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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
Thursday, May 23, 2019, Vol. 22, No. 103
Headlines
A U S T R A L I A
AUSTRALIAN AGRICULTURAL: Annual Net Loss Widens to AUD148.4MM
CAMDEN ART: First Creditors' Meeting Set for May 29
CUSTOM CONTROL: First Creditors' Meeting Set for May 30
D AND D AUTOMOTIVE: First Creditors' Meeting Set for June 3
EMECO HOLDINGS: Fitch Affirms 'B' LT IDR, Outlook Stable
GHOSTGUM MARKETING: Sausage Roll Maker Forced Into Liquidation
HERE LOGISTICS: Second Creditors' Meeting Set for May 29
HOSANNA PROFIT: First Creditors' Meeting Set for May 29
MULTIFIX CONSTRUCTIONS: Second Creditors' Meeting Set for May 28
NORTH EASTERN: Second Creditors' Meeting Set for May 31
PLASTIC GLASSES: First Creditors' Meeting Set for June 3
RPA RAILWAY: Second Creditors' Meeting Set for May 29
SWIM LOOPS: First Creditors' Meeting Set for May 30
TAAVLA CAPITAL: Former Director Banned for 5 Years
C H I N A
ANXIN TRUST: Delays $405MM Payment to More Than 1,000 Investors
DR. PENG: S&P Downgrades ICR to 'B-' on Rising Liquidity Strain
KAISA GROUP: Fitch Rates Proposed US Dollar Sr. Notes 'B(EXP)'
KAISA GROUP: Moody's Assigns B2 Rating to USD3BB Sr. Notes
OCEANWIDE HOLDINGS: Fitch Assigns 'B-' Rating to $280MM Sr. Notes
H O N G K O N G
CITIC RESOURCES: S&P Alters Outlook to Positive & Affirms BB- ICR
HMV MARKETING: Mulls Big Liquidation Sale of CDs, DVDs in HK
I N D I A
ARUN POLYMERS: CRISIL Migrates B+ Rating to Not Cooperating
BRIJRAJ AGRO: CRISIL Migrates 'B' Rating to Not Cooperating
ESSAR STEEL: ArcelorMittal to Pay INR42,000 Crore for Takeover
JDP AGRO: CRISIL Migrates 'B' Rating to Not Cooperating
KALINGA BREEDING: CRISIL Migrates B+ Rating to Not Cooperating
KAMRUP PACKAGING: CRISIL Migrates B Rating to Not Cooperating
KAPOOR PRESERVATIONS: CRISIL Migrates B Rating to Not Cooperating
KARNATAKA RICE: CRISIL Migrates B+ Rating to Not Cooperating
KODAI CARS: CRISIL Migrates 'D' Rating to Not Cooperating
KOTTIYOOR METALS: CRISIL Migrates B Rating to Not Cooperating
KRISHNA COTTEX: CRISIL Reaffirms B+ Rating on INR4cr Loan
MAXIMUM SYNTHETICS: Insolvency Resolution Process Case Summary
NAVANAAMI PROJECTS: CRISIL Migrates B+ Rating to Not Cooperating
NIRMAN ESTATE: CRISIL Migrates B+ Rating to Not Cooperating
ODISHA SLURRY: Insolvency Resolution Process Case Summary
P. RAMU: CRISIL Migrates B+ Rating to Not Cooperating
PARKER VRC: CRISIL Withdraws D Rating on INR45cr Term Loan
PRAKASH INDUSTRIES: CRISIL Migrates B+ Rating to Not Cooperating
RADHAKRISHNA OIL: CRISIL Migrates B+ Rating from Not Cooperating
RAGHURAM INDUSTRIES: CRISIL Reaffirms B+ Rating on INR5cr Loan
SAI POINT: CRISIL Migrates Rating from CRISIL B-/Not Cooperating
TAJ AGRO: CRISIL Withdraws B+ Rating on INR10cr Cash Loan
TOSHBRO MEDICALS: CRISIL Reaffirms B+ Rating on INR6.5cr Loan
I N D O N E S I A
JAPFA COMFEED: Fitch Affirms 'BB-' Long Term IDR, Outlook Stable
M A L A Y S I A
BARAKAH OFFSHORE: Slips Into PN17 Over Payment Default
P A K I S T A N
PAKISTAN: Raises Borrowing Costs in Effort to Combat Inflation
- - - - -
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A U S T R A L I A
=================
AUSTRALIAN AGRICULTURAL: Annual Net Loss Widens to AUD148.4MM
-------------------------------------------------------------
Stuart Condie at The West Australian reports that the Australian
Agricultural Company's full-year loss has widened by 45 per cent to
AUD148.4 million after a AUD47 million hit from flooding that
killed 43,000 head of cattle.
Australia's largest cattle and beef producer made an underlying
profit for the 12 months to March 31 of AUD37.2 million, even after
the AUD60 million impact of drought conditions, but said on May 22
that February's North Queensland floods had hit its bottom line,
the West Australian relates.
Meat sales fell by a quarter and AACo's net loss widened from
AUD102.6 million a year ago, the report discloses.
Nonetheless, managing director and chief executive Hugh Killen said
the loss of cattle would not affect AACo's ability to fulfil supply
obligations or the rollout of its premium branded beef strategy,
according to the report.
"AACo faced weather related events that were unlike anything seen
before: 800,000 hectares of our property were affected by floods,
while drought conditions on other properties drove up expenses,"
the report quotes Mr. Killen as saying. "While we estimate the
loss of around 43,000 head of cattle during this tragic Gulf flood
event, I'd like to acknowledge all of my team and our neighbours
and friends who are also managing the impacts of this disaster."
AACo managed to lift Wagyu herd numbers--which Mr. Killen called
"the engine of our business"--by three per cent, while revenue from
Wagyu meat sales rose 4.5 per cent.
According to the report, Mr. Killen said AACo was reaching the end
of a transition period following last year's decision to mothball
its unprofitable Livingstone Beef abattoir in the Northern
Territory and drop its budget 1824 brand.
"We have a world class executive team in place and have made some
tough decisions, with the outcome being business simplification and
a more efficient AACo," he said, notes the report. "They have
proven to be sound decisions, especially when you consider the
drought, and have helped to set the company up for the next
decade."
Australian Agricultural Company Limited produces and sells cattle
and beef in Australia. The company engages in owning, operating,
and developing pastoral properties; producing beef, including
breeding, backgrounding, feedlotting, and processing cattle; and
the production of grass fed beef, grain fed beef, and Wagyu beef.
It provides its products under the Wylarah, Westholme, Master Kobe,
Kobe Cuisine, and Darling Downs Wagyu brands.
CAMDEN ART: First Creditors' Meeting Set for May 29
---------------------------------------------------
A first meeting of the creditors in the proceedings of Camden Art
Supplies Pty Ltd, trading as Deans Art, will be held on May 29,
2019, at 11:00 a.m. at the offices of Hall Chadwick Chartered
Accountants, at Level 14, 440 Collins Street, in Melbourne,
Victoria.
David Allan Ingram and David Ross of Hall Chadwick Chartered
Accountants were appointed as administrators of Camden Art on May
17, 2019.
CUSTOM CONTROL: First Creditors' Meeting Set for May 30
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Custom
Control Electrical Pty Ltd will be held on May 30, 2019, at 10:00
a.m. at the offices of Jamieson Louttit & Associates, at Penfold
House, Suite 72, Level 15, 88 Pitt Street, in Sydney, NSW.
Jamieson Louttit of Jamieson Louttit & Associates was appointed as
administrator of Custom Control on May 20, 2019.
D AND D AUTOMOTIVE: First Creditors' Meeting Set for June 3
-----------------------------------------------------------
A first meeting of the creditors in the proceedings of D and D
Automotive Pty Ltd, trading as Bridgestone Select Tyres & Auto -
Campbelltown, will be held on June 3, 2019, at 11:00 a.m. at the
offices of Amos Insolvency, at 25/ 185 Airds Road, in Leumeah, NSW.
Peter Andrew Amos of Amos Insolvency was appointed as administrator
of D and D Automotive on May 22, 2019.
EMECO HOLDINGS: Fitch Affirms 'B' LT IDR, Outlook Stable
--------------------------------------------------------
Fitch Ratings has affirmed Australia-based Emeco Holdings Limited's
Long-Term Issuer Default Rating at 'B'. The Outlook is Stable.
The rating reflects Fitch's view that Emeco has successfully
integrated the two companies it acquired - Matilda Equipment and
Force Equipment Pty Ltd - and its cash flow will continue to
benefit from the increasing level of mining activities in
Australia. We expect Emeco's FFO adjusted net leverage to improve
to around 2.0x over the next three years, from 2.5x at the end of
the financial year to June 2018 (FYE18), supported by continued
growth in EBITDA and debt reduction under an excess cash-sweep
provision.
KEY RATING DRIVERS
Improving Financial Profile: We believe Emeco is well-positioned to
benefit from the Australian mining sector's increase in exploration
and production activity. Emeco reported Fitch-adjusted revenue of
AUD224 million in 1HFY19 (1HFY18: AUD171 million) and EBITDA of
AUD99 million (1HFY18: AUD61 million) on an improvement in its
operating utilization to 64% during 1HFY19 from 57% in 1HFY18, a
higher rental yield, and disciplined cost management.
Fitch expects the company's financial performance to continue
improving over the next 12-18 months due to its larger available
rental fleet, recent investments in a new fleet, most of which
already have rental contracts in place, and a rational supply
response from the mining and rental-equipment industries.
Commitment to Deleverage: The company aims to cut leverage,
measured by Emeco-defined net debt/operating EBITDA, to around 1.0x
by FY21 (1HFY19: 2.1x; Emeco-defined). We believe Emeco's publicly
announced commitment to deleveraging and its improving financial
performance increase the probability of it meeting its target and
refinancing its senior secured notes on better terms during
2020-2021. The company's enhanced fleet size provides another layer
of protection to senior lenders and could become an additional
source of cash flow to support its deleveraging if required.
Fitch expects Emeco's leverage, measured by FFO adjusted net
leverage, to improve to around 2.0x by FY20 due to its larger fleet
size, the strong level of mining activity, incremental earnings and
capex savings following the recent fleet investments.
Exposure to Cyclical Sector: Fitch believes Emeco is susceptible to
commodity-price changes and the need for large capex to expand
during commodity-price up cycles. The capital-intensive nature of
the equipment-rental business limits Emeco from repaying debt.
Fitch believes that without equity-funded acquisitions, Emeco's
growth CapEx would have been higher or it would have generated less
cash flow, which would also limit its ability to repay debt. In
addition, Emeco's bargaining power decreased during the previous
downturns, reducing the visibility of its cash flows. However,
Emeco is currently well-positioned within its sector and the
trajectory of its leverage profile as well as its conservative
financial policy counterbalance its cyclical sector exposure.
DERIVATION SUMMARY
Emeco's rating can be compared with peer PT Bukit Makmur Mandiri
Utama (BB-/Stable), which has better revenue visibility and a
relatively stable operating profile that stem from the
Indonesia-based company's long-term contracts with miners and its
diversified service offerings at various production stages. Bukit
Makmur also benefits from the long transition time required to
switch mining contractors (around three years), which results in
high switching costs for coal miners. Bukit Makmur, therefore, had
a more stable operating profile during the previous downturn and
better earnings visibility than Emeco. These factors underscore the
two-notch rating differential.
PT ABM Investama Tbk (BB-/Negative) has a better diversified and
more integrated business model than Emeco. ABM has low-cost coal
mines with an established coal-contracting business, along with its
logistics and engineering businesses that provide diversification
from volatile commodity prices. These factors justify the two-notch
rating differential between Emeco and ABM.
KEY ASSUMPTIONS
- Operating utilization rate remains above 60% due to strong
market conditions and a limited supply of equipment.
- Net CapEx at around 20%-25% of revenue from FY20-FY22. FY19
CapEx is estimated to be around AUD200 million.
- Emeco continues to repay debt under its excess cash-sweep
provision.
RATING SENSITIVITIES
Developments That May, Individually or Collectively, Lead to
Positive Rating Action
- FFO adjusted net leverage below 2.0x on a sustained basis.
- Successfully refinances its US dollar notes at better terms over
the next two years.
Developments That May, Individually or Collectively, Lead to
Negative Rating Action
- Deterioration of operating performance, including shrinkage of
the operating utilization rate and loss of major contracts.
- FFO adjusted net leverage exceeding 4.0x on a sustained basis.
GHOSTGUM MARKETING: Sausage Roll Maker Forced Into Liquidation
--------------------------------------------------------------
Zoe Zaczek at Daily Mail Australia reports that the maker of one of
Australia's most iconic sausage rolls has been forced into
liquidation.
Ghostgum Marketing, which trades as Mrs. Quick Foods, was handed
the wind up notice by the Australian Tax Office on May 20.
Based in Beaudesert, south-east Queensland, Mrs. Quick Foods has
been making the iconic Australian delicacy for over 20 years.
The company was forced into liquidation for owing an undisclosed
amount of money, Daily Mail Australia relates citing a The
Courier-Mail report.
According to the report, this isn't the first time the company has
had a wind-up order--it was first issued a wind-up notice in May
2011. However, according to ASIC records, the notice was dismissed
the following April.
'An Australian favorite for twenty years, we select only the best
quality ingredients for our handmade premium sausage rolls and
pies,' the Mrs. Quick Foods website says.
The company was kickstarted in 1993 and claims to make the
country's 'favorite' sausage rolls.
The products have been found at Coles, Woolworths, IGA and their
premium 3kg beef and chicken sausage rolls were sold only at
CostCo, the report adds.
HERE LOGISTICS: Second Creditors' Meeting Set for May 29
--------------------------------------------------------
A second meeting of creditors in the proceedings of HERE Logistics
Pty Ltd has been set for May 29, 2019, at 10:30 a.m. at the offices
of Deloitte Financial Advisory Pty Ltd, at Level 10, 550 Bourke
Street, in Melbourne, Victoria.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by May 28, 2019, at 4:00 p.m.
Michael James Billingsley and Neil Robert Cussen of Deloitte
Financial were appointed as administrators of HERE Logistics on
April 23, 2019.
HOSANNA PROFIT: First Creditors' Meeting Set for May 29
-------------------------------------------------------
A first meeting of the creditors in the proceedings of Hosanna
Profit Group Pty Ltd will be held on May 29, 2019, at 11:00 a.m. at
the offices of Offices of Quigley & Co, at Level 5, 231, Adelaide
Terrace, in Perth, WA.
Peter Reymond Quigley of Quigley & Co was appointed as
administrator of Hosanna Profit on May 17, 2019.
MULTIFIX CONSTRUCTIONS: Second Creditors' Meeting Set for May 28
----------------------------------------------------------------
A second meeting of creditors in the proceedings of Multifix
Constructions Pty Ltd, trading as Multifix Constructions, has been
set for May 28, 2019, at 10:30 a.m. at the offices of Worrells
Solvency & Forensic Accountants, at Level 8, 102 Adelaide Street,
in Brisbane, Queensland.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by May 27, 2019, at 5:00 p.m.
Nikhil Khatri of Worrells Solvency was appointed as administrator
of Multifix Constructions on April 11, 2019.
NORTH EASTERN: Second Creditors' Meeting Set for May 31
-------------------------------------------------------
A second meeting of creditors in the proceedings of North Eastern
Tasmanian Sands Pty Ltd has been set for May 31, 2019, at 10:30
a.m. at 105 Macquarie St, in Hobart.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by May 30, 2019, at 4:00 p.m.
Paul John Cook of Paul Cook & Associates was appointed as
administrator of North Eastern on April 26, 2019.
PLASTIC GLASSES: First Creditors' Meeting Set for June 3
--------------------------------------------------------
A first meeting of the creditors in the proceedings of Plastic
Glasses Pty Ltd will be held on June 3, 2019, at 11:00 a.m. at the
offices of Vince & Associates, at 51 Robinson Street, in Dandenong,
Victoria.
Peter Robert Vince and Paul William Langdon of Vince & Associates
were appointed as administrators of Plastic Glasses on May 22,
2019.
RPA RAILWAY: Second Creditors' Meeting Set for May 29
-----------------------------------------------------
A second meeting of creditors in the proceedings of RPA Railway
Possessions Australia Pty Ltd has been set for May 29, 2019, at
11:00 a.m. at the offices of Vincents, at Level 34, 32 Turbot
Street, in Brisbane, Queensland.
The purpose of the meeting is (1) to receive the report by the
Administrator about the business, property, affairs and financial
circumstances of the Company; and (2) for the creditors of the
Company to resolve whether the Company will execute a deed of
company arrangement, the administration should end, or the Company
be wound up.
Creditors wishing to attend are advised proofs and proxies should
be submitted to the Administrator by May 28, 2019, at 5:00 p.m.
Nick Combis of Vincents was appointed as administrator of RPA
Railway on April 26, 2019.
SWIM LOOPS: First Creditors' Meeting Set for May 30
---------------------------------------------------
A first meeting of the creditors in the proceedings of Swim Loops
Pty will be held on May 30, 2019, at 11:00 a.m. at Level 4, 91
Upton Street, in Bundall, Queensland.
Glenn Thomas O'Kearney of GT Advisory & Consulting was appointed as
administrator of Swim Loops on May 20, 2019.
TAAVLA CAPITAL: Former Director Banned for 5 Years
--------------------------------------------------
Australian Securities and Investments Commission has disqualified
Mr. Daniel McSweeny of Zetland, NSW from managing companies for the
maximum period of five years following his involvement in 14 failed
companies.
Mr. McSweeny was a former director of:
-- Taavla Capital Pty Limited A.C.N. 139 644 429;
-- Prettoria Capital Pty Limited A.C.N. 143 300 609;
-- Iugis Capital Pty Limited A.C.N. 136 702 639;
-- Wealth Achievers Services Australia A.C.N. 130 189 909;
-- Constantia Capital Pty Limited A.C.N. 143 526 434;
-- FF&I Holdings Pty Limited A.C.N. 124 345 348;
-- Security Chips Pty Ltd A.C.N. 600 199 255;
-- Kimbriki Capital Pty Ltd A.C.N. 133 864 883;
-- Kimbriki Capital Trading Pty Ltd A.C.N. 133 864 892;
-- Wealth Achievers Services Group Pty Ltd A.C.N. 162 529
375;
-- Mondo Oro Pty Ltd A.C.N. 120 262 348;
-- The Village Accountant Australia Pty Ltd A.C.N. 143 264
699;
-- Wealth Achievers Services Pty Ltd A.C.N. 127 843 056; and
-- Logiplan Financial Services Pty Ltd A.C.N 002 663 210;
Mr. McSweeney used the companies to operate a financial services
business. The companies were placed into liquidation between Aug.
21, 2014 and Sept. 8, 2015.
The total amount of debts owed by the 14 companies to creditors
amounted to approximately AUD9.8 million.
ASIC found that Mr. McSweeny:
* had fraudulently misappropriated company money;
* used the company structure for his own dishonest means;
* showed a complete disregard of his director duties;
* failed to observe requirements to lodge documents with
the Australian Taxation Office;
* failed to ensure the companies complied with their
obligation to keep written financial records; and
* failed to prevent the companies from trading while
possibly insolvent.
In reaching its decision, ASIC relied on reports that were lodged
by the liquidators of the failed companies. ASIC also provided
liquidators of Taavla Capital Pty Limited, Prettoria Capital Pty
Limited, Iugis Capital Pty Limited and Wealth Achievers Services
Australian Pty Ltd with funding from the Assetless Administration
Fund (AAF) to prepare supplementary reports that were used to
disqualify Mr. McSweeny.
Mr. McSweeny's disqualification took effect from May 2, 2019 and
extends to May 1, 2024.
Section 206F of the Corporations Act allows ASIC to disqualify a
person from managing corporations for up to five years if, within a
seven-year period, the person was an officer of two or more
companies, and those companies were wound up and a liquidator
provides a report to ASIC about the company's inability to pay its
debts.
ASIC also maintains a 'Banned and Disqualified Persons' register
that provides information about people who have been disqualified
from:
- involvement in the management of a corporation;
- auditing self-managed superannuation funds (SMSFs); or
- practicing in the financial services of credit industry.
Following a separate ASIC investigation, Mr. McSweeny has been
charged with 20 dishonesty offences and one offence of falsifying
books while a company director. The matter is next scheduled for
mention on July 5, 2019 and is being prosecuted by the Commonwealth
Director of Public Prosecutions.
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C H I N A
=========
ANXIN TRUST: Delays $405MM Payment to More Than 1,000 Investors
---------------------------------------------------------------
Liang Hong and Denise Jia at Caixin Global reports that a trust
that raised billions of yuan to back a rural revitalization project
in western China failed to repay more than 1,000 investors on time
April 28 and delayed redemptions by as long as a year after housing
sales slowed and government subsidies didn't materialize.
The trust product, issued by Shanghai-listed Anxin Trust &
Investment Co., hadn't repaid CNY2.8 billion ($405 million) to
investors as of May 13, Caixin relates. The liquidity of Guizhou
Hongde Property Co., the company managing the rural revitalization
project in western Guizhou province, was hurt by the "external
environment" and the company was unable to raise enough to repay
investors, Anxin Trust said in a statement.
Anxin Trust didn't elaborate, but Caixin learned that the delay in
payments may have been caused by slow housing sales and a failure
to obtain expected government subsidies. The deferred redemptions
surprised investors as Anxin Trust reported just a month ago that
the project was going smoothly.
According to the statement cited by Caixin, the trust payouts will
be postponed by a year, and the expected annualized rate of return
will be increased by 50 basis points, or a half-percentage point.
Because the trust contract allowed for deferred payment by as much
as 12 months, the project is not considered in default as it is
only postponing redemption, a person close to the matter said.
In its first-quarter management report released April 9, Anxin
Trust said Guizhou Hongde Property was in sound financial position
and the project was under orderly development, according to
Caixin.
Caixin says the project, located in the Wudang district of Guiyang,
the capital of Guizhou province, aims to redevelop more than 1,200
acres of rural land over 10 years into a modern residential
community of condos, schools, hospitals, parks, public
transportation and leisure facilities. Guizhou Hongde raised funds
through the trust product and plans to repay investors using
revenue from housing sales in the project.
Guizhou Hongde has been optimistic about its property sales, but
the overall real estate market in Guiyang is showing signs of a
downturn. Meanwhile, certain government subsidies in the project
related to road construction have not been put in place as
expected, Caixin learned.
Guizhou Hongde is taking measures actively to raise funds by
slashing sales prices, refinancing with lenders and negotiating
with the government on the subsidies, Anxin Trust, as cited by
Caixin, said. The trust company said it has also sent its own staff
to the project company to facilitate fundraising.
At the same time, a major shareholder of Guizhou Hongde issued a
statement distancing itself from trust's delay in payment, Caixin
reports.
Caixin says Guizhou Sunac Jiye Real Estate Development Co., a
subsidiary of Chinese property giant Sunac China Holdings that
holds a 45% stake in Guizhou Hongde, said the trust was a liability
before it became a shareholder of Guizhou Hongde, and it terminated
a partnership with Guizhou Hongde on March 1 because the company
didn't obtain certain lands as agreed. It also said it is exiting
its equity investment in Guizhou Hongde, without elaborating.
Caixin learned from several sources that the lands mentioned by
Guizhou Sunac are not related to the project underlying the trust.
DR. PENG: S&P Downgrades ICR to 'B-' on Rising Liquidity Strain
---------------------------------------------------------------
On May 22, 2019, S&P Global Ratings lowered its long-term issuer
credit rating on China-based Dr. Peng Telecom & Media Group to 'B-'
from 'B'. S&P also lowered the issue rating on the company's
guaranteed senior unsecured debt to 'B-' from 'B'.
The negative outlook for the next 12 months reflects S&P's view
that Dr. Peng's liquidity could further decline without meaningful
progress in refinancing.
S&P lowered the rating based on Dr. Peng's rising liquidity
pressure. The company has significant debt maturities in the first
half of 2020, but has made limited progress in refinancing.
About Chinese renminbi (RMB) 5.6 billion of Dr. Peng's debt will
mature by June 30, 2020. This mainly comprises about US$410 million
in offshore bonds and two domestic puttable bonds totaling RMB2.0
billion that are exercisable in April 2020 and June 2020,
respectively. Meanwhile, Dr. Peng's unrestricted cash balance
decreased to RMB1.7 billion as of March 31, 2019, due to operating
cash outflow and large capital expenditure.
S&P does not expect Dr. Peng's liquidity position to improve in the
next 12-18 months. Intensifying competition between domestic
broadband service providers caused the company's subscriber base to
drop by a double-digit percentage in 2018, and operating cash flow
to decrease 40% year over year (YoY).
Partly due to the competitive pressure, Dr. Peng is considering
exiting its broadband business, which constitutes a significant
portion of operations. While the exit could generate one-time sales
proceeds, it may also strain operating cash flow due to reduced
prepayment collection. In addition, the sales process could be
protracted, as negotiations will be done on a city-by-city basis
amid a continued loss of subscribers.
Dr. Peng has made limited progress at building bank relationships
over the past few months. Most new funding is small and short term,
and does not sufficiently address the company's sizable maturities
in 2020. Longer-term financing may be more difficult and more
costly to obtain, given Dr. Peng's weakening performance. The
company's revenue dropped 9.2% YoY in the first quarter of 2019,
with the gross margin down by 387 basis points.
S&P said, "We forecast Dr. Peng's debt-to-EBITDA ratio to increase
to 3.5x-3.9x in 2019 and 5.8x-6.2x in 2020, from 2.3x in 2018. This
reflects a narrowing EBITDA margin because of the decline in the
more-profitable broadband business and significant expansion in
network maintenance services, which is a less-profitable segment
(with a profit margin in the low single digits).
"Furthermore, we expect Dr. Peng to fund its significant investment
in IDC through debt. We anticipate that IDC capacity will more than
double over the next two years from around 30,000 "cabinets" in
2019. As a result, we have changed our assessment of Dr. Peng's
financial risk profile to highly leveraged, from significant.
"The negative outlook reflects our view that Dr. Peng's liquidity
could deteriorate over the next 12 months. The company is working
on several refinancing and fund-raising initiatives, but the timing
is uncertain and subject to ongoing negotiations. The execution of
these initiatives will determine the company's liquidity position
and direction of the rating.
If Dr. Peng is unable to make meaningful progress on these
refinancing and fund-raising initiatives over the next two
quarters, we could lower the rating.
"We could revise the outlook to stable if Dr. Peng can execute on
some of these initiatives, and significantly reduces its sizable
maturities in June 2020 and refinancing risk. This may happen if
the company is able to reduce half of its debt maturities in June
2020 over the next two to three months, and we have stronger
confidence that it can refinance the rest."
Dr. Peng is a Shanghai-listed telecommunication service provider
offering fixed-line broadband access, IDC operations, and media
services in China.
S&P said, "We have revised our assessment of Dr. Peng's liquidity
to weak from less than adequate. Although we estimate the company's
ratio of liquidity sources to uses is 1.2x-1.4x over the 12 months
ending March 31, 2020, this ratio will quickly drop below 1x in the
subsequent quarter as most of its debt maturities become current."
KAISA GROUP: Fitch Rates Proposed US Dollar Sr. Notes 'B(EXP)'
--------------------------------------------------------------
Fitch Ratings has assigned China-based homebuilder Kaisa Group
Holdings Limited's (B/Stable) proposed US dollar senior notes an
expected 'B(EXP)' rating with a Recovery Rating of 'RR4'. The
proposed notes will be used to refinance debt.
The proposed notes are rated at the same level as Kaisa's senior
unsecured rating as they will constitute its direct and senior
unsecured obligations. The final rating is subject to the receipt
of final documentation conforming to information already received.
Kaisa's ratings are underpinned by its strong asset base that
supports its scale expansion, which is at a level comparable with
'BB' category homebuilders. The company had a large and
well-located land bank consisting of over 150 projects in 45 cities
across five major economic regions at end-2018. Its geographical
diversification mitigates project and region-related risks and
gives it more flexibility when launching new projects to support
sales growth. Kaisa's ratings are constrained by high leverage -
measured by net debt/adjusted inventory (urban renewal projects
(URPs) and investment properties at original cost) - of 72.7% at
end-2018, though this is partly mitigated by high profitability.
Fitch believes Kaisa will start deleveraging from 2020, supported
by its enlarged scale and increasing margins, with more high-margin
URPs being recognized. Kaisa is able to secure a large land bank at
low cost in China's Greater Bay Area through its URP business; this
supports the company's high EBITDA margin of over 30%. The wider
margin of the URP business of over 40% is an important factor in
helping the company deleverage. However, Kaisa's leverage will be
sustained at a high level if it expands its scale at the same pace
as in 2017 and 2018, as URPs only contributed to 30% of contracted
sales in 2018.
KEY RATING DRIVERS
URPs a Business Strength: Fitch believes Kaisa's URP business
offers operational flexibility, as its high profitability enables
the company to sustain price cuts in a market downturn. Kaisa can
also sell the stakes in its URPs, if needed, at a profit because of
their low land cost. Kaisa's long experience in the URP business
has enabled it to secure a large land bank with a high gross profit
margin of over 40%, supporting the company's overall EBITDA margin,
excluding capitalized interest in cost of goods sold (COGS) of
30%-35%. A large URP pipeline of 119 projects (30 million sq m of
land) also allowed for a consistent stream of projects entering the
sales phase.
Kaisa has converted an average gross floor area (GFA) of 940,000 sq
m a year for the past 10 years and this also gives it some
operational flexibility with land replenishment. Nevertheless, the
URP business has limited scope to build scale and will become a
less important driver at higher rating levels. URPs require a
longer development cycle and thus funds will be trapped for a
longer period and incur higher funding without immediate cash flow
generation or profit contribution, raising Kaisa's leverage above
that of peers without as large an exposure to URPs. The nature of
the business and the high profitability mean Kaisa can operate at a
higher leverage than other Chinese homebuilders for a sustained
period.
High Leverage Constrains Ratings: Fitch expects Kaisa's leverage,
measured by net debt to adjusted inventory, to stay above 70% in
2019, but to fall below 70% thereafter. Kaisa's sales scale in 2019
would be insufficient to cover its high tax and interest burden.
Reliance on the non-URP homebuilding business, which has a lower
margin, and growth at the business that is faster than we expect
may limit capacity to deleverage. However, we think there may be
improvement once the company's attributable sales rise above CNY100
billion from 2020, as its sales efficiency - contracted sales/gross
debt - will exceed 0.8x and support stronger fund flow from
operation.
Large and Premium Land Bank: Fitch believes Kaisa's good-quality
land bank will support the company's ability to meet its total
sales target of CNY90 billion in 2019. Its premium asset base can
also boost liquidity at times when the conversion of its URP land
bank takes longer than the company expects, as it can easily find
buyers for its well-located URPs, especially those in Shenzhen.
Kaisa's land bank totalled 24.0 million sq m (estimated sellable
resources of CNY464 billion) at end-2018, of which 13.0 million sq
m, or 54.3%, was in the Greater Bay Area and 3.2 million sq m in
Shenzhen.
Robust Contracted Sales Growth: Fitch thinks Kaisa's 2019
contracted sales target is achievable due to the supportive
policies in the Greater Bay Area and the company's well-located
land bank. Kaisa had total sellable resources of CNY158 billion at
end-2018, implying a sell-through rate of 57% in 2019 to support
its 20% sales growth, close to its historical sell-through rate of
around 60%. Kaisa's attributable contracted sales rose by 57% to
CNY70.1 billion in 2018, supported by an average selling price
increase of 14% and GFA growth of 38%.
DERIVATION SUMMARY
Kaisa's attributable sales scale of CNY70 billion in 2018 is
comparable with that of 'BB' category peers, such as CIFI Holdings
(Group) Co. Ltd. (BB/Stable), Logan Property Holdings Company
Limited (BB-/Positive) and China Aoyuan Group Limited
(BB-/Positive), and exceeds the CNY40 billion-50 billion sales of
Yuzhou Properties Company Limited (BB-/Stable), KWG Group Holdings
Limited (BB-/Stable) and Times China Holdings Limited (BB-/Stable).
Over half of Kaisa's land bank GFA is in the Greater Bay Area,
similar to that of Logan, China Aoyuan and Times China. Kaisa's
EBITDA margin of over 30% is at the higher-end of 'BB' category
peers, thanks to its high-margin URPs.
Kaisa's leverage of over 70% is similar to that of Oceanwide
Holdings Co. Ltd. (B-/Stable), Xinhu Zhongbao Co., Ltd. (B-/Stable)
and Tahoe Group Co., Ltd. (B-/Negative). Kaisa's business profile
is much stronger than that of Oceanwide and Xinhu, with a larger
sales scale and more diversified land bank. Its churn, measured by
contracted sales/total debt, of 0.64x is also healthier than the
ratios of the two companies, which are below 0.25x. Kaisa and
Tahoe, whose land bank is more exposed to the Pan-Bohai Area, the
Yangtze River Delta and Fujian province, have similar scale and
margin. However, Tahoe's shorter land bank life of two to three
years pressures its leverage and Tahoe's liquidity is much tighter
than that of Kaisa.
Kaisa's closest peer among 'B' rated issuers is Yango Group Co.,
Ltd. (B/Positive). Yango's sales of CNY118 billion in 2018 were
larger than Kaisa's CNY70 billion and its land bank is also more
diversified. However, Yango's EBITDA margin, excluding capitalized
interest, of less than 20% is narrower than Kaisa's more than 30%.
Yango's leverage, measured by net debt/adjusted inventory, was high
at 71% at end-2018, similar to that of Kaisa.
KEY ASSUMPTIONS
Fitch's Key Assumptions within Our Rating Case for the Issuer
- Attributable contracted sales to rise by 20% in 2019 and 2020
- Attributable land premium/contracted sales at 28% in 2019 and
31% in 2020 (2018: 23%)
- Cash collection rate of around 80% in 2019 and 85% in 2020
(2018: 75%)
- Construction cost/sales proceeds at around 30% in 2019 and 2020
(2018: 30%)
- Dividend payout ratio of 20% of net income (2018: 19%)
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- Leverage, measured by net debt/adjusted inventory, sustained
below 60%
- EBITDA margin, excluding capitalized interest in COGS, sustained
above 30%
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Leverage, measured by net debt/adjusted inventory, above 75% for
a sustained period
- EBITDA margin, excluding capitalized interest in COGS, below 25%
for a sustained period
LIQUIDITY
Cash Meets Short-Term Obligations: Kaisa had cash and cash
equivalents of CNY22.5 billion at end-2018, including restricted
cash of CNY6.8 billion, against CNY17.0 billion in short-term debt.
The company also had total credit lines of CNY165 billion, of which
CNY119 billion was unused. In addition, Kaisa obtained approval
from the Shenzhen Stock Exchange to issue four asset-backed
securities, consisting of CNY5 billion linked to supply-chain
financing, CNY3 billion linked to long-term rental apartments,
CNY685 million secured by mortgage balloon payments (issued) and
CNY475 million backed by income of its shipping business (issued).
Kaisa's average funding cost stayed flat at 8.4% in 2018.
KAISA GROUP: Moody's Assigns B2 Rating to USD3BB Sr. Notes
----------------------------------------------------------
Moody's Investors Service has assigned a B2 senior unsecured rating
to the existing USD3 billion senior notes issued by Kaisa Group
Holdings Ltd (B1 stable) in June 2017.
The proceeds of the notes were used by Kaisa mainly to repay
existing debt.
RATINGS RATIONALE
Kaisa's B1 CFR reflects its strong sales execution in the
Guangdong-Hong Kong-Macao Bay Area, established track record with
high-margin urban redevelopment projects, and good quality land
banks in high-tier cities such as Shenzhen.
However, the company's rating is constrained by its moderate
financial metrics, history of debt restructuring and share
suspension, and high financing costs.
The B2 senior unsecured ratings are one notch lower than the
corporate family rating due to structural subordination risk. This
subordination risk refers to the fact that the majority of Kaisa's
claims are at its operating subsidiaries and have priority over
claims at the holding company in a bankruptcy scenario. In
addition, the holding company lacks significant mitigating factors
for structural subordination, resulting in a lower expected
recovery rate for claims at the holding company.
The stable outlook reflects Moody's expectation that Kaisa will
maintain its sales growth in high-tier cities, high profit margins
and good liquidity. The outlook also incorporates Moody's
expectation that the company will expand its access to funding over
the next 12-18 months.
Kaisa's liquidity is good. The company's cash holdings of RMB22.3
billion at 31 December 2018 could cover about 1.3x its short-term
debt as of the same date. Moody's also expects that Kaisa's cash
holdings and operating cash flow will be sufficient to cover its
short-term debt and committed land payments over the next 12-18
months.
Moody's could upgrade Kaisa's ratings if the company (1) maintains
its good liquidity position; (2) diversifies its funding channels;
and (3) improves its adjusted EBIT/interest coverage to above
3.0x-3.5x and revenue/ adjusted debt to above 75%-80% on a
sustained basis.
On the other hand, downward ratings pressure could emerge if the
company fails to achieve sales growth, or aggressively acquires
lands beyond Moody's expectation, such that its financial metrics
and liquidity deteriorate.
Credit metrics that could trigger a rating downgrade include (1)
revenue/adjusted debt below 50% on a sustained basis; (2) adjusted
EBIT/ interest coverage below 2.0x on a sustained basis; or (3)
cash to short-term debt below 1.0x-1.5x.
The principal methodology used in this rating was Homebuilding And
Property Development Industry published in January 2018.
Kaisa Group Holdings Ltd engages in real estate development in
China. The company has a long operating history that spans over 20
years and has established a well-recognized brand, particularly in
urban redevelopment projects in the Greater Bay Area. At 31
December 2018, it had an aggregate gross floor area of 24 million
square meters of saleable resources across 45 cities in China.
Kaisa's operations also involve property management and
non-property related businesses, including hotel and catering
operations, cinema, department store and cultural center
operations, and waterway passenger and cargo transportation.
Founded in 1999, the company is listed on the Hong Kong Stock
Exchange, with its headquarters in Shenzhen. At 31 December 2018,
Kaisa was 39%-owned by its founder, Mr. Kwok Ying Shing, and his
family members.
OCEANWIDE HOLDINGS: Fitch Assigns 'B-' Rating to $280MM Sr. Notes
-----------------------------------------------------------------
Fitch Ratings has assigned China-based Oceanwide Holdings Co.
Ltd.'s (B-/Stable) USD280 million 14.5% senior notes due 2021 a
final rating of 'B-' and a Recovery Rating of 'RR4'. The notes are
being offered in exchange for its USD400 million notes due 2019 and
as new issuance. Oceanwide intends to use net proceeds to refinance
its debt.
The notes are issued by the company's wholly owned subsidiary,
Oceanwide Holdings International Development III Co., Ltd. They
will be guaranteed by the parent and are rated at the same level as
Oceanwide's senior unsecured rating because they constitute its
direct and senior unsecured obligations. The final rating is in
line with the expected rating assigned on 29 April.
Oceanwide's ratings are constrained by its high leverage - measured
by net debt/adjusted inventory, including available-for-sale (AFS)
financial assets and financial institution (FI) investments - of
around 79% at end-2018. Fitch estimates the company's leverage will
improve to 73% by end-2019 after selling assets to Sunac China
Holdings Limited (BB/Stable) in January. The company's total debt
will stay high, and we believe its leverage will remain under
pressure due to weaker sales without contribution from the disposed
of projects, as well as high interest and tax burden.
Oceanwide's high leverage is partly offset by an increasing
contribution from its finance business that had an EBITDA of CNY1.8
billion in 2018, accounting for 51% of total EBITDA. Fitch expects
the company's non-development property EBITDA/interest paid ratio
to improve to 0.25x-0.30x over the next two years, which provides
some buffer in servicing its debt.
KEY RATING DRIVERS
Leverage Stays High: Oceanwide's leverage is among the highest of
'B' rated Chinese homebuilder peers. Its weak credit metrics are
due to its investments in its FI subsidiaries and large exposure to
commercial development properties that have a longer
cash-collection cycle. We estimate Oceanwide's leverage will
improve to 73% by end-2019, from 79% at end-2018, thanks to the
asset disposals to Sunac. However, leverage will remain under
pressure due to weak sales without contribution from the disposed
of Shanghai and Beijing projects as well as its high interest and
tax burden that will amount to CNY10 billion a year in the next
three years.
Extremely Slow Sales: Fitch expects Oceanwide's sales efficiency,
as measured by contracted sales/gross debt excluding FIs, to remain
below 0.25x for the next three years. Fitch estimates Oceanwide's
sales will decrease by around 40% in 2019 and remain weak post the
asset disposals, despite its US projects starting to contribute in
2020. This implies a contracted sales/gross debt ratio at 0.08x in
2019 and 2020.
Funding Pressure Easing Post-Deal: Oceanwide will receive a net
equity consideration of CNY12.6 billion for the assets disposed of
in January 2019. Total debt of CNY28 billion will be transferred to
Sunac, of which CNY10.6 billion is due within 12 months.
Oceanwide's available cash, including cash in its FI subsidiaries,
at end-2018, was CNY7.4 billion, down from CNY9.6 billion at
end-2017, while short-term debt increased to CNY58.4 billion in
2018, from CNY45.3 billion in 2017.
Focus on Finance Businesses: Oceanwide is accelerating its
transformation into a financial conglomerate; EBITDA from its
finance business contributed over 50% of total EBITDA in 2017 and
2018, from only 16% in 2016. Still, the profitability of
Oceanwide's financial business fluctuates depending on the overall
financial environment. Its non-development property EBITDA/interest
paid ratio fell to 0.18x in 2018's weak financial market, from
0.40x in 2017. Fitch expects this ratio to improve to 0.25x-0.30x
over the next two years, which will provide some buffer in
servicing the company's debt.
Asset Base Supports Funding Access: Fitch believes Oceanwide still
has borrowing capacity, with unencumbered assets of CNY22 billion
at end-2018. Oceanwide has pledged property and financial assets of
CNY103.4 billion as well as shares of its FI subsidiaries for CNY80
billion in secured debt. The company had CNY16 billion of
development properties that remained unencumbered at end-2018; and
is likely to be able to use them to secure borrowings due to their
attractive valuation.
DERIVATION SUMMARY
Oceanwide's rating is severely constrained by its poor contracted
sales/gross debt, excluding FIs, of below 0.25x, which is among the
lowest ratios of all rated homebuilders. Its weak cash generation
led to leverage rising consistently, reaching 79% in 2018, and made
it one of the highest leveraged among 'B' rated peers.
Oceanwide's poor credit metrics are due partly to its large
exposure to commercial development properties that have a longer
cash-collection cycle. However, the company's slow-churn business
model means that its land bank is older and substantially
undervalued compared with those of fast-churn homebuilders. This
also means that Oceanwide has a high EBITDA margin among 'B' rated
peers.
KEY ASSUMPTIONS
Fitch's Key Assumptions Within Our Rating Case for the Issuer
- Property development EBITDA margin of 25%-40% in 2018-2020
(2017: 26%)
- Stable performance of finance segment
RATING SENSITIVITIES
Developments that May, Individually or Collectively, Lead to
Positive Rating Action
- Net debt/adjusted inventory including AFS & FI investment
sustained below 70% (79% at end-2018)
- Consolidated EBITDA margin sustained above 35% (28% in 2018)
Developments that May, Individually or Collectively, Lead to
Negative Rating Action
- Further weakening of Oceanwide's liquidity position
- Non-property development EBITDA/interest paid below 0.25x for a
sustained period (0.18x in 2018)
=================
H O N G K O N G
=================
CITIC RESOURCES: S&P Alters Outlook to Positive & Affirms BB- ICR
-----------------------------------------------------------------
On May 21, 2019, S&P Global Ratings revised its outlook on CITIC
Resources to positive from stable. At the same time, S&P affirmed
its 'BB-' long-term issuer credit rating on the Hong Kong-based oil
producer.
S&P said, "We revised the outlook to positive to reflect our view
that CITIC Resources' profitability will be much better and its
financial leverage much lower than levels in 2015-2016, when oil
prices were in a trough. The improvement in credit metrics is
mainly due to the recovery in oil prices.
"In our view, the company's financial performance will be more
resilient even if oil prices soften in 2019 and 2020 on slowing
demand and increasing supply from the U.S. This is because we
expect the company to maintain stringent cost control measures as
it did in the past few years to confront volatile oil prices. We
forecast leverage to rise moderately and for the company to contain
its debt-to-EBITDA ratio at 5.5x-6.0x over the next 12 months,
compared with 5.2x in 2018. This is a notable improvement from our
previous forecast of 8.5x-10.0x. We currently assume Brent oil
prices to average US$60 per barrel for the rest of 2019 and 2020.
Brent oil is currently at US$70 per barrel and has averaged $US66
per barrel in 2019 to date. If this oil price stays at the current
level, the company's debt-to-EBITDA ratio could be better than our
expectations. We foresee CITIC Resources' free operating cash flow
remaining positive on healthy operating cash flow and prudent
capital spending."
CITIC Resources' financial position has strengthened significantly
on the oil price recovery and the company's disciplined spending
over the past two years. The company's debt-to-EBITDA ratio
improved meaningfully to 5.2x in 2018, from 15.2x in 2016. Given
that the crude oil segment is the key profit contributor for the
company, S&P attributes the improvement to a 66% higher average
realized oil price from oilfields in China and Indonesia, despite
being partially offset by 12% lower sales volume over the period
due to a natural decline of existing wells and the sale of a 10%
interest in a production-sharing contract in the Indonesia Seram
oilfield.
The increase in EBITDA was also attributable to the improvement in
financial performance of Alumina Ltd. (AWC; BBB-/Stable/--), an
associate of CITIC Resources. S&P expects dividends from AWC will
continue to contribute to a considerable portion of CITIC
Resources' total adjusted EBITDA in 2019-2020. The company will
receive at least around HK$300 million in 2019 based on US$14.1
cents per ordinary share AWC declared for 2018. CITIC Resources
received HK$389 million in dividends from AWC in 2018, accounting
for around 30% of its total adjusted EBITDA for the year.
CITIC Resources aims to position itself as the main oil platform of
CITIC Group Corp. As such, the company plans to search for new oil
and gas assets to strengthen its crude oil segment. S&P said, "We
believe the expansion to be prudent, targeting good quality
producing assets. In our view, the company is unlikely to spin off
its noncore metals and mining business before it has meaningfully
enlarged its oil business."
S&P said, "The rating affirmation reflects our view that CITIC
Resources will continue to deliver stable operating performance and
that the company will remain a strategically important subsidiary
of CITIC Group. We continue to factor in three notches of parental
support into the rating on CITIC Resources. The company is an
important platform for CITIC Group to invest in the natural
resources sector, especially crude oil production.
"The positive outlook reflects our expectation that CITIC Resources
will maintain its leverage at a much lower level compared with that
during the industry trough of 2015-2016. The company will continue
to generate free operating cash flow on the steady performance of
its various business segments.
"We may raise the rating over the next 12 months if the company can
maintain its debt to EBITDA ratio at close to 5x. We expect such
leverage improvement would be driven by better-than-expected oil
prices and production levels."
S&P could revise the outlook back to stable if the company's
debt-to-EBITDA ratio is material higher than our current
expectations. This could happen if:
-- There is a significant drop in oil price or production;
-- The company engages in a large scale debt-funded acquisition;
or
-- The company's capital expenditure is materially higher than
S&P's current forecast.
HMV MARKETING: Mulls Big Liquidation Sale of CDs, DVDs in HK
------------------------------------------------------------
Enoch Yiu at South China Morning Post reports that HMV Marketing
Limited may hold a huge liquidation sale in Hong Kong with tens of
thousands of discounted CDs, records and DVDs up for grabs after
two potential buyers decided to walk away from the bankrupt music
giant, according to its liquidator.
Several would-be buyers had been gearing up to act as white knights
by acquiring the 25-year old Hong Kong arm of the iconic music
vendor after it went into provisional liquidation in December, said
Wong Sun-keung, a partner at accounting firm Vision AS, the Post
relates.
"Two potential white knights, one a mainland company, the other a
Hong Kong firm, had been very keen on rebooting the HMV business in
the mainland and Hong Kong," he told the Post.
However, after several months of discussion, they both decided to
walk away last week after learning they may not be able to use the
HMV brand, Mr. Wong said.
"There is some legal issue that the HMV licences here are
considered to be ended with the liquidation. It is a shame," the
report quotes Mr. Wong as saying.
Since the legal issue may not be easily solved, Mr. Wong has
decided not to continue his quest to find new buyers. Instead, he
will work with HMV's creditors to find other ways to recoup more
than HK$40 million (US$5.1 million) in debts, the Post relays.
A seven-member committee, which represents the 340 creditors, will
decide by the end of the month on the next step forward, the Post
says.
"It may include the option of selling the stock to some music
collectors. Or we may host a big liquidation sale for a few days,"
Mr. Wong told the Post. "We are negotiating with a landlord for a
potential location in Causeway Bay. Another possible location will
be in Mong Kok."
HMV's vast array of unsold stock is now being stored in two
containers in Sun Tin, Yuen Long.
"We have outstanding over 100,000 items. It includes about 20,000
CDs, 50,000 DVDs, 24,000 Blu-ray discs, 9,000 vinyl records," he
said. "There are also several of HMV's iconic dog statues, which
may attract collectors."
HMV Digital China voluntarily wound up its retail unit, HMV, on
December 18, caving under the pressure of the digital download era.
The company also has film production and artist management
businesses which are not affected, according to the Post.
HMV Digital China chairman Stephen Shiu Jnr fought back tears at a
creditors' meeting in January, as he revealed that the local unit
of the iconic brand had suffered losses of HK$300 million (US$38.3
million) in just two years.
The Post says crushed by online music sales, the stores that had
once attracted superstars such as Mariah Carey, Boyzone and
Backstreet Boys to meet their fans had not been able to generate
sufficient income to pay their rent and other expenses.
Although the remaining stock has a book value of HK$9 million, it
will have to be sold at a discount, meaning a liquidation sale may
only generate about HK$500,000 to HK$1 million, Wong said.
The biggest creditors are the several landlords of the HMV flagship
stores, who are owed a total of HK$30 million, Mr. Wong said, while
the rest are the many small suppliers. Owners of HMV coupons will
not be able to get a refund, the Post relays.
Ten days after Hong Kong HMV's collapse the UK unit, which is under
separate ownership, also went into administration. A Canadian
company Sunrise Records swooped in as a white knight to buy 100
stores in the UK, but will still close 27 shops.
In Asia, Japan is now the only country that still has HMV shops
operating, the Post notes.
=========
I N D I A
=========
ARUN POLYMERS: CRISIL Migrates B+ Rating to Not Cooperating
-----------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Arun Polymers
- Dindigul (AP) to 'CRISIL B+/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 7 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Long Term Loan 4 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with AP for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of AP. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on AP is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of AP to 'CRISIL B+/Stable Issuer not cooperating'.
AP was set up in 2013 in Dindigul, Tamil Nadu as a proprietorship
firm by Mr T Arunkumar. The firm manufactures polypropylene woven
bags. It has an installed capacity of 150 tonne per day (tpd).
BRIJRAJ AGRO: CRISIL Migrates 'B' Rating to Not Cooperating
-----------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Brijraj Agro
Products Private Limited (BAPPL) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 3.4 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Term Loan 2.7 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with BAPPL for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of BAPPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on BAPPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of BAPPL to 'CRISIL B/Stable Issuer not cooperating'.
BAPPL was incorporated in 1993, at Kanpur, by the promoter, Mr Raj
Kumar Kaya. The company is engaged in manufacturing of Kattha, used
in manufacturing of Pan masala. Additionally, the company has also
started manufacturing of Glucose and maltodextrin.
ESSAR STEEL: ArcelorMittal to Pay INR42,000 Crore for Takeover
--------------------------------------------------------------
BloombergQuint reports that global steel major ArcelorMittal told
the National Company Law Appellate Tribunal (NCLAT) that it would
pay INR42,000 crore, including a minimum of guarantee of INR2,500
crore as working capital, for acquiring Essar Steel under the
insolvency process.
Senior advocate Harish Salve appearing for ArcelorMittal also
accused Ruias--former Essar Steel promoters--of creating hurdles in
the resolution process of the bankrupt steel maker, BloombergQuint
relates. According to the report, Salve said issues related to
alleged non-performing assets of the companies of Lakshmi Mittal's
brother have been already dealt with and rejected by the Supreme
Court.
Salve further submitted that the National Company Law Tribunal and
lenders would decide over the distribution of funds among creditors
of Essar Steel, BloombergQuint relays. He also added that the
distribution should be "equitable" between financial creditors and
operational creditors.
The NCLAT continued to hear the Essar Steel insolvency case on May
21. Earlier, Essar Steel Asia Holdings Ltd, a shareholder of Essar
Steel Ltd, had alleged that ArcelorMittal Chairman and Chief
Executive Officer LN Mittal suppressed vital facts that would have
otherwise rendered him ineligible to offer a buyout plan for the
distressed steel mill under Section 29A of the Insolvency and
Bankruptcy Code, BloombergQuint relates. It had also sought
disqualification of ArcelorMittal's bid for the debt-laden
company.
About Essar Steel
Incorporated in 1976, Essar Steel India Ltd. is a part of the Essar
Group and is having 10 MTPA integrated steel manufacturing
facilities at Hazira, Gujarat and iron ore beneficiation and
pelletisation facilities in Paradeep, Odisha (12 mtpa) and Vizag,
Andhra Pradesh (8 mtpa). The company also owns and operates two
iron ore slurry pipelines -- one each in Odisha (Dabuna to Paradip)
and Andhra Pradesh (Kirandul-Vizag), which transport the iron ore
slurry from the beneficiation plant (located near the iron ore
mines in Dabuna and Kirandul) to the pellet plant (located near the
Paradip and Vizag ports). A large portion of the iron ore pellets
produced are intended for captive consumption by ESIL's steel plant
at Hazira for cost optimization.
The National Company Law Tribunal (NCLT) - Ahmedabad Bench admitted
Essar Steel's insolvency case on Aug. 2, 2017.
Satish Kumar Gupta of Alvarez and Marsal India has been appointed
as interim resolution professional upon the suggestion of State
Bank of India (SBI).
Essar Steel owes more than INR45,000 crore to lenders, of which
INR31,671 crore had already been declared as non-performing as of
March 31, 2016, The Economic Times disclosed. The SBI-led
consortium of 22 creditors accounts for 93% of this amount. Essar
Steel owes $450.67 million to Standard Chartered Bank (SCB) in
debt.
JDP AGRO: CRISIL Migrates 'B' Rating to Not Cooperating
-------------------------------------------------------
CRISIL has migrated the rating on bank facilities of JDP Agro
Industries Private Limited (JAIPL) to 'CRISIL B/Stable/CRISIL A4
Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee .78 CRISIL A4 (ISSUER NOT
COOPERATING; Rating Migrated)
Cash Credit 1.96 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Long Term Loan 3.22 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with JAIPL for obtaining
information through letters and emails dated
February 28, 2019 and March 18, 2019 among others, apart from
telephonic communication. However, the issuer has remained non
cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of JAIPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on JAIPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of JAIPL to 'CRISIL B/Stable/CRISIL A4 Issuer not
cooperating'.
Set up by Mr Satindra Pati, JAIPL undertakes custom milling of rice
for government agencies such as Orissa Sate Civil Supplies
Corporation Ltd. It also sells non-basmati rice to distributors in
the local market. Processing unit has installed capacity of 4 tonne
per hour. Operations began in fiscal 2015.
KALINGA BREEDING: CRISIL Migrates B+ Rating to Not Cooperating
--------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Kalinga
Breeding Farms Private Limited (KBFPL) to 'CRISIL B+/Stable Issuer
not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 2 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Long Term Loan 10 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Long Term 1 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with KBFPL for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KBFPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KBFPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of KBFPL to 'CRISIL B+/Stable Issuer not cooperating'.
KBFPL is promoted by Mr Sunrender Reddy and his family. The company
runs a poultry business at a village 70 kilometre from
Secunderabad, Telangana.
KAMRUP PACKAGING: CRISIL Migrates B Rating to Not Cooperating
-------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Kamrup
Packaging Udyog (KPU) to 'CRISIL B/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 2.9 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Term Loan 6.6 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with KPU for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KPU. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KPU is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of KPU to 'CRISIL B/Stable Issuer not cooperating'.
Guwahati (Assam)-based KPU, manufactures different types of
corrugated boxes for use in various fast moving consumer goods
industries. The unit is located in Kamrup (Assam) and operations
are managed by Mr Arya.
KAPOOR PRESERVATIONS: CRISIL Migrates B Rating to Not Cooperating
-----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Kapoor
Preservations LLP (KPL) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 1.2 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Term Loan 4 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with KPL for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KPL is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of KPL to 'CRISIL B/Stable Issuer not cooperating'.
KPL has been set up by Mr Arpit Kapoor and his family members for
setting up a cold storage facility at Fatehpur in Barabanki. The
firm is setting up a multipurpose cold storage, with capacity to
store 6013 tonne of potatoes for farmers and traders. The unit is
expected to start commercial operations from November 2018.
KARNATAKA RICE: CRISIL Migrates B+ Rating to Not Cooperating
------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Karnataka Rice
Industries (KRI) to 'CRISIL B+/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with KRI for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KRI. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KRI is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of KRI to 'CRISIL B+/Stable Issuer not cooperating'.
KRI is a partnership firm promoted by Mr Mohammed Shayub, Mr
Mohammed Yusuf, and Mr Mohammed Yunus. It mills and processes
non-basmati rice at its facility at Tumkur, Karnataka.
KODAI CARS: CRISIL Migrates 'D' Rating to Not Cooperating
---------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Kodai Cars
Private Limited (KCPL) to 'CRISIL D/CRISIL D Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 2 CRISIL D (ISSUER NOT
COOPERATING; Rating Migrated)
Cash Credit 10 CRISIL D (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with KCPL for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KCPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KCPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of KCPL to 'CRISIL D/CRISIL D Issuer not cooperating'.
Incorporated in 2007 in Tamil Nadu and promoted by Mr. Jayakumar
and his wife, Ms. Sunita Jayakumar, KCPL is an authorised dealer
for M&M's passenger car.
KOTTIYOOR METALS: CRISIL Migrates B Rating to Not Cooperating
-------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Kottiyoor
Metals Private Limited (KMPL) to 'CRISIL B/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 10 CRISIL B/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with KMPL for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of KMPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on KMPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of KMPL to 'CRISIL B/Stable Issuer not cooperating'.
KMPL was incorporated in July 2017 by Mr M M Thomas and Mr Sunny
Cyraic. Its stone crushing plant at Kanoon, Kerala, has capacity of
50,000 CFT per day, and its products are used in various local
infrastructure projects.
KRISHNA COTTEX: CRISIL Reaffirms B+ Rating on INR4cr Loan
---------------------------------------------------------
CRISIL has reaffirmed its rating on the long-term bank facilities
of Krishna Cottex (KC) at 'CRISIL B+/Stable'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 4 CRISIL B+/Stable (Reaffirmed)
Proposed Long Term
Bank Loan Facility 3 CRISIL B+/Stable (Reaffirmed)
The rating reflects KC's modest scale of operations in the
intensely competitive cotton industry with low profitability,
working capital-intensive operations, and average financial risk
profile. These weaknesses are partially offset by promoters'
extensive experience, and proximity of unit to Gujarat's
cotton-growing belt.
Analytical Approach
Unsecured loans from promoters have been treated as neither debt
nor equity as these carry lower-than-market interest rate and are
expected to be retained in business.
Key Rating Drivers & Detailed Description
Weaknesses
* Modest scale of operations in highly fragmented industry:
Intense competition in the cotton ginning industry, and limited
product differentiation, constrain the firm's pricing and
bargaining power with customers and suppliers, and have led to
estimated modest scale of operations at around 18 crore in fiscal
2019.
*Vulnerability to changes in cotton prices: Availability of cotton
depends on monsoon, and prices are further affected by government
interventions and fluctuations in global output. Hence, the firm's
ability to manage volatility in cotton prices and maintain
profitability, will be a key rating sensitivity factor.
*Average financial risk profile: Capital structure remains moderate
as reflected in estimated gearing and TOLTNW around 1.27 and 1.58
times respectively for fiscal 2019. Above average debt protection
metrics with estimated interest coverage and NCATD of around 2.33
times and 0.11 times respectively for fiscal 2019. Also average net
worth of INR2.9 crore as on 31st March, 2019.
Strengths
*Extensive experience of the partners in the cotton ginning
industry: Benefits from the more than a decade-long experience of
partners, their understanding of local market dynamics, and
established relationships with customers and suppliers, will
continue.
*Proximity of processing unit to cotton-growing belt: ensures easy
availability of raw material and low transportation cost.
Liquidity
Liquidity profile is adequate, marked by accruals vs. no term debt
obligations which would support incremental requirement if any,
moderate BLU of around 62 percent for past 11 months ended
Feb-2018( for cash credit limit of INR4 crore) and support from
promoters in form of unsecured loan of INR80 lac as on 31st, March,
2019.
Outlook: Stable
CRISIL believes KC will continue to benefit over the medium term
from promoters' extensive experience. The outlook may be revised to
'Positive' if substantial revenue and stable profitability lead to
increase in accrual. The outlook may be revised to 'Negative' if
low operating margin, large, debt-funded expansion, or inefficient
working capital management weakens financial risk profile.
Set up as a partnership firm in Amreli, Gujarat, in fiscal 2013 by
Suvagiya and Paradava families, KC gins cotton.
MAXIMUM SYNTHETICS: Insolvency Resolution Process Case Summary
--------------------------------------------------------------
Debtor: Maximum Synthetics Private Limited
135, Ambaji Textile Market, Ajmer Road
Bhilwara 311001, Rajasthan
Insolvency Commencement Date: May 17, 2019
Court: National Company Law Tribunal, Jaipur, Rajasthan Bench
Estimated date of closure of
insolvency resolution process: November 13, 2019
(180 days from commencement)
Insolvency professional: Rajeev Sharma
Interim Resolution
Professional: Rajeev Sharma
House Number 351, Rai Ji Ka Gher
Chandi Ki Taksal
Jaipur, Rajasthan
E-mail: rajiv_sharmaadv26@yahoo.co.in
Last date for
submission of claims: May 31, 2019
NAVANAAMI PROJECTS: CRISIL Migrates B+ Rating to Not Cooperating
----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Navanaami
Projects Private Limited (NPPL) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Long Term Loan 10 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
CRISIL has been consistently following up with NPPL for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of NPPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on NPPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of NPPL to 'CRISIL B+/Stable Issuer not cooperating'.
Established in 2005 as a private limited company, Navanaami
projects Pvt Ltd (NPPL) is engaged in residential real estate
construction business in Hyderabad and Bangalore. The firm has two
on-going projects currently ' one in Hyderabad and one in
Bangalore. The firm is promoted and managed by Mr.G Venkat Naveen.
NIRMAN ESTATE: CRISIL Migrates B+ Rating to Not Cooperating
-----------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Nirman Estate
Developers Private Limited (NEDPL) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 8 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Long Term 3 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with NEDPL for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of NEDPL. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on NEDPL is
consistent with 'Scenario 1' outlined in the 'Framework for
Assessing Consistency of Information with CRISIL BB' rating
category or lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of NEDPL to 'CRISIL B+/Stable Issuer not cooperating'.
Setup in 1990, NEDPL is engaged in residential real estate
development in Nasik (Maharashtra). It currently has two ongoing
projects - Nirman Dwarkapuram and Nirman Vrindavan Garden. The
company is managed by Mr. Nemchand Poddar and his sons Mr. Vipul
Poddar and Mr. Hitesh Poddar.
ODISHA SLURRY: Insolvency Resolution Process Case Summary
---------------------------------------------------------
Debtor: Odisha Slurry Pipeline Infrastructure Limited
Registered office & Principal office:
H.No. 119, Ward No. 11, Badahal Road
NH-6, Behind Indian Bank, Keonjhar
Odisha 758001
India
Insolvency Commencement Date: May 14, 2019
Court: National Company Law Tribunal, Kolkata Bench
Estimated date of closure of
insolvency resolution process: November 10, 2019
Insolvency professional: Ashish Chhawchharia
Interim Resolution
Professional: Ashish Chhawchharia
Grant Thornton
10C Hungerford Street
Kolkata 700017
E-mail: ashish@bccoindia.com
- and -
Grant Thornton India LLP
C/o Kuresh Khambati
16th Floor, Tower II
Indiabulls Finance Centre
SB Marg, Elphinstone (W)
Mumbai 400013
E-mail: ospil.rpteam@in.gt.com
Last date for
submission of claims: May 29, 2019
P. RAMU: CRISIL Migrates B+ Rating to Not Cooperating
-----------------------------------------------------
CRISIL has migrated the rating on bank facilities of P. Ramu (PR)
to 'CRISIL B+/Stable Issuer not cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Overdraft 6 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Long Term 2 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with PR for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of PR. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on PR is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of PR to 'CRISIL B+/Stable Issuer not cooperating'.
P Ramu, proprietorship firm executes road projects in Tamil Nadu.
PARKER VRC: CRISIL Withdraws D Rating on INR45cr Term Loan
----------------------------------------------------------
CRISIL has withdrawn its ratings on the bank facilities of Parker
VRC Infrastructure Private Limited (PVIPL) on the request of the
company and receipt of a no objection certificate from its bank.
The rating action is in line with CRISIL's policy on withdrawal of
its ratings on bank loans.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Rupee Term Loan 45 CRISIL D (ISSUER NOT
COOPERATING; Rating Withdrawn)
CRISIL has been consistently following up with PVIPL for obtaining
information through letters and emails dated July 31, 2018 and
January 15, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as they are arrived at without any management
interaction and are based on best available or limited or dated
information on the company'.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of PVIPL. This restricts CRISIL's
ability to take a forward PVIPL is consistent with 'Scenario 1'
outlined in the 'Framework for Assessing Consistency of Information
with CRISIL BB rating category or lower. Based on the last
available information, the rating on bank facilities of PVIPL
continues to be 'CRISIL D Issuer Not Cooperating'.
PVIPL, incorporated in May 2012, is a joint venture between Parker
Estate Developers Pvt Ltd (rated 'CRISIL BB/Stable/Issuer Not
Cooperating') and VRC Constructions India Pvt Ltd (rated 'CRISIL
BBB/Stable/CRISIL A2'). PVIPL's promoters are Mr. Manish Garg, Mr.
Manohar Lal Garg, Mr. Rajiv Kumar Gupta, Mr. Ravinder Mohan Garg
and Mr. Chandra Shekhar Bansal. The company is developing
residential real estate projects, White Lily and White Lily
Residency, in Sonepat.
PRAKASH INDUSTRIES: CRISIL Migrates B+ Rating to Not Cooperating
----------------------------------------------------------------
CRISIL has migrated the rating on bank facilities of Prakash
Industries - Junagadh (PI) to 'CRISIL B+/Stable Issuer not
cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5 CRISIL B+/Stable (ISSUER NOT
COOPERATING; Rating Migrated)
Proposed Long Term .06 CRISIL B+/Stable (ISSUER NOT
Bank Loan Facility COOPERATING; Rating Migrated)
CRISIL has been consistently following up with PI for obtaining
information through letters and emails dated February 28, 2019 and
March 18, 2019 among others, apart from telephonic communication.
However, the issuer has remained non cooperative.
'The investors, lenders and all other market participants should
exercise due caution while using the rating assigned/reviewed with
the suffix 'ISSUER NOT COOPERATING'. These ratings lack a forward
looking component as it is arrived at without any management
interaction and is based on best available or limited or dated
information on the company.
Detailed Rationale
Despite repeated attempts to engage with the management, CRISIL
failed to receive any information on either the financial
performance or strategic intent of PI. Which restricts CRISIL's
ability to take a forward looking view on the entity's credit
quality. CRISIL believes information available on PI is consistent
with 'Scenario 1' outlined in the 'Framework for Assessing
Consistency of Information with CRISIL BB' rating category or
lower'.
Therefore, on account of inadequate information and lack of
management cooperation, CRISIL has migrated the rating on bank
facilities of PI to 'CRISIL B+/Stable Issuer not cooperating'.
Prakash Industries (PI) was established as a partnership firm in
1961. The operations of the firm is managed by Maru Family. The
promoters are having more than five decades experience in cotton
ginning and pressing. PI carries out cotton ginning and pressing
operations and oil mill operations at its facility located at
Bantwa, Junagadh (Gujarat).
RADHAKRISHNA OIL: CRISIL Migrates B+ Rating from Not Cooperating
----------------------------------------------------------------
Due to inadequate information, CRISIL, in line with SEBI
guidelines, had migrated the rating on the bank facilities of
Radhakrishna Oil Industries (ROI) to 'CRISIL B+/Stable Issuer Not
Cooperating' through its rationale dated May 30, 2018. However, the
management has subsequently started sharing requisite information,
necessary for carrying out comprehensive review of the rating.
Consequently, CRISIL is migrating the rating on bank facilities of
ROI from 'CRISIL B+/Stable Issuer Not Cooperating' to 'CRISIL
B+/Stable'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 7.2 CRISIL B+/Stable (Migrated
from 'CRISIL B+/Stable ISSUER
NOT COOPERATING')
The rating continues to reflect moderate scale of operations in
highly competitive cotton ginning market and its weak financial
risk profile driven by low networth levels and weak debt protection
metric. Also ROI's operations remain working capital intensive
driven by high inventory days. These weaknesses are partially
offset by extensive experience of partners in cotton ginning and
trading business and having strong relationship with various cotton
traders all over India. Also firm is not having any repayment
obligations which gives comfortable liquidity position for firm.
Key Rating Drivers & Detailed Description
Weaknesses
* Below-average financial risk profile: The firm's financial risk
profile is constrained by expected high gearing of more than 4.2
times as on March 31, 2019, and subdued debt protection metrics
reflected in expected interest coverage ratio of 1.3 times and net
cash accrual to total debt ratio of 0.04 time in fiscal 2019.
* Working capital-intensive operations: Inventory of 3-4 months
lead to large working capital requirement and high bank line
utilisation. CRISIL expects the inventory cycle to remain over 60
days over the medium term.
* Modest scale in a fragmented industry: ROI's scale of operations
(operating revenue of INR33.91 crore in fiscal 2018) will remain
modest over the medium term. It is expected to cross INR50 crores
for FY19. Operations are also susceptible to government regulations
regarding cotton and intense competition in a fragmented industry.
Strength
* Proprietor's extensive experience and financial support: The
proprietor's extensive industry experience has led to longstanding
relationships with customers and suppliers. The proprietor has
extended unsecured loans to the firm.
Liquidity
Bank limit utilization is high around 99 percent for the past
twelve months ended March 31, 2019. CRISIL believes that bank limit
utilization is expected to remain high on account of large working
capital requirement. Cash accrual are expected to be over INR30
lakhs against which there are no repayment obligation. Current
ratio is healthy at estimated 1.26 as on March 31, 2019. The
partners are likely to extend support in the form of equity and
unsecured loans to the company to meet its working capital
requirements and repayment obligations.
Outlook: Stable
CRISIL believes ROI's will continue to benefit from its
proprietor's industry experience and established relationships with
customers and suppliers. The outlook may be revised to 'Positive'
if steady sales growth and better profitability lead to higher cash
accrual and improved key credit metrics. The outlook may be revised
to 'Negative' if decline in accrual; large, debt-funded capital
expenditure; or increase in working capital requirement weakens the
financial risk profile, especially liquidity.
ROI was established as a partnership firm in 1999. The operation of
the firm is managed by Jaiswal family. The partners are having more
than two decades experience in cotton ginning and also having
farming business in city of Bhikangaon, Madhya Pradesh. ROI carries
out cotton ginning and oil extraction work in Bhikangaon only. It
gins and presses cotton, and extracts oil from seeds. It has
installed capacity of 300 bales per day.
RAGHURAM INDUSTRIES: CRISIL Reaffirms B+ Rating on INR5cr Loan
--------------------------------------------------------------
CRISIL has reaffirmed its 'CRISIL B+/Stable' rating on the bank
facilities of Raghuram Industries (Raghuram).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 5 CRISIL B+/Stable (Reaffirmed)
Proposed Long Term
Bank Loan Facility .6 CRISIL B+/Stable (Reaffirmed)
The rating continues to reflect the firm's exposure to intense
competition in the rice milling industry and susceptibility to
volatile paddy prices and regulatory changes. These weaknesses are
partially offset by the extensive industry experience of the firm's
partner in the rice milling industry.
Key Rating Drivers & Detailed Description
Weakness:
* Exposure to intense competition in the rice milling industry
resulting in low profitability margin: Raghuram's business risk
profile is marginally constrained by its modest scale of operations
in the fragmented rice milling industry, which restricts the firm
from deriving benefits of economies of scale.
* Susceptibility to volatile raw material prices and changes in
government regulations: Cost of paddy accounts for 85-90% of the
cost of producing rice. Hence, profitability is highly susceptible
to volatile paddy prices and change in government policy pertaining
to rice procurement and other regulations.
Strengths:
* Extensive industry experience of the promoters: Raghuram's
business risk profile benefits from the two-decade-long experience
of its partners in the rice industry and healthy relationships with
farmers in the region, thereby aiding the raw material (paddy)
procurement. Furthermore, the firm has established strong
relationships with FCI, traders, and wholesalers, thus aiding large
off take of rice.
Liquidity
* High bank limit utilisation: Bank limit utilisation is high at
100 percent for the past twelve months ended February 28, 2019.
CRISIL believes that bank limit utilization is expected to remain
high on account large working capital requirement.
* Sufficient cash accruals: Cash accrual are expected to be over
INR30 lacs, INR35 lacs and INR40 lacs for fiscal 2018, 2020 and
2021 respectively against no repayment obligation In addition, it
will be act as cushion to the liquidity of the company.
* Moderate current ratio: Current ratio of the firm was at a
moderate level at 1.46 times as on March 31, 2018 and is estimated
at 1.41 times as on March 31, 2019.
Outlook: Stable
CRISIL believes Raghuram will continue to benefit over the medium
term from its partners' extensive industry experience. The outlook
may be revised to 'Positive' if substantial and sustained increase
in profitability and net worth backed by sizeable equity infusion
from the partners strengthens the capital structure. The outlook
may be revised to 'Negative' if steep decline in profitability, any
large, debt-funded capital expenditure, or stretched working
capital cycle weakens the capital structure.
Established in 2009 as a partnership firm, Raghuram is engaged in
milling and processing of paddy into rice, rice bran, broken rice,
and husk. Its rice mill is located in Nalgonda, Telangana. The firm
is managed by Mr Sri Emmadi Anjaiah, Mr Sri Emmadi Somanarsaih, and
Mr Sri Emmadi Somaiah who are also the partners.
SAI POINT: CRISIL Migrates Rating from CRISIL B-/Not Cooperating
----------------------------------------------------------------
Due to inadequate information and in line with Securities and
Exchange Board of India guidelines, CRISIL had migrated its rating
on the bank facilities of Sai Point Automobiles Private Limited
(SPAPL) to 'CRISIL B-/Stable Issuer Not Cooperating'. SPAPL has
subsequently provided the necessary information and CRISIL has
migrated the rating to 'CRISIL B/Stable' from 'CRISIL B-/Stable
Issuer Not Cooperating'.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 2 CRISIL B/Stable (Migrated from
'CRISIL B-/Stable ISSUER NOT
COOPERATING')
Inventory Funding 41.5 CRISIL B/Stable (Migrated from
Facility 'CRISIL B-/Stable ISSUER NOT
COOPERATING')
Proposed Long Term 2.5 CRISIL B/Stable (Migrated from
Bank Loan Facility 'CRISIL B-/Stable ISSUER NOT
COOPERATING')
The rating continues to reflect the company's exposure to intense
competition in the automobile (auto) dealership segment and its
below-average financial risk profile. These weaknesses are
partially offset by the extensive experience of the promoters and
moderate operating profit.
Key Rating Drivers & Detailed Description
Weaknesses:
* Exposure to intense competition in the auto dealership sector;
limited bargaining power with the principal: SPAPL generates
revenue from the sale of vehicles and spare parts and from its
service station business. Its principal, Honda Motorcycle And
Scooter India (HMSI), faces competitive pressure from other brands,
such as Hero Honda Motors Ltd and Bajaj Auto Ltd. HMSI is key
supplier for the company thus company's bargaining power with
supplier is limited however partially supported by long standing
relationship.
* Below average financial risk profile: Financial risk profile is
below average indicated by modest networth at INR9.39 crore and
high gearing at 4.73 times as on March 31, 2018, as the company
depends on external debt for its working capital requirement.
Gearing is estimated at 4.55 times as on March 31, 2019.
Strength:
* Extensive experience of the promoters: Benefits from the
two-decade-long experience of the promoters in the auto dealership
business. This has enabled them to establish a longstanding
relationship with the principal will continue to support the
business.
Liquidity
Liquidity is adequate: net cash accrual, expected at INR2.7-4.1
crore over the medium term, should sufficiently cover term debt
obligation of INR0.45 crore-0.87 crore. Operations are moderately
working capital-intensive, as indicated in gross current assets of
89 days as on March 31, 2018. Utilisation of fund-based working
capital limit was high, averaging 96% over the 12 months through
December 2018. Current ratio was low at 0.84 time as on March 31,
2018, and is expected to remain at a similar level over the medium
term. Of the total capex of INR3 crore in fiscal 2020, INR2.15
crore in fiscal 2020 will be funded through promoters' funds and
the remaining through internal accrual.
Outlook: Stable
CRISIL believes SPAPL will continue to benefit from its promoters'
strong entrepreneurial experience. The outlook may be revised to
'Positive' if substantial and sustained increase in revenue and
profitability strengthens the capital structure. The outlook may be
revised to 'Negative' if steep decline in profitability margin,
large debt contracted to meet capital expenditure, or high working
capital requirement weakens the financial risk profile, especially
liquidity.
Incorporated in 2002, SPAPL is an authorised dealer of two-wheelers
and spare parts of HMSI. Mr Dilip Patil, the promoter, handles the
day-to-day operations. The company has 14 showrooms and 15 service
stations in Maharashtra.
TAJ AGRO: CRISIL Withdraws B+ Rating on INR10cr Cash Loan
---------------------------------------------------------
Due to inadequate information, CRISIL, in line with Securities and
Exchange Board of India guidelines, had migrated the rating of Taj
Agro Industries LLP (Taj LLP) to 'CRISIL B+/Stable Issuer Not
Cooperating'. Taj LLP has subsequently provided the necessary
information and CRISIL has migrated the ratings on bank facility of
Taj LLP from 'CRISIL B+/Stable Issuer Not Cooperating' to 'CRISIL
B+/Stable'. Consequently, CRISIL has withdrawn its rating on bank
facility of Taj LLP following a request from the firm and on
receipt of a 'no objection certificate' from the banker. The rating
action is in line with CRISIL's policy on withdrawal of bank loan
ratings.
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Cash Credit 10 CRISIL B+/Stable (Migrated
from 'CRISIL B+/Stable ISSUER
NOT COOPERATING'; Rating
Withdrawn)
Established in May, 2014 and promoted by Mr. Himmatlal Chandra and
Mr. Jayesh Ganatra, Taj LLP is engaged in processing and milling of
dal. The firm has installed capacity of about 35,000 MTPA of food
grain, pulses and lentils (dal).
TOSHBRO MEDICALS: CRISIL Reaffirms B+ Rating on INR6.5cr Loan
-------------------------------------------------------------
CRISIL has reaffirmed its 'CRISIL B+/Stable/CRISIL A4' ratings on
the bank facilities of Toshbro Medicals Private Limited (TMPL).
Amount
Facilities (INR Crore) Ratings
---------- ----------- -------
Bank Guarantee 5 CRISIL A4 (Reaffirmed)
Cash Credit 6.5 CRISIL B+/Stable (Reaffirmed)
The ratings continue to reflect TMPL's below-average financial risk
profile and large working capital requirement. These weaknesses are
partially offset by the extensive experience of the promoters in
trading in medical equipment.
Analytical Approach
Unsecured loans (outstanding at INR5.95 crore as on March 31, 2018)
extended to TMPL by the promoters have been treated as neither debt
nor equity. This is because the loans carry interest that is lower
than bank rate, are subordinated to bank debt, and likely to remain
in the business over the medium term.
Key Rating Drivers & Detailed Description
Weaknesses
* Below-average financial risk profile: Small networth and high
Total Outside Liabilities / Adjusted Networth (INR1.69 cr and 8.30
times respectively as on March 31, 2018) along with subdued debt
protection metrics marked by, interest coverage and net cash
accrual to total debt ratios of 1.29 times and 0.08 time,
respectively, for fiscal 2018 reflects below average financial risk
profile of the company. Interest coverage is estimated to at
around 1.4 times for fiscal 2019.
* Large working capital requirement: Operations are working capital
intensive, as reflected from gross current assets of 157 days as on
March 31, 2018 driven by receivables 62 days and inventory of 89
days.
Strength
* Extensive experience of the promoters: Benefits from the
promoters' experience of around two decades, and their healthy
relationships with principal suppliers and customers and strong
understanding of local market dynamics should continue to support
the business.
Liquidity
Liquidity is adequate: net cash accrual, expected at INR0.49-0.65
crore over the medium term, should sufficiently cover term debt
obligation of INR0.03 crore. Operations are working
capital-intensive, as indicated in gross current assets of 157 days
as on March 31, 2018. Utilisation of fund-based working capital
limit was moderate, averaging 85% over the 12 months through
February 2019. Current ratio was low at 1.52 times as on March 31,
2018, and is expected to remain at a similar level over the medium
term.
Outlook: Stable
CRISIL believes TMPL will continue to benefit from the extensive
experience of the promoters. The outlook may be revised to
'Positive' if an increase in revenue, stable profitability, and
improvement in capital structure strengthen key credit metrics. The
outlook may be revised to 'Negative' if a steep decline in
profitability, or large debt-funded capital expenditure weakens
financial risk profile.
TMPL, incorporated in 2001 in Mumbai, trades in medical equipment
related to ophthalmology and neurosurgery. Mr Arun Toshniwal and
his son, Mr Anurag Toshniwal, are the promoters.
=================
I N D O N E S I A
=================
JAPFA COMFEED: Fitch Affirms 'BB-' Long Term IDR, Outlook Stable
----------------------------------------------------------------
Fitch Ratings has affirmed the Long Term Issuer Default Rating
(IDR) rating of PT Japfa Comfeed Indonesia Tbk at 'BB-' with a
Stable Outlook. Fitch Ratings Indonesia has also affirmed the Japfa
National Long-Term Rating at 'A + (idn)' with a Stable Outlook.
These affirmations reflected Japfa's strong operational
performance, with EBITDA around IDR4.7 trillion and EBITDAR margin
at 13.9% in 2018, higher than Fitch's projections of IDR3.3
trillion and 9.9% respectively. Year-end leverage of 1.3x, measured
by adjusted net adjusted debt / EBITDAR which is proportionally
consolidated with minority ownership in a number of subsidiaries,
also lower than Fitch's projection of 2.2x.
The national ranking in category 'A' shows the expectation of a low
risk of default, relative to other issuers or debt securities in
Indonesia. However, changes in conditions or economic conditions
may affect the capacity to pay in a timely manner compared to
financial commitments as indicated by higher ranking categories.
RATING MOVEMENT FACTORS
Solid Market Position, Financial Profile: Japfa's rating reflects
its position in the strong domestic market in the poultry feed
industry and poultry farms, which are supported by vertically
integrated company operations, extensive national distribution
networks and strong supplier relations. Skala Japfa, based on
EBITDAR, is smaller than other internationally ranked protein
companies, but this company is the second largest public company in
the ungags market in Indonesia, where the two largest players
control around 50% of market share.
The rating also reflects the company's strong financial profile. We
estimate leverage around 2.0x-2.5x in the short to medium term
assuming a stable margin profit. However, an imbalance in key
industrial supply or demand or capital expenditure that is far
higher than our expectations - with the potential to expand market
share in the nursery and commercial agriculture segments - is a
risk in our view. In addition, Fitch believes that Japfa's
relationship with its parent - Japfa Ltd (JL) - is weak, reflecting
moderate ring fencing control in Japfa based on documentation of
USD bonds and the Indonesian stock exchange regulations that limit
related party transactions. Therefore, we continue to assess Japfa
independently. However,
Supporting Government Policies: The Indonesian government has taken
an active role in regulating the supply of chicken. The most recent
intervention occurred in March 2019 when the government directed
the poultry industry to reduce the supply of day-old chicks after
the decline in poultry prices lived around 25% in 3M19. The average
price of live poultry increased in April to around IDR 19,000 / kg,
up from the average price of IDR 17,000 / kg in 1Q19. We believe
the government will be proactive in taking steps to maintain the
balance of market demand and supply, because low poultry prices
during times of oversupply can harm small-scale farmers.
Production Flexibility; Cost Pass-Through: Fitch believes Japfa's
exposure to the volatility of raw material costs is mitigated by
the company's large drying and storage facilities. Japfa is exposed
to the risk of unstable raw material prices, especially given the
government's import restrictions on corn - the main raw material
for animal feed - which forces companies to rely on domestic
sources. Corn harvest in Indonesia usually only occurs in the first
and third quarters of each year, causing price fluctuations
throughout the year. Fitch believes Japfa's corn drying facility
allows the company to store dry corn for up to six months,
providing production flexibility during the non-harvest period
Japfa can also reduce the risk of rising raw material costs by
imposing a cost increase on customers in its main animal feed
segment. This can be done because of its strong market position and
its ability to maintain corn stocks and adjust production output.
PT Charoen Pokphand Indonesia Tbk and Japfa jointly control about
half of the poultry feed market in Indonesia and react similarly
when there is an increase in raw material costs by raising prices.
DERIVATION NOTES
Japfa's IDR rating can be compared to Pilgrim's Pride Corporation
(PPC, BB / Stable), Marfrig Global Foods SA (BB / Stable), Minerva
SA (BB- / Stable) and Agri Business Holding Miratorg LLC (B /
Stable). Fitch believes PPC - one of the largest global chicken
producers, with its operational reach in the US, Mexico, Puerto
Rico and Europe - has a superior credit profile compared to Japfa
supported by a larger scale of operations, stronger global market
position, and geographical diversification better. PPC's business
profile and credit are strong for the 'BB' ranking category, but
are constrained by weak corporate governance from its main
controlling company, although indirect, JBS SA is based in Brazil
(BB / Stable).
Fitch sees the scale of Japfa's smaller EBITDAR operations
compensated by its strong financial profile relative to Marfrig and
Minerva. Leverage and interest on Japfa loans (adjusted EBITDAR /
interest expense + rent) are superior to Minerva, while Marfrig's
leverage is three times higher than Japfa in 2018, although we
estimate that it will rise to the level equivalent to Japfa in the
next three years depending on the success of the plan to divest its
subsidiaries. All three companies have an EBITDAR margin of around
10% and free cash flow which tends to be negative to neutral, all
of these show comparable credit profiles that justify the same
rating level.
Relative to Miratorg - the largest pork producer in Russia with
exposure to poultry and livestock - Fitch believes Japfa's higher
ranking to several levels is based on Miratorg's weaker financial
profile, weak free cash flow, and corporate governance issues, as
evidenced by complexity of the group of companies and the structure
of their government.
Japfa National Rating is comparable to PT Sri Rejeki Isman Tbk
(Sritex, A + (idn) / Stabil), PT Alfaria Trijaya Tbk (Alfamart, AA-
(idn) / Stabil) and PT Mayora Indah Tbk (AA (idn) / Stable) . We
believe that the larger scale of operating EBITDAR, lower exposure
to commodity prices, and better Alfamart financial profiles - the
largest mini-market operator in Indonesia - underlie differences in
several levels with Japfa ratings. Likewise, we believe that a
stronger financial profile, broader profit margins, better income
for free cash flow, and better stability of Mayora's income - a
leading producer of consumer goods in Indonesia - guarantees a
ranking difference of several levels with Japfa.
Sritex and Japfa are both exposed to volatility in raw material
prices, but both have the ability to adjust prices to customers
according to cost fluctuations. We believe that the larger scale of
Japfa's operating EBITDAR offsets the income of better Sritex cash
flow. Japfa's stronger market position as the second largest
poultry company in Indonesia also compensates for weaker
geographical diversification compared to Sritex. We believe this
underlies the same ranking in both companies.
MAIN ASSUMPTIONS
Fitch's Main Assumptions in Rating Case for Issuers
- Net sales growth of around 6.5% -8.0% annually in 2019-2022
(2018: 15%)
- Average flat selling price for the animal feed segment in 2019
and 1% annual growth in 2020-2022 (2018: 3.5%)
- EBITDAR margin of around 9.5% in 2019-2022
- Capital expenditure of around IDR2 trillion per year in
2019-2022, around 4% -6% of
RATING SENSITIVITIES
Future developments that can, individually or collectively, trigger
positive rating actions:
- Leverage, measured by proportional net adjusted debt / adjusted
EBITDAR consolidated with ownership in a number of subsidiaries,
under 1.5x on an ongoing basis
- There is no significant weakening of significant industrial
fundamentals or Japfa's market share
Future developments that can, individually or collectively, trigger
negative rating actions:
- Leverage above 2.5x for a sustainable period (2018: 1.3x)
- Significant reduction in the size of the animal feed segment,
indicated by contributions to total falling income below 30% (2018:
37%)
===============
M A L A Y S I A
===============
BARAKAH OFFSHORE: Slips Into PN17 Over Payment Default
------------------------------------------------------
The Sun Daily reports that Barakah Offshore Petroleum Bhd has
become a Practice Note 17 (PN17) company after it failed to make
instalment payments to Export-Import Bank of Malaysia Bhd (Exim
Bank) and was unable to provide a solvency declaration to Bursa
Malaysia Securities Bhd.
According to the report, Barakah Offshore's wholly owned subsidiary
Kota Laksamana 101 Ltd had on May 17, 2019, received a notice of
demand for the outstanding instalment payments of US$2.65 million
(MYR11.08 million). The loan with Exim Bank was taken for the
financing of the pipe lay barge, Kota Laksamana 101 under an
Islamic facility (Ijarah).
Sun Daily relates that KL101 is not able to meet its obligation to
repay Exim Bank due to financial constraints and therefore had
defaulted its payments to Exim Bank. The company is in the midst of
finalising a comprehensive plan to address the group's current
financial concerns which may include restructuring all its banking
facilities, the report relays.
"The group is in the midst of finalising a scheme to restructure
the group's debt with Exim Bank and past due creditors as part of a
comprehensive plan to address the group's current financial
concern, so that the group will be able to continue its current
operations and meet its obligations for the current projects that
the group is currently executing," Barakah said, adds Sun Daily.
Barakah Offshore Petroleum Berhad, an investment holding company,
provides offshore and onshore pipeline services for the oil and gas
industry primarily in Malaysia.
===============
P A K I S T A N
===============
PAKISTAN: Raises Borrowing Costs in Effort to Combat Inflation
--------------------------------------------------------------
The Financial Times reports that Pakistan's central bank has
increased interest rates, as expected, citing the need to contain
inflation and a devaluation of the rupee, which has shed nearly 6
per cent in two months.
According to the FT, the State Bank of Pakistan on May 20 raised
its key policy rate 150 basis points to 12.25 per cent. The rupee
has fallen about 5.9 per cent against the dollar since March.
The FT relates that analysts said the rate rise was made in line
with Pakistan's IMF commitments to secure a $6 billion loan to
stabilise the country's weak economy. The consumer price index
eased in April to 8.8 per cent from 9.4 per cent a month earlier.
The rate is higher than the 3.7 per cent recorded in April 2018.
The increase "seems to have largely covered the market's
expectation for now", the FT quotes Muhammad Suhail from Karachi's
Topline securities brokerage and investment house as saying. "The
consensus was that interest rates will rise between 100 and 200
basis points."
The FT says Imran Khan's government is due to present its annual
budget next month for the financial year that ends in June 2020,
which will include a number of reforms.
Pakistan's opposition parties including the Pakistan Muslim
League-Nawaz (PML-N) and the Pakistan People's Party (PPP) this
week met for the first time since Mr. Khan's election last year to
plan future protests, focused mainly around increasing economic
challenges for ordinary Pakistanis, the FT reports.
Former prime minister Nawaz Sharif, the de facto leader of the
PML-N, and Asif Ali Zardari, Pakistan's former president and de
facto leader of the PPP, both face charges of corruption. Mr. Khan
and his loyalists claim that the two parties are planning an
anti-government drive to divert attention from accusations against
their leaders, the FT notes.
As reported in Troubled Company Reporter-Asia Pacific on Feb. 7,
2019, S&P Global Ratings lowered its long-term sovereign credit
rating on Pakistan to 'B-' from 'B'. The outlook for the long-term
rating is stable. At the same time, S&P affirmed the short-term
sovereign rating and issue rating at 'B'. S&P also lowered the
long-term issue rating on senior unsecured debt and sukuk trust
certificates to 'B-' from 'B'.
S&P said, "The stable outlook reflects our expectations that
Pakistan will secure sufficient financing to meet its external
obligations over the next 12 months, and that neither external nor
fiscal metrics will deteriorate well beyond our current
projections. "We may raise our ratings on Pakistan if the economy
materially outperforms our expectations, strengthening the
country's fiscal and external positions.
"Conversely, we may lower our ratings if Pakistan's fiscal,
economic, or external indicators continue to deteriorate, such that
the government's external debt repayments come under pressure.
Indications of this would include GDP growth below our forecast, or
external or fiscal imbalances higher than what we expected."
*********
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.
Marites O. Claro, Joy A. Agravante, Rousel Elaine T. Fernandez,
Julie Anne L. Toledo, Ivy B. Magdadaro and Peter A. Chapman,
Editors.
Copyright 2019. 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.
*** End of Transmission ***