A cyclist rides across a clearing near residential buildings in Noida, Uttar Pradesh, India.(Photographer: Anindito Mukherjee/Bloomberg)

As Debt Woes Spread, India's IL&FS Ratings Cut to Lowest Levels

(Bloomberg) -- The Indian infrastructure finance and construction firm that has rocked the nation’s credit markets with rare defaults had some of its credit ratings cut as low as they can go, as more debt deadlines loom.

Infrastructure Leasing & Financial Services Ltd., which helped fund India’s longest tunnel, started missing deadlines on short-term debt instruments late last month. In light of those developments, ICRA and Care Ratings cut their scores on several debt instruments of the firm to D on Monday, indicating actual or imminent default.

“The liquidity profile of the group has been under pressure given the delays in fund raising as initially envisaged, deterioration in credit profile of key investee companies and the sizable repayment obligations at group level in the near term,” Moody’s Investors Service unit ICRA said in an emailed statement.

IL&FS Group reported losses before tax of 21.1 billion rupees ($292 million) in the year to March 31, the first such loss since at least 2015, according to its annual reports. While India is rushing to enact infrastructure-related policies that could boost employment in Asia’s third-largest economy before elections in 2019, new project announcements have been subdued. At the same time, the rates that all companies pay for money have shot up to multi-year highs, and the group’s own fundraising costs are no exception.

Read more about the Care downgrades

Worries over the ability of the beleaguered IL&FS Group to service debt heightened last month following a delayed payment by one its units on commercial paper. The board of the company has been considering various options to raise funds including a share sale to existing investors and new loans.

As part of a deleveraging plan, IL&FS Group had aimed to monetize certain assets, in addition to the equity capital infusion and funding lines, according to a release from Care.

“However, the deleveraging has taken longer than expected time, while uncertainty about the timely infusion of funds vis-à-vis impending debt payment obligations in the near term has severely impacted the liquidity profile of the company,” the release said.

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