India Ratings Downgrades Tebma Shipyard to IND D

India Ratings has downgraded Tebma Shipyard Ltd’s (Tebma) Long-Term Issuer Rating to ‘IND D’ from ‘IND BB’. 

The downgrade reflects Tebma’s defaults on a settlement amount to a non-corporate debt restructuring (CDR) lender in respect of a forward contract. As highlighted by the company’s auditors, Tebma defaulted on INR46m for 22 months as at 28 May 2012. The company had also defaulted on its bank loans till the implementation of the CDR package, for which approval was obtained in October 2010. However, its facilities were restructured taking into account the borrowings outstanding on the cut-off date i.e. 1 April 2010 and hence all defaults have been regularised under the CDR scheme. Ratings have not been re-assigned post the default considering that India Ratings does not have adequate information to prepare meaningful cash flow forecasts.

The ratings also reflect Tebma’s continued weak credit metrics although it has shown a slight improvement in FY12 from previous years’ on reporting positive EBITDA of INR122m. However, total adjusted debt increased to INR4,898m in FY12 from INR3,734m in FY11 due to higher working capital borrowings. For FY12 (year end March), financial leverage (adjusted net debt/operating EBITDA) was 40.1x (FY11: negative 10.2x) and interest coverage (EBITDA/gross interest expenses) was 0.3x (FY11: negative 1.1x). The negative leverage in FY11 was on account of operating losses of INR364.7m. The rating action is based on publicly available information.

Future developments that may lead to positive rating action include an improvement in financial profile of the company and timely repayment of all its debt obligations.

Rating actions on Tebma’s bank facilities are as follows:

– INR1,800m long-term debt: downgraded to Long-Term ‘IND D’ from ‘IND BB’

– INR3,700m cash credit/export packing credit limits: downgraded to Long-Term ‘IND D’ from ‘IND BB’

– INR16bn non-fund-based limit: downgraded to Short-Term ‘IND D’ from ‘IND A4+’

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Press Release, February 1, 2013