Fitch Ratings has revised ATL's rating to negative from stable after the company is in the process to acquire Reliance Infrastructure’s (RInfra) Mumbai power generation, transmission, distribution and retail business.
Fitch Ratings has revised Adani Transmission Limited's (ATL) rating to negative from stable after the company is in the process to acquire Reliance Infrastructure’s (RInfra) Mumbai power generation, transmission, distribution and retail business.
“We have affirmed the company's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR), and the rating on its $500 million 4.0% senior secured notes due 2026, at 'BBB-',” read Fitch Ratings’ announcement.
“We believe the acquisition will not increase the company's business risk. The addition of retail customers will diversify ATL's counterparty risk, which would counteract the negative impact of taking on RInfra's relatively complex operations and the maintenance of its distribution wires, as well as the competition in the electricity supply business. The agency's Negative Outlook is premised on our expectations of a deterioration in ATL's financial profile due to the largely debt-funded nature of the transaction,” added their statement made on Wednesday.
Fitch Ratings expect ATL's financial metrics to deteriorate due to the potentially large debt-funded nature of the acquisition. ATL's net leverage (adjusted net debt to EBITDAR) is expected to temporarily increase to 4.2x for the financial year ending 31 March 2019 (FY19) from 3.9x in FYE18, before normalising to 3.4x by FYE20. On the other hand, its EBITDAR net fixed-charge cover and adjusted net-debt-to-fixed-assets ratio are expected to remain around our negative rating action triggers of 2.2x and 65%, respectively, over the next few years.
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