SP group firm Goswami’s high-yield debt sees ratings cut

Financing plans of Shapoorji Pallonji group have received a setback with Care Ratings cutting the credit rating of group company Goswami Infratech Pvt. Ltd's (GIPL) non-convertible debentures (NCDs). Rating on these NCDs, issued last year, has been downgraded from Care BBB- to Care BB with negative outlook, Care Ratings said on 24 May.

“The NCDs outstanding are not backed by cashflow and is thus dependent on timely refinancing in the short term and support from promoter entities. Given the refinancing risk, the long-term rating outlook has been revised from Stable to Negative. The outlook may be revised to 'Stable’ in case of completion of the refinancing exercise at the group level within the timelines,” said Care.

Also read: SP group firm’s bond offers 16-17% yield but here’s the risk

A banker familiar with the matter said SP group had breached covenants on these bonds twice this year—first in January and then in April—before seeking an extension on deadline for meeting certain covenants this month.

Queries emailed to SP group went unanswered.

The SP group had issued these NCDs last June to raise ₹14,300 crore. The rupee-denominated NCDs matures in April 2026 at a redemption premium of 18.75%. Investors like Cerberus Capital, Varde Partners, Canyon Capital, Davidson Kempner, as well as existing lenders Deutsche Bank, Edelweiss Special Opportunities Fund and Ares SSG had subscribed to these bonds.

The bonds were issued against the collateral of pledged shares of Tata Sons and Afcons, the engineering, procurement and construction (EPC) arm of SP group.

“The rating continues to remain tempered by the low operating cash flows of GIPL, with the entity being holding company and no major cashflow in form of interest/dividend either received in past or expected in the period going forward and inherent market related risk impacting the market value of direct and indirect investments of credit option provider,” added Care.

Also read: SP raises ₹14,300 crore via high-yield debt

The funds were raised with the aim to refinance the maturities of CIPL's debt, prepay Sterling Investment Corp Pvt Ltd's (SICPL) debt amounting to ₹3,327 crore and also use ₹3,000 crore to fund the other group debt obligations.

The rating revision comes after GIPL extended the deadline for meeting certain covenants on the ₹14,300 crore bonds from 26 May to 30 September 2024, which has been approved by the investors through Debenture Trustee, ahead of the payment date.

According to the Economic Times, SP group is offering ₹400 crore more to the bondholders of GIPL in exchange for the extension. The company, which has to pay ₹1,400 crore in interest this month, has sought a four-month window to allow it to sell some assets and ensure the payment.

Also read: SP group faces tough investor conditions

These NCDs included a special clause called 'most favoured nation' (MFN), suggesting that if any SP Group affiliate borrows at a higher rate after 26 May 2024, Goswami Infratech must offer the same return to its bondholders.

The latest rating revision comes at a time when the group is at an advanced stage of refinancing the 2021 bonds issued by SP group's other promoter holing company SICPL, against its 9.1% shareholding in Tata Sons. A Bloomberg article noted that it is in talks with lenders including Power Finance Corporation to raise as much as ₹15,000 crore.

Also read: Adani Ports to buy majority stake in Shapoorji Pallonji's Gopalpur Port for around ₹1,349 crore

That said, the SP group is also working on monetising its other assets. On 26 March Shapoorji Pallonji Group and Adani Ports and Special Economic Zone (APSEZ) signed a deal wherein APSEZ will purchase the 56% stake of the Shapoorji Pallonji Group. Additionally, APSEZ will also buy 39% stake of Orissa Stevedores in Gopalpur Port. It has also filed the Draft Red Herring Prospectus for Afcons Infrastructure Ltd, where GIPL has investment in the form of compulsory convertible preference shares (CCPs).