty about Samarco’s ability to resume mining operations in Brazil, concerns over liquidity pressures and risk arising from compensation payments the company has to make in light of its dam burst accident.

Samarco’s mining operations have been suspended since November 2015 when a dam rupture at one of its mines caused a massive flood in the Minas Gerais district of Brazil.

In the absence of mining operations, revenue generation has been significantly affected and the company may not have sufficient funds to meet its financial obligations and operating expenses in 2016.

Further, with compensation claims arising from the incident, Samarco could face significant cash outflows in 2016, further pressuring the company’s liquidity.

During March 2016, the miner and its shareholders (BHP Billiton and Vale S.A.) signed a compensation agreement with Brazilian federal authorities which outlined the financial terms Samarco would have to comply with until 2030 in relation to the accident.

As per the agreement, Samarco would have to make payments amounting to a total of BRL 4.4bn from 2016 to 2018, and further annual payments between BRL 0.8 – 1.6bn from 2019 to 2021. Payments to be made from 2022 until 2030 would be defined by the authorities based on the targets set by the agreement.

Source: Moodys’ Rating Report (16 March 2016)



Moody’s downgrades BHP Billiton

Mining giant BHP Billiton’s credit rating was downgraded by rating agency Moody’s to A3 from A1 amid a prolonged commodity price slump. The move follows a rating downgrade conducted earlier by S&P.

The downgrade adds to its disappointing first-half results where the company recorded losses of $5.6bn, mainly on write-downs of its U.S energy assets. The dismal earnings also led to the suspension of its dividend policy.

Price of iron ore, the commodity which accounts for a large chunk of BHP’s earnings, was down more than 70% since its peak in 2011 of nearly $192 a metric ton.

The firm has struggled with the outcome of a pending claims settlement case related to its investment in Samarco Mineracao, a Brazilian mining firm, formed by 50:50 JV with Vale S.A. Samarco faced a lawsuit in Brazil related to its dam bursting incident in which state authorities seek a compensation of upto BRL 20bn ($5bn). However, a statement released by JV partner Vale states that an agreement with the Brazilian authorities could allow the companies to pay BRL 9.6bn in compensation by 2030.

Source: WSJ