SP group firm's high yield debt sees second downgrade in 4 months
Summary
- Rating on the non-convertible debentures, issued last year, has been downgraded to Care BB- with negative outlook from Care BB, the rating agency said on 28 September
Mumbai: The financial woes of the Shapoorji Pallonji group seem to be worsening with CARE Ratings further downgrading the credit rating of its group company Goswami Infratech Pvt Ltd in a span of 4 months.
Rating on these non-convertible debentures (NCDs), issued last year, has been downgraded to Care BB- with negative outlook from Care BB, the rating agency said on 28 September.
"The revision in rating assigned to Non-Convertible Debentures of Goswami Infratech Pvt Ltd (GIPL) takes into account delays in fund raising at the group level, as against earlier envisaged timelines, which has thereby resulted in heightened refinancing risk associated with the NCD repayment," said Care in its note.
The rating downgrade comes after the SP Group breached covenants for the third time on the ₹14,300 crore bonds sold by Goswami Infratech last year. This forced the conglomerate to seek a further extension of the ₹1,800 crore interest payment due on 30 September to 31 December 2024. The conglomerate had breached the covenant in January and April this year.
"The group is at an advanced stage of refinancing the borrowings at SICPL level. Thus, in the interim period, to align with the refinancing, the company has sought the extension for MFN Trigger event from 30 September 2024 to 31 December 2024 which has been approved by the investors ahead of the due date," said the rating agency.
Also read: PFC independent directors raise concerns over ₹20,000-cr loan plan for SP Group
Issuing NCDs
The SP group had issued these NCDs last June to raise ₹14,300 crore. The rupee-denominated NCDs mature 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 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 downgrade comes at a time when SP group has received Securities and Exchange Board of India's (Sebi) approval to list Afcons Infrastructure Ltd, where GIPL has investment in the form of compulsory convertible preference shares (CCPS).
In a letter to the debenture holders in mid-September, the conglomerate said that it has sought an extension of the deadline for the initial public offer (IPO), which is expected to fetch ₹8,400 crore, from 30 September to 31 October.
Read more: SP group firm Goswami’s high-yield debt sees ratings cut
Talks with PFC
SP Group is also in talks with Power Finance Corp. (PFC) to borrow nearly ₹20,000 crore to refinance the debt taken by the group's main investment vehicle Sterling Investment Corp. three years ago.
Sterling Investment raised ₹18,000 crore via non-convertible debentures against Tata Sons shares in 2021.
While the power financier had sought legal opinion on whether the unlisted shares of Tata Sons can be used as collateral to grant loans, its independent directors have raised concerns regarding this proposal.
In an emailed interview to The Economic Times in May, Tata Sons' chief executive officer Siddharth Sharma had made it clear that the pledged shares cannot be transferred by SP Group, which is the single-largest minority shareholder in the holding company of the Tata Group with an 18.37% stake.