/raid1/www/Hosts/bankrupt/TCRAP

/raid1/www/Hosts/bankrupt/TCRAP_Public/130909.mbx T R O U B L E D C O M P A N Y R E P O R T E R A S I A P A C I F I C Monday, September 9, 2013, Vol. 16, No. 178 Headlines A U S T R A L I A CONVECTOR GRAIN: Goes Into Voluntary Administration GIPPSLAND SECURED: Placed Into Receivership MENTONE GARDENS: Families Set to Lose Thousands Over Collapse NINE ENTERTAINMENT: Moody's Rates AUD20MM Term Loan '(P)Ba2' OPES PRIME: Former Director Found Not Guilty of Dishonesty RETAIL ADVENTURES: Creditors Set to Take Legal Action * Moody's Sees Improvements in Australian Mortgage Arrears C H I N A CHINA MINZHONG: S&P Puts 'BB-' CCR on CreditWatch Developing HENGDELI HOLDING: Fitch Affirms 'BB+' LT Issuer Default Rating INTIME RETAIL: Fitch Affirms 'BB' Issuer Default Ratings PARKSON RETAIL: Fitch Lowers LT Issuer Default Rating to 'BB+' H O N G K O N G * Moody's Downgrades Ratings on Six Hong Kong Banks I N D I A B. HIMMATLAL: CRISIL Assigns 'BB' Ratings to INR160MM Loans BHARATH INFRA: CRISIL Raises Ratings on INR200MM Loans to 'BB' BHOORATHNOM CONSTRUCTION: CRISIL Cuts Rating on INR1BB Loans to D DR. B.S. GUPTA: CRISIL Ups Ratings on INR63.5MM Loans to 'B' FITMET INDUSTRIAL: CRISIL Assigns 'D' Ratings to INR75.2MM Loans GREY'S EXIM: CRISIL Cuts Ratings on INR110MM Loans to 'B' JAIN UDHAY: CRISIL Assigns 'B-' Ratings to INR373.9MM Loans LINERS INDIA: CRISIL Cuts Ratings on INR510MM Loans to 'D' MACEDON VINIMAY: CRISIL Raises Ratings on INR81.7MM Loans to 'B' MACROCOSM INDUSTRIES: CRISIL Cuts Rating on INR250MM Loan to 'D' ODEON BUILDERS: CRISIL Lowers Rating on INR600MM Loans to 'B' SOMA ISOLUX: CRISIL Cuts Ratings on INR9.78BB Term Loan to 'D' SR VAPORS: CRISIL Assigns 'D' Ratings to INR119.6MM Loans SRI BALAMBIKA: CRISIL Ups Ratings on INR621.4MM Loans to 'BB-' STOTZ GEARS: CRISIL Downgrades Ratings on INR36.8MM Loans to 'B-' SWASTIK METAFORGE: CRISIL Lowers Ratings on INR150MM Loans to 'D' VIRAJ POLYPLAST: CRISIL Ups Ratings on INR150MM Loans to 'B' * Moody's Downgrades Ratings on 11 Indian Banks J A P A N RENESAS ELECTRONICS: To Sell Two LSI Units to Broadcom * Moody's Says Japanese CMBS Performance Continues to Improve N E W Z E A L A N D BLACKTOP CONSTRUCTION: Goes Into Receivership P H I L I P P I N E S UNITRUST DEV: Depositors, Creditors to Receive Partial Payment * Moody's Lowers Ratings on Two Philippine Banks - - - - - ================= A U S T R A L I A ================= CONVECTOR GRAIN: Goes Into Voluntary Administration --------------------------------------------------- Brett Worthington at the ABC Rural reports that a Victorian grain handler has gone into voluntary administration, owing farmers, transport companies and the bank close to AUD10 million. The creditors for Melbourne-based Convector Grain say the ANZ bank will receive its money, about AUD2 million, according to ABC Rural. The report notes that administrator Richard Cauchi, from SV Partners, says it's unclear if the more than AUD8 million owed to farmers and transport companies will be paid back. Growers owed money are furious and were considering trying to remove the administrators at a creditors meeting, ABC Rural relates. Farmers in the Victorian Mallee said they're owed about AUD1.5 million, the report relates. The report discloses that Victorian Farmers Federation grains president Brett Hosking says it comes as grain growers face tough times with their crops. "I think once it gets to this stage there is not a lot a grower can do other than just ride it out and hope for the best. . . . Certainly we are hopeful there will be some money coming back to growers and hopefully it will be as much as possible, but that's one of the challenges when a company goes into receivership like this," the report quoted Mr. Cauchi as saying. Mr. Cauchi said all staff had received their entitlements before Convector Grains called in the administrators, the report adds. GIPPSLAND SECURED: Placed Into Receivership ------------------------------------------- Louis Nelson at Latrobe Valley Express reports that embattled lender Gippsland Secured Investments has been placed into receivership, after the Federal Court blocked a six-week effort to bail out the mortgage fund on September 2. About AUD143 million worth of deposits from about 3,500 mostly Gippsland-based investors are now at the mercy of the receivership process, which until now have been frozen pending the Federal Court's decision, the report says. While the majority of GSI businesses and investors were from East Gippsland, with a small number of stakeholders in the West Gippsland area, Committee for Gippsland chief executive Mary Aldred said GSI's collapse would have a flow-on affect through the entire regional economy, according to the report. "This is going to have a direct impact on local investors, retirees, mums and dad, which will be felt beyond direct stakeholders, however we will have to wait to see how the (receivership) process from here goes," the report quotes Ms. Aldred as saying. Latrobe Valley Express recalls that GSI froze investors' accounts in July, after a review found its loan portfolio had been hit with asset write-downs and loan payment shortfalls. The group representing investors' interests, The Trustee Company, soon after moved to have the fund placed into receivership, the report notes. Latrobe Valley Express, citing GSI's most recent prospectus, released in early 2013 (now redundant), discloses that of the company's AUD$118.5 million loan security portfolio, AUD6.9 million was in the Latrobe Valley local government area. According to the report, Ernst and Young receiver Adam Nikitins said the receivership process was primarily concerned with the interests of investors. "While the total returns for note holders are inherently uncertain at this early stage of the receivership, we expect the returns will be meaningful and exceed an estimated 80 cents in the dollar," Mr. Nikitins, as cited by Latrobe Valley Express, said. Gippsland Secured Investments Limited (GSI) operates as a non-bank lender. It borrows funds from the public and lends those funds to borrowers on the security of registered mortgages over real property. MENTONE GARDENS: Families Set to Lose Thousands Over Collapse ------------------------------------------------------------- Amy Bainbridge at ABC News reports that dozens of families of residents at an aged care respite home in Melbourne's south-east have lost thousands of dollars in fees. The ABC has learned Mentone Gardens collected large deposits from some families. Mentone Gardens went into administration in June this year, with debts of more than AUD4 million, ABC discloses. ABC relates that the case has been referred to the corporate regulator by the administrator. Families have been told their money will not be recovered. Mentone Gardens is a Victorian Government-regulated Supported Residential Service (SRS) providing respite and occasional care for the elderly. NINE ENTERTAINMENT: Moody's Rates AUD20MM Term Loan '(P)Ba2' ------------------------------------------------------------ Moody's Investors Service has assigned a provisional (P)Ba2 senior secured rating to a proposed USD Term Loan Facility (equivalent to around AUD 200 million) to be entered into by Nine Entertainment Group Pty Ltd and Nine Entertainment (Delaware) Corporation, 100% owned and guaranteed subsidiaries of Nine Entertainment Co Holdings Limited ("NEC"). The assignment of a definitive rating to the facility is subject to review of the final documentation and to successful close of the transaction. The proceeds of issuance will be used to partially fund the acquisition of WIN Perth. Ratings Rationale: "The acquisition of WIN Perth, which will be largely debt-funded, can be accommodated within the tolerance levels set for the rating but reduces headroom to accommodate any material deterioration in operating performance," says Maurice O'Connell, a Moody's Vice President -- Senior Analyst. "Assuming the acquisition of WIN Perth proceeds as expected, Moody's anticipates that NEC's adjusted debt/EBITDA will be around 3.2-3.3 x, over the next 12-24 months," adds O'Connell who is also Lead Analyst for the company. "NEC's appetite for debt-funded acquisitions has raised the level of uncertainty built into the company's rating and diminishes Moody's expectation of an ongoing stable business profile. Further largely debt funded acquisitions could place material pressure on the company's rating and/or outlook and would raise the likelihood of a negative rating action," said O'Connell. NEC's (P)Ba2 rating reflects its strong operating profile combined with a moderately conservative financial profile post implementation of a Scheme of Arrangement completed in January 2013. The company's strong operating profile is driven by its national scale operations which provide it with a good ability to withstand and absorb localized weak operating conditions or sporadic market disruptions, across its entire network. At the same time NEC has a solid track record of strong audience and revenue share as well as a good degree of diversification across different advertising channels. Nevertheless we consider that NEC faces strong competition from other Free to Air networks which could impact on margins depending on the success of future content. With no plans for dividends in the near term and manageable capex, the leverage ratio should gradually improve. Also driving the rating is NEC's liquidity profile which Moody's considers to be strong. The rating considers the earnings diversification provided by NEC's Events and Digital operations. Finally, the rating also considers a degree of uncertainty around the future capital structure due to the complex shareholder structure and the potential for the capital structure to change following a possible IPO in the short to medium term. The stable rating outlook reflects the solid liquidity and our expectation that NEC will continue its focus on maintaining sufficient financial leverage to cushion any adverse industry developments. Ratings could be downgraded if debt-to-EBITDA ratios are sustained above 4.25x (including Moody's standard adjustments) which could be due to operating weakness, acquisitions or cash distributions to shareholders. Failure to maintain good liquidity including a comfortable cushion to financial covenants to absorb a cyclical downturn in revenue could also result in a downgrade. Further largely debt funded acquisitions would likely reduce headroom within the rating and raise the potential for negative rating action. The principal methodology used in this rating was the Global Broadcast and Advertising Related Industries Industry Methodology published in May 2012. OPES PRIME: Former Director Found Not Guilty of Dishonesty ---------------------------------------------------------- Australian Associated Press report that former director of Opes Prime Julian Smith has been found not guilty of dishonesty over the firm's collapse. Mr. Smith said he hopes to "get his life back" after being found not guilty of dishonesty. According to the report, Mr. Smith walked free from court on Sept. 6, acquitted of accusations he duped a bank into lending him AUD95 million just days before Melbourne-based company Opes Prime collapsed. Mr. Smith, 51, was charged with two counts of using his position as director dishonestly to gain advantage, AAP relates. After a five-week Victorian Supreme Court trial, jurors took one day to return with the not guilty verdict, says AAP. According to the news agency, Mr. Smith spoke briefly as he left court and said he wanted to "get my life back". "I'm just very grateful to the jury and thankful it's all over," he told reporters, AAP reports. About Opes Prime Opes Prime Group Ltd was an Australian unlisted public company providing a range of financial services and products for high net worth individuals, stockbrokers and financial advisors, asset managers, banks and other firms, both for themselves and their clients. The Group conducted business via a number of operating subsidiaries based in Melbourne, Sydney and Singapore: 1) Opes Prime Stockbroking Limited is a full Market Participant of the Australian Stock Exchange Ltd, and holds an Australian Financial Services Licence (#247408) which enables it to deal and advise in financial services and products to retail and wholesale clients. The company was first registered on 10 March 1999, and started business with its current shareholders in 2005. Opes Prime Stockbroking is a specialist provider of securities lending and equity financing services. In Singapore, the firm operates through Opes Prime Group's wholly owned subsidiary, Opes Prime International Pte Ltd. In Australia, Opes Prime Stockbroking has granted Authorized Representative status to Trader Dealer Pty Ltd, an on-line non-advisory trading execution service for the semi-professional and professional trader. 2) Opes Prime Structured Products Pty Ltd develops, manages and markets specialized leveraged products for the high net worth market, providing outstanding risk protection and return potential. 3) Opes Prime Paradigm Pty Ltd, is a corporate finance and advisory firm specializing in small and mid cap stocks. 4) In Singapore, Opes Prime Asset Management Pte Ltd provides specialist hedge fund incubation, advisory and trade management services, and Five Pillars Associates Pte Ltd provides Islamic finance consultancy. * * * The Troubled Company Reporter-Asia Pacific reported on April 1, 2008, that Opes Prime was placed under receivership after directors became aware of a number of cash and stock movement irregularities in relation to a small number of accounts. Ferrier Hodgson Partners John Lindholm, Peter McCluskey and Adrian Brown have been appointed Administrators by the directors of Opes Prime Group Limited and a number of its subsidiaries and related entities including, Opes Prime Stockbroking Limited. Initial investigations indicate that the solvency of the business was under pressure due to a number of major clients not meeting significant margin calls. Sal Algeri and Chris Campbell from the Deloitte Corporate Reorganization Group were appointed by a secured creditor, ANZ Banking Group Ltd., as Receivers and Managers of Opes Prime Group Ltd, Opes Prime Stockbroking Ltd, Leveraged Capital Pty Ltd and Hawkswood Investments Pty Ltd. The TCR-AP reported on Oct. 17, 2008, that Opes Prime's creditors voted on Oct. 15, 2008, to liquidate Opes Prime Stockbroking Limited. According to the Australian Associated Press, the decision of the creditors will allow the liquidator to pursue claims against Opes Prime's secured creditors -- ANZ Bank and Merrill Lynch -- that were not available to the administrator. About 1,200 Opes clients lost shares they had placed with Opes in return for margin loans, when the major secured creditors of Opes -- ANZ, Merrill Lynch, Dresdner Kleinwort -- began selling a pool of nearly AUD1.6 billion in shares soon after the Opes collapse, in a bid to recover money owed to them by Opes, the AAP said. Opes Prime owed clients about AUD585 million at the time of the collapse, but due to fluctuations in the share market that figure had fallen to about AUD400 million on Sept. 22, 2008, the AAP noted citing Ferrier Hodgson. RETAIL ADVENTURES: Creditors Set to Take Legal Action ----------------------------------------------------- Sue Mitchell at BRW reports that Kathmandu founder Jan Cameron's fight to regain full control over her failed discount retail empire, Retail Adventures, may not be over. While creditors owed AUD49 million voted in favor of Ms. Cameron's deed of company arrangement last week, creditors owed about AUD32 million are taking legal action to wind the company up, BRW relates. BRW says with funding from IMF (Australia), the creditors are finalising an application to the Federal Court to have the Retail Adventures DOCA set aside on the grounds that the resolution was only passed because of the support of related parties -- creditors whose debt had been assigned to Ms. Cameron's company. "Related parties are permitted to vote, but it means the court can consider whether there is scope to set aside the decision," the report quotes Colin Biggers & Paisley partner Scott Hedge, who is advising the creditors, as saying. As reported in the Troubled Company Reporter-Asia Pacific on Sept. 4, 2013, SmartCompany said Retail Adventures founder Jan Cameron has won back control of her business nearly a year after the company collapsed into administration, with creditors voting in favor of a new deed of company arrangement. Creditors voted on September 2 to approve the deal, which will see them receive between five and six cents for every dollar owed by the company. With around AUD114 million owed by the company, that means a AUD5.5 million return to creditors, SmartCompany disclosed. The purchase comes after Deloitte said earlier this month creditors should vote against Ms. Cameron's plan, in favor of a liquidation plan which would see creditors receive between 22c and 48c in the dollar, the report related. About Retail Adventures Retail Adventures Pty Ltd is an Australia-based discount variety retailer and operates nationally under brand names Chickenfeed, Go-Lo, Crazy Clark's, and Sam's Warehouse. The company operates around 270 stores across the four brands. Deloitte Restructuring Services Partners Vaughan Strawbridge, David Lombe and John Greig were appointed Joint Voluntary Administrators of Retail Adventures Pty Limited, effective Oct. 26, 2012. Ms. Cameron, the sole shareholder and only secured creditor, bought back 210 Sam's Warehouse and Crazy Clarks stores and two distribution centres for AUD59 million from the administrators, Deloitte, in February, BRW reports. * Moody's Sees Improvements in Australian Mortgage Arrears ---------------------------------------------------------- Moody's Investors Service says that Australian prime mortgage arrears improved in June in comparison with May. As published in Moody's just-released Global Structured Finance Collateral Performance Review, Moody's says arrears in excess of 30 days in the Australian prime residential mortgage market were 1.52% in June, down from 1.62% in May, and down from 1.56% the same period a year earlier. Australian prime 60-day-plus arrears at 0.83% compare favorably to some of the other countries covered in the Global Collateral Performance Report. Japan (0.28%) is the only country reporting a lower 60-plus arrears rate. "Looking ahead, we expect the performance trends witnessed to date in 2013 to continue with stable delinquencies, underpinned by expected GDP growth of 2.0% to 3.0%, the current low interest rate environment, and a steady unemployment rate of 5.0% to 6.0%" says Jennifer Wu, a Moody's Vice President and Senior Credit Officer. About Moody's Global Collateral Performance Report Moody's Global Collateral Performance Report is updated monthly and covers the collateral performance of 40 structured finance sectors located globally. In the US, the performance metrics of 12 asset classes are covered, in Europe: 19, in Japan: 7, in Australia: 1, and in Canada: 1. The report features typical aggregate performance metrics, such as delinquencies and losses, as well as sector-specific metrics that include residential and commercial property prices, loans in special servicing, refinancing profiles, average WARF levels, senior OC levels, payment rates, and excess spread. The underlying data is also included. The metrics are accompanied by sector commentary and outlooks, and projected losses by vintage where applicable. Australian data focuses on: - Australian Prime RMBS - Australian Home Prices ========= C H I N A ========= CHINA MINZHONG: S&P Puts 'BB-' CCR on CreditWatch Developing ------------------------------------------------------------ Standard & Poor's Ratings Services said that it had placed its 'BB-' long-term corporate credit rating and its 'cnBB+' long-term Greater China regional scale rating on China-based agriculture company China Minzhong Food Corp. Ltd. on CreditWatch with developing implications. S&P placed the ratings on CreditWatch pending greater clarity on the implications of Indonesia-based packaged food producer PT Indofood Sukses Makmur Tbk. becoming a controlling shareholder of Minzhong. As of Sept. 4, 2013, Indofood owns 51.6% of Minzhong, compared with 29.3% earlier. The CreditWatch placement indicates that S&P could lower, affirm, or raise the ratings on Minzhong depending on its assessment of any change in the company's credit quality. "We believe Indofood will further increase its shareholding in Minzhong, and are evaluating whether there will be any major change in strategic direction at Minzhong or operational and financial integration between the two companies," said Standard & Poor's credit analyst Joe Poon. Indofood and its parent, First Pacific Co. Ltd., have a much larger scale and are more diversified than Minzhong. Separately, a U.S.-based short-selling firm Glaucus Research Group has made allegations of fraud at Minzhong, to which Minzhong has publicly responded with supporting documents. S&P is still valuating the situation and are assessing whether such allegations will disrupt Minzhong's access to capital markets or its regular operations. "We aim to resolve the CreditWatch within three months, following our discussion with the management on potential changes to the company's strategic direction, the degree of integration with Indofood, and financial policy objectives," said Mr. Poon. S&P could raise the ratings if it assess that Indofood is a stronger parent and intends to support Minzhong operationally or financially. Alternatively, S&P could affirm or lower the ratings on Minzhong if the effects of fraud allegations offset any potential benefit of becoming a subsidiary of Indofood. HENGDELI HOLDING: Fitch Affirms 'BB+' LT Issuer Default Rating -------------------------------------------------------------- Fitch Ratings has revised China-based watch retailer Hengdeli Holding Limited's Outlook to Negative from Stable. The agency has affirmed Hengdeli's Long-Term Issuer Default Rating (IDR) and senior unsecured rating at 'BB+', respectively. The Negative Outlook reflects the weaker operating environment in watch retailing in mainland China and the challenges the company will likely face in its strategy to increase its focus on the mid- end market. Further deterioration in the operating environment or setbacks in its repositioning strategy may undermine or delay the recovery of the company's credit metrics. Key Rating Drivers Weak industry environment: Hengdeli's sales in H113 were affected by overall weak consumer sentiment in mainland China and the government's anti-graft campaign, particularly given the company's current high exposure to luxury watches in the retail segment. The company's same-store-sales growth (SSSG) in mainland China declined 7.5% in H113 as high-end watch SSSG contracted 18.9% and mid-range watch SSSG remained flat. Steeper price discounting mainly in high-end watches also contributed to the decline. Overall revenue still grew 9.5% yoy to CNY6.3bn for H113, driven by stronger sales from Hong Kong and revenue inclusion of its associate-turned-subsidiary Harvest Max. Fitch expects recovery, albeit mild, in the operating environment in 2014. Inventory optimisation increases working capital: In response to the difficult operating environment, Hengdeli is changing its product mix by increasing its inventory of mid-end watches while gradually destocking slower-moving high-end watches. However, this shift has resulted in increased working capital, causing average inventory days to remain high at 225 days for H113 (2012: 205 days). Fitch expects inventory days and working capital requirement to stay elevated until Hengdeli successfully optimises its product mix. Timing for deleveraging uncertain: Leverage increased to 3x in H113 (2012: 2.5x) due to slower sales, higher inventory and increased investments in, Harvest Max. The company has flexibility in capex but deleveraging will be driven primarily by inventory reduction and sales recovery, timing for which remains uncertain. High variable costs: Despite the sharp SSSG fall and steep discounting, Hengdeli's EBITDA margin did not decline significantly (9.7% in H113 against 11.5% in 2012) because of the high variable cost structure of the company, especially due to its extensive use of turnover rent (rentals as a share of turnover). However, Fitch believes that stronger competition in the mid-end segment may not allow Hengdeli to improve margins significantly, even though this segment is currently more profitable than the high-end segment. Rating Sensitivities Future developments that may, individually or collectively, lead to negative rating action include: - Average inventory days sustained over 210 days - FFO net adjusted leverage sustained above 2.75x - SSSG in China remaining negative - EBITDA margin sustained below 10% The Outlook may be revised back to Stable if Hengdeli is able improve on the guidelines set out above. INTIME RETAIL: Fitch Affirms 'BB' Issuer Default Ratings -------------------------------------------------------- Fitch Ratings has revised China-based Intime Retail (Group) Company Limited's Outlook to Negative from Stable. Its Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) and senior unsecured rating have been affirmed at 'BB'. The Outlook revision reflects a weaker operating environment for department store operators in China, which adds uncertainty to the timing of Intime's deleveraging following a period of high capex. Key Rating Drivers 2013 leverage stays high: Intime's H113 annualised funds from operation net leverage adjusted for lease, payables and customer deposits (funds flow from operations (FFO) adjusted net leverage) was at 5.12x. Fitch expects 2013 adjusted net leverage to peak at 5.5x as this year will see the highest capex for Intime. This will be up from 4.6x in 2012 despite a 16% yoy increase in H113 EBITDA as adjusted net debt continued to rise by CNY711m. Challenging operating environment: Growing population, continued urbanisation, rising disposable income and government policy all point to steady growth in retail in the long term. However, other store formats such as shopping malls and online retail are threatening department stores' share of the retail industry. This implies department store revenue growth might underperform overall retail market growth over the medium term. As such Fitch believes Intime's department store operations will grow at a slower pace than previously expected. Expansion into shopping malls should provide diversification benefits although this is still modest at just five shopping malls compared with 27 department stores at end- H113. High H113 growth unsustainable: Fitch believes it is difficult for Intime to repeat from 2014 the 13.7% same store sales growth (SSSG) seen in H113. Intime's Q213 SSSG of 19% may not be sustainable as it was boosted by mid-year sales promotion, and fast-growing stores established in 2011 and in 2012. Intime's longer-term SSSG is likely to trend towards the 7.6% growth that its top 10 largest and more stable stores showed in H113. Long deleveraging process: Intime's on-going effort to divest non- core assets, together with growing EBITDA and slowing capex, are key factors driving its deleveraging. The completion of CNY500m non-core assets disposal and its combined book value of CNY1,372m in non-core assets and development properties at end-June 2013 helped to fund its CNY2.1bn capital commitment at end-2012. New stores contributing in 2014 will drive over 50% of Intime's concessionaire commission growth, helping to increase EBITDA by an estimated CNY200m. All these together should help keep Intime's 2014 adjusted net leverage within 4.5x-5.0x. Liquidity position has strengthened: Fitch expects Intime to generate positive free cash flow (FCF) from 2014. This, together with the combined CNY4.2bn bank facilities and its H113 cash holdings of CNY1.7bn, is sufficient to meet the repayment of Intime's total debt of CNY5.4bn as at end-H113. Intime has in June 2013 obtained a new dual-currency three-year term loan facility of up to HKD750m and USD266m. This dual currency facility will be used to refinance HKD1,941bn convertible bonds due in October 2013 and the balance will be used for repayment of other borrowings. It also has undrawn banking facilities of CNY2bn. Rating Sensitivities Negative: Future developments that may, individually or collectively, lead to negative rating action include: -- FFO adjusted net leverage rising above 4.5x on a sustained Basis -- generating negative FCF on a sustained basis Positive: As the current Rating is on Negative Outlook Fitch's sensitivities do not currently anticipate developments, individually or collectively, with a material likelihood of leading to a rating upgrade. The Outlook will be revised to Stable if: -- FFO adjusted net leverage trends lower towards 4.5x in 2014; and -- neutral FCF is being generated on a sustained basis PARKSON RETAIL: Fitch Lowers LT Issuer Default Rating to 'BB+' -------------------------------------------------------------- Fitch Ratings has downgraded China-based department store operator Parkson Retail Group's Long-Term Issuer Default Rating (IDR) and senior unsecured rating to 'BB+' from 'BBB-'. The Outlook is Stable. The downgrade reflects Parkson's weaker sales growth and profitability which will likely pressure credit metrics over the next two to three years. Key Rating Drivers Weak YTD 2013 performance: A slower-than-expected economic recovery and the company's mature store network, which leaves it more exposed to competition, continued to affect Parkson's performance well into 2013. As a result, the company's H113 same store sales (SSSG) declined 0.7% on H212 despite a one-off boost in gold/jewellery sales in Q2 spurred by lower gold prices. The lower-than-expected revenue growth and start-up costs for new stores also affected the company's profitability, with H113 EBITDA falling 24% yoy to CNY605m. Notwithstanding Fitch's expectations of a slight recovery in H213, SSSG for the full year is likely to be 2%-3%, lower than the mid-single digits Fitch had expected earlier this year. Challenging operating environment: Growing population, continued urbanisation, rising disposable income and government policy all point to steady growth in retail in the long term. However, other store formats such as shopping malls and online retail are threatening department stores' share of the retail market. This implies department store revenue growth is likely to underperform overall retail market growth over the medium term. Within the department store sector, Parkson's older and mature store network generate lower revenue growth relative to competitors with newer stores. Overall Fitch believes Parkson's operations will grow at a slower pace than previously expected and compared with other rated peers. Pressure on credit metrics: Parkson's reliance on leased property is also putting more pressure on its profitability in a slower- growth environment given its higher portion of fixed rental expense. More than 80% of Parkson's stores are leased. As a result, Fitch now expects funds flow from operations (FFO) fixed charge coverage to remain below 2.5x for the next two to three years, which the agency believes is not in line with that of an investment-grade company. Well diversified nationwide network: Parkson's ratings continue to be supported by its well-established and geographically diversified presence in China across 36 cities. Its top five stores accounted for 30% of GSP, compared with around 60% respectively for rated major peers. In Fitch's view, Parkson's low concentration risk partially offsets the lower sales growth at its older stores relative to its key competitors. Strong liquidity: Parkson's ratings are also supported by the company's healthy cash position and debt maturity profile. At end- June 2013, the company had cash and cash equivalents of CNY4.4bn, and no short-term debt. During H113, the company successfully refinanced existing debt by issuing a five-year USD500m bond. Flexible capex: The company is still in an expansionary mode and also open to acquisitions and Fitch, as a result, expects the company to generate negative free cash flow in 2013. However, Parkson has scaled back expansion plans in H213, and as evidenced in 2012, it has the willingness to further adjust its capex by delaying store openings or scale back discretionary acquisition plans, depending on the market environment. Rating Sensitivities Negative: Future developments that may, individually or collectively, lead to negative rating action include -- FFO fixed charge coverage lower than 2.0x on a sustained basis (2012: 2.2x) -- Sustained negative free cash flow -- Adjusted FFO net leverage (adjusted for lease, payables and customer deposits) sustained above 4x (2012: 3.3x) Positive: Future developments that may, individually or collectively, lead to positive rating action include -- FFO fixed charge coverage greater than 2.75x on a sustained Basis -- Adjusted FFO net leverage (adjusted for lease, payables and customer deposits) sustained below 2.5x -- A neutral free cash flow position on a sustained basis ================ H O N G K O N G ================ * Moody's Downgrades Ratings on Six Hong Kong Banks --------------------------------------------------- Moody's Investors Service downgraded the subordinated debt ratings (Lower Tier II) and selected junior subordinated debt ratings (Upper Tier II) for the Basel II compliant securities of six Hong Kong banks. The banks' senior obligation ratings and their stand- alone baseline credit assessments were not affected. Moody's views the probability of support from the Hong Kong government as having diminished to the point where such support no longer warrants any uplift in banks' subordinated debt ratings. For Mainland Chinese-owned Hong Kong banks, following this rating action, Moody's now rates their subordinated debt at two notches below the baseline credit assessment adjusted to reflect the benefit of parental support (adjusted BCA). This approach incorporates assumptions about support from their Chinese bank parents. However, since the ratings of their parents benefit from systemic support from the Chinese Government, Moody's judges that there is some risk that such support may not be extended to the subordinated debt of their subsidiaries and that it is appropriate to reduce the uplift of such parental support by one notch. The rating actions conclude the review commenced on June 3, 2013. The outlook on the subordinated debt ratings of Bank of East Asia and Wing Lung Bank are negative, in line with the negative outlook on the deposit and bank financial strength ratings (BFSR) of these banks. The outlook on the subordinated debt ratings of Bank of China (Hong Kong), China CITIC Bank International, Industrial and Commercial Bank of China (Asia), and Standard Chartered Bank (Hong Kong) are stable. Ratings Rationale: Moody's downgrade reflects the increasing international trend of imposing losses on holders of subdebt securities (creditor "bail- in") as a pre-condition for distressed banks to receive government support. As a consequence, Moody's no longer assumes that Hong Kong government support would be forthcoming for the holders of such securities. For Hong Kong subsidiaries of Mainland banks, Moody's now rates their subordinated debt at two notches below the baseline credit assessment adjusted to reflect the benefit of parental support (with a floor of unadjusted baseline credit assessment minus one notch), in contrast with the methodology in which the agency stated that subordinated debt ratings are usually positioned one notch below banks' adjusted BCA. The wider notching reflects doubts that parental support would extend to subordinated debt given that the parent bank ratings incorporate systemic support from the Chinese government. "We recognize that Hong Kong and Mainland Chinese bank supervisors have in the past acted in a manner to support bank creditors", says Sonny Hsu, a Moody's analyst. "However, the experience of the global financial crisis has shown that the willingness to provide support can change rapidly as costs mount and losses have been imposed on bank creditors even in the absence of a formal resolution framework. Fears that creditor bail-ins might trigger serious contagion risks have largely not been realized." This rating action relates only to Moody's view on the potential for systemic support for the banks' junior securities. It does not reflect any change in the banks' intrinsic credit quality. Moody's continues to rate Hong Kong banks amongst the strongest in the world on a stand-alone basis. Additionally, the rating agency continues to incorporate the potential for systemic support into the ratings of some Hong Kong banks' senior obligations. Background In recent years, losses have been imposed on the holders of junior securities during the resolution of troubled banks in crisis-hit countries. In the majority of cases, investors have suffered losses as a result of distressed exchanges, which do not necessarily require a developed resolution framework to be in place. Furthermore, experience has shown that such a framework can be developed quickly at times of stress. As a consequence, Moody's approach globally is now to assume, as a starting point, that no government support would be extended to the subordinated debt holders of a distressed bank, except where particular circumstances justify. A detailed rationale explaining our decision can be found in our upcoming special comment entitled "The World Has Changed: The Support Probability for Bank Subordinated Debt in Asia-Pacific Has Significantly Diminished". Listed Of Affected Ratings Bank of East Asia, Limited - Subordinated debt: downgraded from (P)A3/A3 to (P)Baa3/Baa3 - Long-term foreign and local currency bank deposit rating: unchanged at A2 - Bank financial strength rating/baseline credit assessment: unchanged at C-/baa2 Bank of China (Hong Kong) Limited - Subordinated debt: downgraded from (P)A1/A1 to (P)A3/A3 - Long-term foreign and local currency bank deposit rating: unchanged at Aa3 - Bank financial strength rating/baseline credit assessment: unchanged at C+/a2 China CITIC Bank International Limited - Subordinated debt: downgraded from (P)Baa3/Baa3 to (P)Ba1/Ba1 - Junior subordinated debt: downgraded from (P)Ba1 to (P)Ba2 - Long-term foreign and local currency bank deposit rating: unchanged at Baa2 - Bank financial strength rating/baseline credit assessment: unchanged at D+/baa3 Industrial and Commercial Bank of China (Asia) Ltd. - Subordinated debt: downgraded from (P)A3/A3 to (P)Baa1/Baa1 - Long-term foreign and local currency bank deposit rating: unchanged at A2 - Bank financial strength rating/baseline credit assessment: unchanged at C-/baa2 Standard Chartered Bank (Hong Kong) Ltd - Subordinated debt: downgraded from (P)A1/A1 to (P)A2/A2 - Junior subordinated debt: downgraded from (P)A2 to (P)A3 - Long-term foreign and local currency bank deposit rating: unchanged at Aa3 - Bank financial strength rating/baseline credit assessment: unchanged at B-/a1 Wing Lung Bank Limited - Subordinated debt : downgraded from (P)Baa1/Baa1 to (P)Baa2/Baa2 - Long-term foreign and local currency bank deposit rating: unchanged at A3 - Bank financial strength rating/baseline credit assessment: unchanged at C-/baa1 The principal methodology used in these ratings was Global Banks published in May 2013. ========= I N D I A ========= B. HIMMATLAL: CRISIL Assigns 'BB' Ratings to INR160MM Loans ----------------------------------------------------------- CRISIL has assigned its 'CRISIL BB/Stable/CRISIL A4+' ratings to the bank facilities of M/s. B. Himmatlal Agrawal. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Proposed Cash 50 CRISIL BB/Stable (Assigned) Credit Limit Letter of Credit 40 CRISIL A4+ (Assigned) Cash Credit 110 CRISIL BB/Stable (Assigned) Bank Guarantee 100 CRISIL A4+ (Assigned) Bill Discounting 100 CRISIL A4+ (Assigned) The ratings reflect BHLA's healthy order book and the extensive experience of the firm's promoters. The ratings also factor in BHLA's moderate financial risk profile supported by expected improvement in the firm's cash accruals. These rating strengths are partially offset by BHLA's moderate scale of operations, which is further susceptible to the tender-based nature of its operations in a fragmented industry, and large working capital requirements. For arriving at the ratings, CRISIL has treated unsecured loans of INR75 million extended to BHLA by its promoters as on August 27, 2013 as neither debt nor equity. This is because these loans are expected to remain in the business during the tenure of the bank debt and an undertaking for the same has been received from the management. Outlook: Stable CRISIL believes that BHLA will continue to benefit over the medium term from its healthy order book. The outlook may be revised to 'Positive' in case the firm registers significant improvement in its liquidity, most likely because of higher-than-expected cash accruals due to significantly higher-than-expected scale of operations and profitability levels, also leading to improvement in its business risk profile. Conversely, the outlook maybe revised to 'Negative' in case of pressure on BHLA's liquidity because of lower-than-expected cash accruals or larger-than- expected debt-funded working capital requirements, or lower-than- expected profitability. BHLA, established as a proprietorship concern by Mr. Himmatlal Agrawal in 1975 in Nagpur (Maharashtra), was reconstituted as a partnership concern in 2006. The operations of the firm are currently handled by Mr. Brijesh Agrawal and Mr. Kishor Agrawal. BHLA is primarily involved in coal transportation and trading operations, apart from labour works and civil construction works which contribute a small portion to its revenues. BHARATH INFRA: CRISIL Raises Ratings on INR200MM Loans to 'BB' -------------------------------------------------------------- CRISIL has upgraded its rating on the long-term bank facilities of Bharath Infra Exports and Imports Limited to CRISIL BB/Stable from CRISIL BB-/Stable, while reaffirming the rating on the short-term bank facilities at CRISIL A4+. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 100 CRISIL BB/Stable (Upgraded from 'CRISIL BB-/Stable') Letter of Credit 750 CRISIL A4+ (Reaffirmed) Proposed Long-Term 100 CRISIL BB/Stable (Upgraded Bank Loan Facility from 'CRISIL BB-/Stable') Proposed Short-Term 550 CRISIL A4+ (Reaffirmed) Bank Loan Facility The upgrade reflects CRISIL's expectation that BIEIL's revenues and accruals will be significantly higher vis a vis the earlier expectations and BIEIL will manage its working capital requirements effectively. The ratings continue to reflect extensive experience industry experience of the promoter and well established relationship with its customers and suppliers. These rating strengths are partially offset by moderate financial risk profile marked by moderate total outside liabilities to net worth ratio and modest debt protection indicators. Outlook: Stable CRISIL believes that BIEIL will benefit over the medium term from its promoters' extensive industry experience. The outlook may be revised to 'Positive' in case of significant and sustainable improvement in its capital structure, while maintaining its revenue growth and profitability. Conversely, the outlook may be revised to 'Negative' in case of decline in the company's revenues or profitability or a lengthening of its working capital cycle impacting its financial risk profile. BIEIL was established in 2008 by Mr. Dayananda Reddy. BIEIL owns and operates Landmaark mall which provides an interface between building material suppliers and real estate and infrastructure players. The company is also engaged in trading in MS Billets and TMT bars. Mr. Dayananda Reddy is the Chairman and Managing Director of the company and oversees the day to day operations of the company. Mr. Reddy also has interests in real estate business. Mr. Reddy has been associated with Karnataka Land Developer's Association and Bommasandra Industrial Association, Bengaluru. BIEIL reported a profit after tax (PAT) of INR51.4 million on net sales of INR6.6 billion for 2012-13, against a PAT of INR11.0 million on net sales of INR4.2 billion for 2011-12 BHOORATHNOM CONSTRUCTION: CRISIL Cuts Rating on INR1BB Loans to D ----------------------------------------------------------------- CRISIL has downgraded its ratings on the bank facilities of Bhoorathnom Construction Company Pvt Ltd to 'CRISIL D/CRISIL D' from 'CRISIL B/Stable/CRISIL A4'. The rating downgrade reflects instances of delay by BCC in servicing its term loan; the delays have been caused by the company's weak liquidity. BCC has weak liquidity mainly on account of its large working capital requirements and delays in receipt of payments from its customers. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 640 CRISIL D (Downgraded from 'CRISIL A4') Cash Credit 140 CRISIL D (Downgraded from 'CRISIL A4') Proposed Bank 155 CRISIL D (Downgraded from Guarantee 'CRISIL A4') Secured Overdraft 20 CRISIL D (Downgraded from Facility 'CRISIL B/Stable') Term Loan 45 CRISIL D (Downgraded from 'CRISIL B/Stable') BCC is also exposed to risks related to the tender-based nature of its business. However, BCC benefits from its healthy order book, which provides revenue visibility, and strong project implementation capabilities. BCC was set up in 1972 in Hyderabad (Andhra Pradesh). The company manufactures pre-stressed concrete, reinforced cement concrete, and mild steel pipes. BCC undertakes water pipeline projects for state and central government agencies across India. BCC has also diversified into the road projects segment in Andhra Pradesh. BCC reported, on a provisional basis, a profit after tax (PAT) of INR23 million on net sales of INR658 million for 2012-13 (refers to financial year, April 1 to March 31), against a PAT of INR24 million on net sales of INR937 million for 2011-12. DR. B.S. GUPTA: CRISIL Ups Ratings on INR63.5MM Loans to 'B' ------------------------------------------------------------ CRISIL has upgraded its rating on the long-term bank facility of Dr. B.S. Gupta Medical Charitable Society to 'CRISIL B/Stable' from 'CRISIL B-/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Overdraft Facility 63.5 CRISIL B/Stable (Upgraded from 'CRISIL B-/Stable') The rating upgrade reflects continuous improvement in BSG's liquidity, as reflected in moderate utilisation of its overdraft (OD) facilities, at 60 per cent for the 15 months through June 2013. Furthermore, the society has no capital expenditure (capex) plans over medium term and it has not contracted any long-term debt for its routine capex. Liquidity continues to be supported by unsecured loans of INR25 million which is likely to remain in the business. CRISIL has treated unsecured loans of INR25 million as neither debt nor equity as management intends to retain the same in the business. Furthermore, the unsecured loans have been extended by an associate concern and are interest-free in nature. The rating reflects BSG's small scale of operations and geographically concentrated revenue profile. Also, the business remains susceptible to adverse regulatory changes in the education sector, hampering revenue and profitability growth over the medium term. These rating weaknesses are partially offset by BSG's low gearing and healthy debt protection metrics, and the benefits the society is likely to derive from its promoters' extensive experience in the education industry. Outlook: Stable CRISIL believes that BSG will continue to benefit from the extensive experience of its promoters in the education sector. The outlook may be revised to 'Positive' if there is a more-than- expected increase in BSG's operating income and profitability, and increased cash accruals, leading to improvement in its liquidity and net worth. Conversely, the outlook may be revised to 'Negative' if the society undertakes a larger-than-expected debt- funded capex programme, causing its debt protection metrics and capital structure to weaken, or if there is a significant drop in student enrolment at its institutes. BSG was established in 1999 by Dr. R K Gupta and his family members. The society operates a dental college, Seema Dental College and Hospital, in Rishikesh (Uttarakhand). The college is affiliated to the Hemwati Nandan Bahuguna Garhwal University, Uttarakhand, and is currently managed by Dr. Amit Gupta, son of Dr. R K Gupta. The college has 100 seats in the bachelor of dental surgery course and 21 seats in the master of dental surgery course. FITMET INDUSTRIAL: CRISIL Assigns 'D' Ratings to INR75.2MM Loans ---------------------------------------------------------------- CRISIL has assigned its 'CRISIL D/CRISIL D' ratings to the bank facilities of Fitmet Industrial Fittings Pvt Ltd. The rating reflects instances of delay by Fitmet in servicing its debt; the delays have been caused by the company's constrained liquidity. Fitmet has weak liquidity because of its large working capital requirements against its limited bank lines. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Term Loan 20.7 CRISIL D Proposed Short-Term 15.0 CRISIL D Bank Loan Facility Cash Credit 24.5 CRISIL D Inland/Import Letter 15.0 CRISIL D of Credit Fitmet also has a small scale of operations in a fragmented industry, and a below-average financial risk profile marked by a modest net worth and low cash accruals. However, Fitmet benefits from its promoters' extensive experience in the trading industry (through group entities) and the funding support that it receives from them. Fitmet was set up in 2004 by the Sheth family in Pune (Maharashtra). It manufactures butt-weld fittings. The company's product portfolio includes elbow 90 degree, elbow 45 degree, eccentric reducers, equal tees, reducing tees, caps, long stub ends, short stub ends, concentric reducers, and collars. Fitmet's promoters have over 25 years of experience in the trading and manufacturing of fittings. GREY'S EXIM: CRISIL Cuts Ratings on INR110MM Loans to 'B' --------------------------------------------------------- CRISIL has downgraded its rating on the long-term bank facilities of Grey's Exim Pvt Ltd to 'CRISIL B/Stable' from 'CRISIL B+/Stable', while reaffirming its rating on GEPL's short-term bank facilities at 'CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bill Discounting 34.5 CRISIL B/Stable (Downgraded from 'CRISIL B+/Stable') Cash Credit 60.0 CRISIL B/Stable (Downgraded from 'CRISIL B+/Stable') Letter of Credit 20.0 CRISIL A4 (Reaffirmed) Packing Credit 15.0 CRISIL A4 (Reaffirmed) Proposed Long-Term 15.5 CRISIL B/Stable (Downgraded Bank Loan Facility from 'CRISIL B+/Stable') The downgrade reflects deterioration in GEPL's financial risk profile, particularly its liquidity, because of large incremental working capital requirements. As GEPL's operations are working- capital-intensive, a sharp year-on-year sales growth of more than 45 per cent to about INR695 million in 2012-13 (refers to financial year, April 1 to March 31) translated into significant working capital requirements. Consequently, the company relied heavily on its fund-based bank limits, as reflected in its full utilisation of its bank limits over the 12 months through June 2013 and the weakening in its gearing to just above 4 times as on March 31, 2013, from 3.5 times a year earlier. CRISIL believes that timely enhancement in bank lines and infusion of long-term funds by GEPL's promoter to support sharp growth in sales will be critical for the company in maintaining liquidity over the medium term. CRISIL's ratings reflect GEPL's modest scale of operations in the highly fragmented textile industry and the company's below-average financial risk profile marked by small net worth, aggressive gearing, and weak debt protection metrics. The ratings also reflect GEPL's working-capital-intensive operations. These rating weaknesses are mitigated by the extensive experience of GEPL's promoter in the textile industry. Outlook: Stable CRISIL believes that GEPL's financial risk profile will remain constrained over the medium term, on account of large working capital requirements. The outlook may be revised to 'Positive' in case of a significant improvement in GEPL's working capital management leading to improvement in its liquidity or if the company's promoter infuses significant equity, leading to improvement in the company's capital structure and liquidity. Conversely, the outlook may be revised to 'Negative' in case of deterioration in the company's working capital management, or if the company undertakes a larger-than-expected debt-funded capex programme, leading to weakening in its financial risk profile. Incorporated in 1986, GEPL is promoted by Mr. Mehul Sedani. The company manufactures woven garments such as tops, shorts, inner wear, shorts, and shirts for men. For 2012-13, on a provisional basis, GEPL reported a net profit of INR9.1 million on net sales of INR695 million, against a net profit of INR4.3 million on net sales of INR475 million for 2011- 12. JAIN UDHAY: CRISIL Assigns 'B-' Ratings to INR373.9MM Loans ----------------------------------------------------------- CRISIL has revoked the suspension of its ratings on the bank facilities of Jain Udhay Fabrics Pvt Ltd, and has assigned its 'CRISIL B-/Stable/CRISIL A4' ratings to the company's bank facilities. CRISIL had earlier, on March 22, 2013, suspended the ratings as JUFPL had not provided the necessary information required for a rating review. The company has now shared the requisite information, enabling CRISIL to assign a rating to the company's bank facilities. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 105.0 CRISIL B-/Stable (Assigned) Letter of Credit 20.0 CRISIL A4 (Assigned) Term Loan 268.9 CRISIL B-/Stable (Assigned) The ratings reflect JUFPL's small scale of operations and large working capital requirements. The ratings also reflect the company's weak financial risk profile marked by a high gearing and weak debt protection metrics. These rating weaknesses are partially offset by the extensive experience of JUFPL's promoters in the textiles business. Outlook: Stable CRISIL believes that the JUFPL will continue to benefit over the medium term from its promoters' extensive experience in the textiles business; however, its financial risk profile is expected to remain weak driven by high gearing and weak debt protection metrics. The outlook may be revised to 'Positive' in case the company registers significant improvement in its scale of operations and profitability, resulting in higher-than-expected cash accruals and consequently improvement in financial risk profile. Conversely, the outlook may be revised to 'Negative' in case JUFPL faces further pressure on its liquidity on account of deterioration in its working capital management because of lower- than-expected cash accruals. JUFPL, incorporated in 1990, manufactures ready-made garments under its brand names Jus and Blue Mount. Its manufacturing unit is at Doraha in Ludhiana (Punjab). The company is managed by its promoters Mr. Sanjeev Jain and Mr. Naveen Jain. JUFPL reported a net loss of INR42.1 million on net sales of INR189.7.8 million for 2011-12 (refers to financial year, April 1 to March 31), against a net loss of INR46.7 million on net sales of INR625.8 million for 2010-11. JUFPL's net sales are estimated at INR118.0 million in 2012-13. LINERS INDIA: CRISIL Cuts Ratings on INR510MM Loans to 'D' ---------------------------------------------------------- CRISIL has downgraded its ratings on the bank facilities of Liners India Ltd to 'CRISIL D/CRISIL D' from 'CRISIL BB/Negative/CRISIL A4+'; the rating on the company's fixed deposit programme has also been downgraded to 'FD' from 'FB+/Negative'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 17.5 CRISIL D (Downgraded from 'CRISIL A4+') Cash Credit 115.0 CRISIL D (Downgraded from 'CRISIL BB/Negative') Cash Credit 145.0 CRISIL D (Downgraded from 'CRISIL BB/Negative') Foreign Bill 10.0 CRISIL D (Downgraded from Discounting 'CRISIL A4+') Letter of Credit 75.0 CRISIL D (Downgraded from 'CRISIL A4+') Letter of Credit 40.0 CRISIL D (Downgraded from 'CRISIL A4+') Proposed Long-Term 36.5 CRISIL D (Downgraded from Bank Loan Facility 'CRISIL BB/Negative') Term Loan 71.0 CRISIL D (Downgraded from 'CRISIL BB/Negative') The rating downgrade reflects the delay by LIL in servicing its debt. While interest obligations are being met on time, the company has not been repaying the principal amount in a timely manner. The delays are on account of stretched liquidity due to low cash accruals. LIL's business performance remains impacted by the continuing slowdown in medium and heavy commercial vehicle (M&HCV) industry, resulting in low cash generation. The company's liquidity is further constrained by its large working capital requirements and high bank limit utilisation. CRISIL's ratings reflect LIL's established market position in the cylinder liner industry backed by its diversified clientele. This rating strength is partially offset by the company's limited pricing power due to significant dependence on large M&HCV and tractor customers, substantial working capital requirements, and sub-par financial risk profile, marked by weak gearing and debt protection metrics. LIL was originally established in 1974 as a partnership firm by Mr. S Ganesh; the firm was reconstituted as a private limited company in 1986 and to a public limited company in 1994. LIL has two divisions: cylinder liner manufacturing and automobile components trading. In 2011-12 (refers to financial year, April 1 to March 31), the manufacturing division contributed around 59 per cent to LIL's revenue while trading contributed the remainder. LIL manufactures cylinder liners and cast iron products. The centrifugally cast cylinder liners are used in diesel automotive engines. LIL supplies to original equipment manufacturers of heavy, medium, and light commercial vehicles, tractors, and diesel engines worldwide. The company has manufacturing units in Vijayawada (Andhra Pradesh [AP]), and Rudrapur (Uttarakhand), with an installed capacity of 240 million liners per annum. The trading division was formed after acquisition of Jai Motors Ltd by LIL in January 2009. Under this division, LIL is a distributor (South India region) for automotive component manufacturing companies. It is an exclusive distributor of Shriram Pistons & Rings Ltd and Allied Nippon Ltd for AP, Karnataka, Kerala, and Tamil Nadu. It is also a distributor of six other automotive component manufacturing companies in South India. For 2011-12, LIL reported a profit after tax (PAT) of INR11.6 million on net sales of INR1180 million, against a PAT of INR3.1 million on net sales of INR1045 million for 2010-11. For the six months ended September 30, 2012, LIL reported a PAT of INR4 million on net sales of INR590 million, against a PAT of INR8 million on net sales of INR550 million for the corresponding period of 2011. MACEDON VINIMAY: CRISIL Raises Ratings on INR81.7MM Loans to 'B' ---------------------------------------------------------------- CRISIL has upgraded its ratings on the bank facilities of Macedon Vinimay Pvt Ltd to 'CRISIL B/Stable/CRISIL A4' from 'CRISIL D/CRISIL D'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 1 CRISIL A4 (Upgraded from 'CRISIL D') Cash Credit 50 CRISIL B/Stable (Upgraded from 'CRISIL D') Term Loan 31.7 CRISIL B/Stable (Upgraded from 'CRISIL D') Letter of Credit 9 CRISIL A4 (Upgraded from 'CRISIL D') The upgrade in the ratings reflects sufficient track record of timely debt servicing by MVPL. Though the accruals have been tightly matched against the maturing obligations, timely funding support from the promoters in the form of unsecured loans has supported the company's liquidity. Such unsecured loans from the promoters stood at INR35 million as on March 31, 2013. The upgrade assumes continued funding support from MVPL's promoters to ensure timely debt servicing on an ongoing basis. MVPL continues to have a small scale of operations, as well as being working capital intensive, and a below-average financial risk profile, marked by modest net worth, moderate gearing, and weak debt protection metrics. These rating weaknesses are partially offset by MVPL's healthy order book providing revenue visibility over the medium term and the continued funding support extended by its experienced promoters. Outlook: Stable CRISIL believes that MVPL's financial risk profile will continue to remain constrained due its modest accruals and high debt repayment obligations. The outlook may be revised to 'Positive' if the company registers significantly higher-than-expected accruals. Conversely, the outlook may be revised to 'Negative' in case of delays in funding support from the promoters or pressure on profitability, or stretch in its working capital cycle leading to further weakened liquidity. Promoted by the members of the Dhanuka family based in Kolkata (West Bengal) in 1995, MVPL manufactures fibre reinforced plastic (FRP)-based products primarily for the railways and the power industries. The company manufactures FRP-based glass shutters, window guides, window assembly, window seals, and trays for the Railways and ladders, metres enclosures, cupboards, and panel boxes for the power industry. MVPL also manufactures chutes for the Railways. For 2012-13, MVPL, on a provisional basis, reported profit after tax (PAT) of INR4 million on net sales of INR214 million as against net loss of INR3 million on revenue of INR130 million for 2011-12. MACROCOSM INDUSTRIES: CRISIL Cuts Rating on INR250MM Loan to 'D' ---------------------------------------------------------------- CRISIL has downgraded its rating on the long-term bank facility of Macrocosm Industries Pvt Ltd to 'CRISIL D' from 'CRISIL B- /Stable'. The downgrade reflects consistent overdrawals in MIPL's cash credit facility for over 30 days on account of weak liquidity. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 250 CRISIL D (Downgraded from 'CRISIL B-/Stable') MIPL also has working-capital intensive operations, and is exposed to risks related to volatility in copper prices and the commodity- like market for its products. The Macrocosm group of companies, of which MIPL is a part, was promoted by Mr. Hrishikesh Shah and his brother, Mr. Jaikishen Shah. MIPL, started in 2007-08, trades in copper wires and strips and scraps. ODEON BUILDERS: CRISIL Lowers Rating on INR600MM Loans to 'B' ------------------------------------------------------------- CRISIL has downgraded its ratings on the bank facilities of Odeon Builders Pvt Ltd to 'CRISIL B/Stable/CRISIL A4' from 'CRISIL BBB- /Stable/CRISIL A3'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Bank Guarantee 1,470 CRISIL A4 (Downgraded from 'CRISIL A3') Cash Credit 600 CRISIL B/Stable (Downgraded from 'CRISIL BBB-/Stable') The rating downgrade reflects pressure on Odeon's liquidity, because of stretch in the company's working capital cycle arising primarily from delays in realising its debtors. Furthermore, Odeon's financial flexibility is severely constrained by significant increase in the company's debt levels and by its fully utilised bank limits. The ratings reflect Odeon's large working capital requirements and weak liquidity; and exposure to risks related to cyclicality in the real estate industry. These rating weaknesses are partially offset by Odeon's established position in the commercial construction segment. Outlook: Stable CRISIL believes that Odeon's financial risk profile will remain constrained on account of stretch in its working capital requirements. The outlook may be revised to 'Positive' if Odeon is able to improve its liquidity position. Conversely, the outlook may be revised to 'Negative' if Odeon's financial risk profile is further constrained by larger-than-expected working capital requirements or if the company undertakes a large, debt-funded capital expenditure programme. Odeon, a New Delhi-based construction contractor, was incorporated in 1991. The company mainly constructs residential and commercial buildings, malls, schools, and hospitals. Until 2007, Odeon constructed buildings only in the private sector, mainly for Sun City Projects Pvt Ltd. In 2008, Odeon began undertaking government projects; the business is currently the company's focus area for future growth. For 2012-13 (refers to financial year, April 1 to March 31), Odeon reported, on a provisional basis, a profit after tax (PAT) of INR119 million on net sales of INR4.5 billion; the company reported a PAT of INR158 million on net sales of INR4.7 billion for 2011-12. SOMA ISOLUX: CRISIL Cuts Ratings on INR9.78BB Term Loan to 'D' -------------------------------------------------------------- CRISIL has downgraded its rating on the long-term bank facilities of Soma Isolux Kishangarh Beawar Tollway Pvt Ltd to 'CRISIL D' from 'CRISIL BB+/Stable'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Term Loan 9,780 CRISIL D (Downgraded from 'CRISIL BB+/Stable') The rating downgrade reflects instances of delay by SIKB in meeting its debt servicing obligations. The delay has been caused by the company's weak liquidity. There has been a delay in SIKB's project completion, resulting in cost overrun of INR1.5 billion, which mainly comprise interest costs. The company is in the process of tying of funds for the cost overrun; this is expected to be completed over the next two months. Therefore, CRISIL believes that SIKB's liquidity will remain weak in the near term. SIKB has high project implementation risk associated with obtaining pending approvals for structures and weak debt protection metric in the initial years of operation. However, the company benefits from presence of industrial and tourist destinations on the project highway. SIKB is a special-purpose vehicle jointly promoted by Isolux Corsan India Engineering and Construction Pvt Ltd (a part of the Isolux Corsan group) and Soma Enterprises Ltd. SIKB has entered into a concession agreement with the National Highway Authority of India (rated 'CRISIL AAA/Stable') for the execution of its road project on a design, build, finance, operate, and transfer basis. The project involves designing, building, financing, operating, and transferring six lanes of the Kishangarh-Ajmer-Beawar section of National Highway 8, from 364.125 kilometres (km) to 58.245 km (total length of 93.56 km), in Rajasthan. The concession period is of 18 years, including construction period of 30 months. The project execution is delayed by around 20 months and COD has been revised to January 2014. SIKB completed 94.30 per cent of the physical work by June 30, 2013, as against the targeted 96.21 per cent. The delay is mainly on account of pending approval from railway authorities for construction of railway overbridges. The tolling is expected to commence from November 2013, post obtaining provisional COD. SR VAPORS: CRISIL Assigns 'D' Ratings to INR119.6MM Loans --------------------------------------------------------- CRISIL has assigned its 'CRISIL D' rating to the long-term bank facilities of SR Vapors Pvt Ltd. The rating reflects delay by SRVPL in meeting the interest obligations on its term loan; the delay has been caused by the company's weak liquidity. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Long-Term Loan 115.0 CRISIL D Cash Credit 4.6 CRISIL D SRVPL is also exposed to implementation and demand risks associated with its on-going carbon dioxide (CO2) project. However, the company is expected to benefit from steady supply of raw material on account of the proximity of its plant to its group concern SR Breweries Pvt Ltd. SRVPL was set up in June 2011 by Mr. Ranjan Kumar Padhi and his wife Dr. Saina Kar with the main objective to manufacture and bottle CO2. The company is currently setting up a plant to manufacture and bottle CO2 in both liquid as well as gaseous form. SRI BALAMBIKA: CRISIL Ups Ratings on INR621.4MM Loans to 'BB-' -------------------------------------------------------------- CRISIL has upgraded its ratings on the bank facilities of Sri Balambika Textile Mills (P) Ltd to 'CRISIL BB-/Stable/CRISIL A4+' from 'CRISIL B+/Stable/CRISIL A4'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 150.0 CRISIL BB-/Stable (Upgraded from 'CRISIL B+/Stable') Working Capital 71.4 CRISIL BB-/Stable (Upgraded Demand Loan from 'CRISIL B+/Stable') Long-Term Loan 400.0 CRISIL BB-/Stable (Upgraded from 'CRISIL B+/Stable') Letter of credit & 38.0 CRISIL A4+ (Upgraded Bank Guarantee from 'CRISIL A4') The ratings upgrade reflect CRISIL's belief that SBTMPL will sustain the improvement in its financial risk profile and liquidity, backed by enhanced cash accruals; and the absence of significant debt-funded capital expenditure (capex) plans. SBTMPL reported an operating margin of 12.4 per cent for 2012-13 (refers to financial year, April 1 to March 31). The company is likely to maintain a healthy operating margin over the medium term. SBTMPL's gearing improved to around 3.69 times as on March 31, 2013, from around 6.42 times as on March 31, 2012. The company's gearing is expected to improve to less than 3.00 times over the medium term, on the back of a sustained improvement in cash accruals, and the absence of large, debt-funded capex plans. The rating reflects the extensive experience of SBTMPL's promoter in the textile industry. The rating strength is partially offset by the company's average financial risk profile, marked by moderate net worth, high gearing and average debt protection metrics; and exposure to volatility in cotton prices. Outlook: Stable CRISIL believes that SBTMPL will continue to benefit from its established market position in the textile industry, and the promoter's extensive industry experience, over the medium term. The outlook may be revised to 'Positive' if SBTMPL's liquidity and capital structure improve significantly and sustainably, supported by larger-than-expected cash accruals. Conversely, the outlook may be revised to 'Negative' if SBTMPL undertakes a large, debt-funded capex programme; or reports a significant decline in its revenues or profitability, thereby adversely affecting its debt-servicing ability. SBTMPL is engaged in the spinning of cotton yarn, and has a factory in Tirupur. SBTMPL also has two windmills with a combined generation capacity of 1.2 megawatts. The company is promoted by Mr. M Rathnasamy. SBTMPL reported a net profit of INR60.4 million on operating revenues of INR1.1 billion for 2012-13, and a net loss of INR133.2 million on operating revenues of INR482.5 million for the preceding year. STOTZ GEARS: CRISIL Downgrades Ratings on INR36.8MM Loans to 'B-' ----------------------------------------------------------------- CRISIL has downgraded its ratings on the bank facilities of Stotz Gears Pvt Ltd (SGPL; part of the Stotz group) to 'CRISIL B- /Stable/CRISIL A4' from 'CRISIL BB/Stable/CRISIL A4+'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 32 CRISIL B-/Stable (Downgraded from 'CRISIL BB/Stable') Letter of Credit 23.2 CRISIL A4 (Downgraded from 'CRISIL A4+') Standby Line of Credit 4.8 CRISIL B-/Stable (Downgraded from 'CRISIL BB/Stable') The rating downgrade reflects the weakening of the Stotz group's liquidity, driven by deterioration in its working capital cycle between 2010-11 (refers to financial year, April 1 to March 31) and 2012-13. The group's gross current asset days increased to around 300 as on March 31, 2013, from around 110 as on March 31, 2011. Besides, its cash credit account was frequently overdrawn over the 12 months through June 2013. The deterioration in the Stotz group's working capital cycle was because of substantial inventory required for catering to large orders from a few of its customers. The inventory had increased to 287 days as on March 31, 2012, from 33 days a year earlier, and remained high at 254 days as on March 31, 2013. CRISIL believes that the Stotz group's liquidity is likely to remain under pressure over the medium term because of its large working capital requirements. The ratings reflect the Stotz group's small scale of operations, and its susceptibility to any decline in demand for its products because of reduced investments in its end-user industry. The ratings also factor in the group's weak financial risk profile, marked by a highly leveraged capital structure and a modest net worth, and its susceptibility to volatility in raw material prices. These rating weaknesses are partially offset by the Stotz group's established customer relationships, well-diversified customer profile, and promoters' extensive experience in the engineering industry. For arriving at its ratings, CRISIL has combined the financial and business risk profiles of SGPL and its subsidiary, Swastik Metaforge Pvt Ltd. This is because the two companies, together referred to as the Stotz group, have a common management and strong operational and financial linkages with each other. Outlook: Stable CRISIL believes that the Stotz group will continue to benefit over the medium term from its promoters' experience in the engineering business and its established relationships with customers. The outlook may be revised to 'Positive' if the group manages its incremental working capital requirements efficiently, leading to improvement in its liquidity, or if there is a substantial and sustained improvement in its revenues and operating margin. Conversely, the outlook may be revised to 'Negative' if the group's operating margin declines substantially, or its capital structure weakens, most likely because of more-than-expected increase in its working capital borrowings or larger-than-expected debt-funded capital expenditure. SGPL was incorporated in 1992, promoted by Mr. Pradip Kalra and Mr. Sunil Kalra. The company manufactures a wide range of heavy machinery components. It supplies to various industries, including sugar, cement, thermal power, iron and steel, and coal. It has specialised in manufacturing large-diameter (more than 6 metres) gears. SMPL, a wholly owned subsidiary of SGPL, manufactures heavy forgings, mild-steel castings, and other products. Its main focus is on kiln fabrication, hydro turbine components, and metal frames for tunnels. It started production in March 2011. The manufacturing units of both the companies are in Ghaziabad (Uttar Pradesh). For 2011-12, the Stotz group reported a profit after tax (PAT) of INR10.5 million on net sales of INR115 million, against a PAT of INR3.7 million on net sales of INR223 million for 2010-11. SWASTIK METAFORGE: CRISIL Lowers Ratings on INR150MM Loans to 'D' ----------------------------------------------------------------- CRISIL has downgraded its ratings on the bank facilities of Swastik Metaforge Pvt Ltd to 'CRISIL D/CRISIL D' from 'CRISIL BB/Stable/CRISIL A4+'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 36.0 CRISIL D (Downgraded from 'CRISIL BB/Stable') Letter of Credit 30.0 CRISIL D (Downgraded from 'CRISIL A4+') Proposed Long-Term 39.2 CRISIL D (Downgraded from Bank Loan Facility 'CRISIL BB/Stable') Standby Line of Credit 5.0 CRISIL D (Downgraded from 'CRISIL BB/Stable') Term Loan 39.8 CRISIL D (Downgraded from 'CRISIL BB/Stable') The rating downgrade reflects delays by SMPL in servicing its term loan. The delays have been caused by SMPL's weakening liquidity, mainly driven by its large working capital requirements. The ratings reflect the Stotz group's small scale of operations, and its susceptibility to any decline in demand for its products because of reduced investments in its end-user industry. The ratings also factor in the group's weak financial risk profile, marked by a highly leveraged capital structure and a modest net worth, and its susceptibility to volatility in raw material prices. These rating weaknesses are partially offset by the Stotz group's established customer relationships, well-diversified customer profile, and promoters' extensive experience in the engineering industry. For arriving at its ratings, CRISIL has combined the financial and business risk profiles of SMPL and its parent, Stotz Gears Pvt Ltd. This is because the two companies, together referred to as the Stotz group, have a common management and strong operational and financial linkages with each other. SGPL was incorporated in 1992, promoted by Mr. Pradip Kalra and Mr. Sunil Kalra. The company manufactures a wide range of heavy machinery components. It supplies to various industries, including sugar, cement, thermal power, iron and steel, and coal. It has specialised in manufacturing large-diameter (more than 6 metres) gears. SMPL, a wholly owned subsidiary of SGPL, manufactures heavy forgings, mild-steel castings, and other products. Its main focus is on kiln fabrication, hydro turbine components, and metal frames for tunnels. It started production in March 2011. The manufacturing units of both the companies are in Ghaziabad (Uttar Pradesh). For 2011-12, the Stotz group reported a profit after tax (PAT) of INR10.5 million on net sales of INR115 million, against a PAT of INR3.7 million on net sales of INR223 million for 2010-11. VIRAJ POLYPLAST: CRISIL Ups Ratings on INR150MM Loans to 'B' ------------------------------------------------------------ CRISIL has upgraded its rating on the bank facilities of Viraj Polyplast Technologies Pvt. Ltd. to 'CRISIL B/Stable' from 'CRISIL D'. Amount Facilities (INR Mln) Ratings ---------- --------- ------- Cash Credit 30 CRISIL B/Stable (Upgraded from 'CRISIL D') Proposed Long-Term 76.3 CRISIL B/Stable (Upgraded Bank Loan Facility from 'CRISIL D') Term Loan 43.7 CRISIL B/Stable (Upgraded from 'CRISIL D') The upgrade reflects improvement in the liquidity profile of VPTPL as reflected in timely servicing of its term debt obligations based on the performance till August 2013. The improvement was driven by modest improvement in the company's business performance with steady capacity utilization and sustained cost containment initiatives. The promoters have also supported the business operations by infusing unsecured loans during 2012-13. The company's financial performance remains in line with CRISIL's expectations. VPTPL reported revenues of around INR163 million for 2012-13 (refers to financial year, April 1 to March 31), as against INR152 million for 2011-12. The ratings also reflect VPTPL's modest scale in a highly fragmented industry coupled with its working capital-intensive nature of business. These rating weaknesses are partially offset by the promoter's vast industry experience and established relationships with customers and suppliers. Outlook: Stable CRISIL believes that VPTPL will maintain its stable business risk profile over the medium term, backed by the extensive experience of its promoters and established relationships with customers and suppliers. The outlook may be revised to 'Positive' in case the company scales up its operations effectively, while improving its capital structure and working capital cycle. Conversely, the outlook may be revised to 'Negative' if VPTPL faces a slowdown in offtake, thereby adversely affecting its revenues and margins, or if it undertakes a large debt-funded capital expenditure programme, thereby leading to weakening of its liquidity and financial risk profile. Incorporated in 2004, Viraj Polyplast Technologies Pvt. Ltd. is primarily engaged in the manufacturing of precast PVC moulds, which are used to produce concrete tiles and pavers. The company also manufactures gaskets rings used in PVC pipe fittings. In 2012-13, VPTPL plans to start production of plastic mats, primarily used in cars and other LMVs. The company's day-to-day operations are managed by Mr. Darpan Shah and its registered office is located at Goregaon (Mumbai). VPTPL reported a profit after tax (PAT) of INR13.1 million on net sales of INR163 million for 2012-13 (refers to financial year, April 1 to March 31), as against a PAT of INR11.9 million on net sales of INR152 million for 2011-12. * Moody's Downgrades Ratings on 11 Indian Banks ----------------------------------------------- Moody's Investors Service has downgraded the subordinated debt (subdebt) and junior subordinated debt ratings of 11 Indian banks. The banks' senior obligation ratings and their stand-alone baseline credit assessments were not affected. Moody's removed one to two notches of the two to three notches systemic support uplift previously incorporated in the public sector banks' subdebt and junior subdebt ratings, concluding a review started on June 3, 2013. Moody's also removed the one notch support uplift incorporated in the private sector banks' subdebt and junior subdebt ratings. The 11 banks affected are 8 public sector banks (with a minimum 51% government shareholding) and three private sector banks: Public Sector Banks - Bank of Baroda (deposits Baa3 stable, BFSR D/BCA ba2 negative) - Bank of India (deposits Baa3 stable, BFSR D/BCA ba2 negative) - Canara Bank (deposits Baa3 stable, BFSR D/BCA ba2 negative) - IDBI Bank Ltd (deposits Baa3 stable, BFSR D-/BCA ba3 stable) - Indian Overseas Bank (deposits Baa3 negative, BFSR D-/BCA ba3 negative) - State Bank of India (deposits Baa2 stable, BFSR D+/BCA ba1 stable) - Syndicate Bank (deposits Baa3 stable, BFSR D/BCA ba2 negative) - Union Bank of India (deposits Baa3 stable, BFSR D/BCA ba2 negative) Private Sector Banks - Axis Bank Limited (deposits Baa2 stable, BFSR D+/BCA baa3 stable) - HDFC Bank Limited (deposits Baa2 stable, BFSR D+/BCA baa3 stable) - ICICI Bank Limited (deposits Baa2 stable, BFSR D+/BCA baa3 stable) Ratings Rationale: Moody's downgrade reflects the increasing international trend of imposing losses on holders of subdebt securities (creditor "bail- in") as a pre-condition for distressed banks to receive government support. As a consequence, Moody's assumes that Indian government support is less likely to be forthcoming for the holders of such securities. "The global financial crisis has demonstrated that support can be provided selectively, with the costs being shared with subordinated creditors of a bank, without triggering any contagion, as it was previously feared", says Gene Fang, a Vice President at Moody's. Moody's analysis observes that India has a modern and progressive approach to bank regulation. There is no explicit legal power allowing Indian regulators to selectively impose losses on subdebt holders outside of a liquidation process. However, as a member of the G20 and Financial Stability Board (FSB), India could move towards adopting a bank resolution framework which imposes losses on subordinated debt holders. On balance, Moody's assumes that Indian government support will be less likely in the future. Nevertheless, we believe for public sector banks a high probability of support is still justified, resulting in a one notch subdebt rating uplift. This is an exception to the general assumption in our methodology that support should be removed from subordinated debt ratings. In contrast, we assume that the probability of support for private sector banks is now low-to-moderate from high before, which is no longer sufficient to result in a rating uplift at their current baseline credit assessments. This rating action relates only to Moody's view on the potential for systemic support for the banks' junior securities. It does not reflect any change in the banks' intrinsic credit quality or in the support assumptions for issuer or senior debt ratings. Background In recent years, losses have been imposed on the holders of junior securities during the resolution of troubled banks in crisis-hit countries. In the majority of cases, investors have suffered losses as a result of distressed exchanges, which do not necessarily require a developed resolution framework to be in place. Furthermore, experience has shown that such a framework can be developed quickly at times of stress. As a consequence, Moody's approach globally is now to assume, as a starting point, that no government support would be extended to the subordinated debt holders of a distressed bank, except where particular circumstances justify. In the case of Indian banks, Moody's concluded that the unique role of public sector banks in implementing Indian government policy, as well as recent government capital provided to the banks, merited a continued level of support, though at a lower level than previously assumed. In parallel, we also lowered the support assumption for private sector banks to moderate. At the lower level of support and current baseline credit assessments (BCA) of Indian private sector banks, the subordinated and junior subordinated debt ratings would not receive additional government support. Therefore, the subordinated and junior subordinated debt ratings are lowered to reflect the new methodology. A detailed rationale explaining our decision can be found in our upcoming special comment entitled "The World Has Changed: the Support Probability for Bank Subordinated Debt in Asia-Pacific Has Significantly Diminished". Ratings Affected Axis Bank Limited, DIFC Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. Axis Bank Limited, Hong Kong Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. Axis Bank Limited, Singapore Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt rating downgraded to Ba2 (hyb) from Ba1 (hyb). The outlook on the new rating is stable. Bank of Baroda, London Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency subordinated debt rating downgraded to Ba2 from Ba1. The outlook on the new rating is negative. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba3 from (P)Ba2. Bank of India: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. Bank of India, London Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency subordinated debt rating downgraded to Ba2 from Ba1. The outlook on the new rating is negative. Bank of India, Jersey Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba3 from (P)Ba2. Canara Bank, London Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba3 from (P)Ba2. -- Long-term foreign currency junior subordinated debt rating downgraded to Ba3 (hyb) from Ba2 (hyb). The outlook on the new rating is negative. HDFC Bank Limited: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. HDFC Bank Limited, Bahrain Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. HDFC Bank Limited, Hong Kong Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. ICICI Bank Limited: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. ICICI Bank Limited, New York Branch: -- Long-term local currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term local currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. ICICI Bank Limited, Bahrain Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt rating downgraded to Ba2 (hyb) from Ba1 (hyb). The outlook on the new rating is stable. ICICI Bank Limited, Dubai Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. ICICI Bank Limited, Hong Kong Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. ICICI Bank Limited, Singapore Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. IDBI Bank Ltd: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba3 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)B1 from (P)Ba2. IDBI Bank Ltd, DIFC Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba3 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)B1 from (P)Ba2. Indian Overseas Bank: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba3 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)B1 from (P)Ba2. Indian Overseas Bank, Hong Kong Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba3 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)B1 from (P)Ba2. State Bank of India: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. State Bank of India, Hong Kong Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. State Bank of India, London Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. State Bank of India, Nassau Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba1 from (P)Baa3. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. Syndicate Bank: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba3 from (P)Ba2. Syndicate Bank, London Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba3 from (P)Ba2. Union Bank of India: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba3 from (P)Ba2. Union Bank of India, Hong Kong Branch: -- Long-term foreign currency subordinated debt program rating downgraded to (P)Ba2 from (P)Ba1. -- Long-term foreign currency junior subordinated debt program rating downgraded to (P)Ba3 from (P)Ba2. The principal methodology used in these ratings was Global Banks published in May 2013. ========= J A P A N ========= RENESAS ELECTRONICS: To Sell Two LSI Units to Broadcom ------------------------------------------------------ The Japan Times reports that Renesas Electronics Corp. has said it will sell two overseas affiliates related to system large-scale integrated circuits for cellphones to Broadcom Corp. of the U.S. for $164 million on Oct. 1. According to the report, the units put up for sale are Renesas Mobile Europe Oy in Helsinki and Renesas Mobile India in Bangalore, India. They are currently under the wing of Renesas Mobile Corp., a wholly owned subsidiary of Renesas Electronics. The Japan Times notes that when Renesas Electronics announced in June its decision to withdraw from system LSIs for mobile phones at the end of this year, it said the two affiliates plus Renesas Tongxinjishu (Beijing) Co., also under Renesas Mobile, will be liquidated. Based in Tokyo, Japan, Renesas Electronics Corp. -- http://am.renesas.com/-- manufactures semiconductor systems for mobile phones and automotive applications. The Company reported a net loss of JPY168 billion for the fiscal year ended March 31, 2013, compared with a net loss of JPY62.60 billion in fiscal year ended March 31, 2012. In February, shareholders of Renesas Electronics Corp. approved a JPY150 billion investment plan from a government-backed fund and eight companies to accelerate restructuring steps, the Japan Times Online reported. * Moody's Says Japanese CMBS Performance Continues to Improve ------------------------------------------------------------- Moody's Japan K.K. says that performance for Japanese CMBS and RMBS continued to improve in July and June 2013, while the default rate for auto loan ABS rose slightly in June 2013. For CMBS, the default rate -- expressed as the outstanding defaulted loan amount compared to the total loan amount -- fell to 21.8% in July 2013 from 23.0% in June 2013, and from 30.4% a year ago. For RMBS and auto loan ABS, their most recent data is for June 2013. For RMBS, the annualized default rate fell to 0.12% in June 2013 from 0.13% in May 2013. In recent years, the rate has averaged around 0.15%, and ranged between 0.08% and 0.30%. For auto loans ABS, the annualized default rate rose to 0.75% in June 2013 from 0.73% in May 2013. Looking ahead, Moody's expects the performance trends for RMBS and auto loan ABS to remain stable because of the relatively high job security of most borrowers. Moody's Global Collateral Performance Report is updated monthly and covers the collateral performance of 40 structured finance sectors located globally. In this report, we update the key indices for Japanese CMBS, RMBS and ABS on a monthly basis. ==================== N E W Z E A L A N D ==================== BLACKTOP CONSTRUCTION: Goes Into Receivership --------------------------------------------- Radio New Zealand International reports that the Fiji Roads Authority has confirmed that Blacktop Construction Ltd, the Auckland-based contractor responsible for road work in the Northern Division, has gone into receivership. FBC news reports the Chief Executive Officer Neil Cook said they are in early discussions with the receiver and whatever happens, the Authority will ensure that road work in the Northern Division continues, according to Radio New Zealand International. The report relates that the receiver has ten days to satisfy the Authority that Blacktop will be able to continue to perform at the required standard and that Fijian creditors are protected. ===================== P H I L I P P I N E S ===================== UNITRUST DEV: Depositors, Creditors to Receive Partial Payment -------------------------------------------------------------- The Philippine Deposit Insurance Corporation (PDIC), the Liquidator of the closed Unitrust Development Bank, announced that it will start distributing cash payments to the depositors and creditors of Unitrust starting September 9, 2013. The cash portion is in partial settlement of the claims of the depositors and creditors of Unitrust against the assets of the bank. To receive the payment, Unitrust depositors and creditors are required to appear personally or thru a duly authorized representative at the Unitrust Development Bank Exchange Corner located at the Ground Floor, Exchange Corner Complex Condominium, Exchange Corner Building, V.A. Rufino St. corner Esteban and Bolanos Sts., Legaspi Village, Makati City on their designated schedule. The schedule is based on the list that was published on September 1, 2013 in a newspaper of general circulation and also posted in the PDIC website, www.pdic.gov.ph. Depositors are required to present two (2) valid identification documents (IDs) and submit their corresponding duly accomplished and notarized Release, Waiver and Quitclaim, With Undertaking. Additional requirements for individual creditors, sole proprietors and corporate creditors as well as the schedule of cash payments are posted in the PDIC website. The Release, Waiver and Quitclaim, With Undertaking may also be downloaded from the website. PDIC Executive Vice President Cristina Q. Orbeta of the Receivership and Liquidation Sector assured concerned depositors and creditors that Unitrust has sufficient funds to pay all the claims. Presiding Judge Winlove Dumayas of the Regional Trial Court of Makati City, Branch 59 (Liquidation Court) earlier ordered the depositors and creditors of Unitrust to attend the hearing set on September 10, 2013 at 8:30 a.m., at the Liquidation Court "to agree to the proposed allocations of their interests in the real properties as payment equivalent to 38% of their respective claims" and "to execute their respective quitclaims and waivers once all their claims have been fully-settled." This is pursuant to the Omnibus Order dated August 5, 2013 issued by the Liquidation Court. The Order further directed PDIC to submit before the Liquidation Court a list of all unfiled claims after the 45-day period counted from the date of publication of the notice as these unfiled claims shall be written-off and shall be distributed to the stockholders of the Unitrust. The PDIC urged Unitrust depositors and creditors to attend the September 10 hearing set by the Liquidation Court to discuss the payment of the remaining balance of their respective claims. The proposal of Unitrust stockholders is to pay the remaining balance with real properties. The payment of the cash portion of the claims is without prejudice to the final resolution of PDIC's petition for certiorari (C-A- G.R. No. 128241) before the Court of Appeals on the December 17, 2012 Order. For more information, depositors and creditors may visit the PDIC website at www.pdic.gov.ph or call Mr. Ronald C. Angeles at telephone no. 841-4780 and Mr. Marcelo Torres at telephone numbers 841-4784 and 841-4983. Unitrust was ordered closed by the Monetary Board on January 4, 2002, and is now under the liquidation of the PDIC. * Moody's Lowers Ratings on Two Philippine Banks ------------------------------------------------ Moody's Investors Service has downgraded the subordinated debt (subdebt) ratings of two Philippine banks following a review launched on June 3 to re-assess the probability of government support that was assumed for this debt class. The two banks affected are Rizal Commercial Banking Corporation (RCBC) and Philippine National Bank (PNB). Moody's concluded its review by removing the support uplift previously incorporated in the banks' subdebt ratings, resulting in these banks' subdebt now being rated one notch below their baseline credit assessments adjusted for parental support (adjusted BCAs). At the same time, Moody's confirmed the subdebt rating of Metropolitan Bank & Trust Company (MBT). This rating was placed on review for upgrade on July 25, together with the bank's deposit ratings, following the review for upgrade on the Government of the Philippines' debt ratings. The decision to the remove support uplift from this debt class means that subdebt ratings would now generally move in tandem with a bank's BCA. The three banks' senior obligation ratings and their stand-alone baseline credit assessments (BCA) were not affected. Ratings Rationale: Moody's downgrade reflects the increasing international trend of imposing losses on holders of subdebt securities (creditor "bail- in") as a pre-condition for distressed banks to receive government support. As a consequence, Moody's no longer assumes that Philippine government support would be forthcoming for the holders of such securities. "We recognize that the Philippine's central bank, Bangko Sentral ng Pilipinas, has in the past stepped in to assist ailing banks in a way that supported all creditors. However, the global financial crisis has demonstrated that support can be provided selectively, with the costs being shared with subordinated creditors of a bank, without triggering any contagion, as it was previously feared," says Simon Chen, a Moody's Assistant Vice President and Analyst. Moody's analysis observes that the Philippines has a modern and progressive approach to bank regulation. There is no explicit legal power allowing Philippine regulators to selectively impose losses on subdebt holders outside of a liquidation process. The current banking regulations including the General Banking Law of 2000 and the New Central Bank Act provide for an ailing bank to be placed under control by the regulatory authorities, with powers to wind up and/or restructure the ailing bank's operations. "In our view, such recourse could be used to coerce subdebt holders into a distressed exchange, if not for the outright imposition of losses on them outside of liquidation," Chen concludes. As a consequence, Moody's assumes that the Philippine government support would be much less likely. This rating action relates only to Moody's view on the potential for systemic support for the banks' junior securities. It does not reflect any change in the banks' intrinsic credit quality or in the support assumptions for issuer or senior debt ratings. Background In recent years, losses have been imposed on the holders of junior securities during the resolution of troubled banks in crisis-hit countries. In the majority of cases, investors have suffered losses as a result of distressed exchanges, which do not necessarily require a developed resolution framework to be in place. Furthermore, experience has shown that such a framework can be developed quickly at times of stress. As a consequence, Moody's approach globally now is to assume, as a starting point, that no government support would be extended to the subordinated debt holders of a distressed bank, except where particular circumstances justify. A detailed rationale explaining our decision can be found in our upcoming special comment entitled "The World Has Changed: The Support Probability for Bank Subordinated Debt in Asia-Pacific Has Significantly Diminished". Ratings Affected Rizal Commercial Banking Corporation (deposits Ba2 stable; BFSR D- stable / BCA ba3 stable) - Long-term foreign currency subordinated debt MTN program rating downgraded to (P)B1 from (P)Ba3. The outlook is stable. Philippine National Bank (deposits Ba2 stable; BFSR E+ / BCA b1 positive) - Long-term local currency subordinated debt rating downgraded to B2 from Ba3. The outlook is positive. Metropolitan Bank & Trust Company (deposits Ba1 review for upgrade; BFSR D+ / BCA ba1 stable) - Long-term local currency subordinated debt rating of Ba2, confirmed with a stable outlook. The principal methodology used in these ratings was Global Banks published in May 2013. ********* Tuesday's edition of the TCR-AP delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR-AP editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Tuesday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR-AP constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR-AP editor holds some position in the issuers' public debt and equity securities about which we report. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR-AP. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com Friday's edition of the TCR-AP features a list of companies with insolvent balance sheets obtained by our editors based on the latest balance sheets publicly available a day prior to publication. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter-Asia Pacific is a daily newsletter co- published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Valerie U. Pascual, Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez, Julie Anne L. Toledo, Frauline S. Abangan, and Peter A. Chapman, Editors. Copyright 2013. All rights reserved. ISSN: 1520-9482. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. TCR-AP subscription rate is US$775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are US$25 each. For subscription information, contact Peter Chapman at 215-945-7000 or Nina Novak at 202-241-8200. *** End of Transmission ***