Rating agencies CARE Ratings and India Ratings & Research have downgraded real estate focused lender Altico Capital India Ltd, after the lender default on an interest payment.
CARE Ratings has revised Altico Capital's credit rating for proposed long-term bank facilities from 'CARE AA-' to 'CARE B' with a negative outlook. India Ratings has downgraded the lender's long-term issuer rating to 'D' from 'A+' and short-term issuer rating to 'D' from 'A1', with a negative outlook.
On Thursday, Altico Capital had defaulted on interest payments of Rs 19.9 crore due to Dubai-based Mashreq Bank. The foreign private equity-backed non-bank lender has a total outstanding debt of Rs 4,361.55 crore.
"The revision in ratings assigned to the proposed bank facilities of Altico Capital India Limited takes into account default in repayment of External Commercial Borrowing (not rated by CARE) due to liquidity constraints. The revision also takes into account Altico's significant exposure to real estate sector which is witnessing slowdown and experiencing heightened refinancing risk which is reflected to an extent with moderation in asset quality of the company," CARE said.
"The ratings remain constrained due to concentration risks in terms of clients, geography and sector as the company is primarily engaged in real estate financing and limited seasoning of the recently originated portfolio," the rating agency added.
CARE said that the outlook has been revised from 'stable' to 'negative' on account of the increased risk profile of Altico's real estate lending business; which is experiencing a slowdown and heightened refinancing risk. The revision in outlook also takes into account moderation in profitability, asset quality and liquidity position, it added.
According to India Ratings, the downgrade reflects Altico's default on interest payment of Rs 20 crore on the external commercial borrowings (ECBs), which had principal outstanding of Rs 340 crore, on September 12, 2019.
As per the management, Altico faced the pressure of accelerated debt repayment from some lenders and also experienced difficulty in mobilising fresh funds. While the existing cash balance was sufficient to meet the present obligation, the company defaulted on this.
Shareholders (Fiera Capital (erstwhile Clearwater Capital Partners LLC acquired by Fiera Capital), Abu Dhabi Investment Council, and Varde Partners) had earlier articulated that they would ensure adequate liquidity for Altico (as per the board approved policy). However, the shareholders were not forthcoming to shore up the liquidity buffers of the company.
Given the recent developments, Ind-Ra opined that it may be difficult for Altico to service its debt obligations in a timely manner from here on.
Edited by Chitranjan Kumar