Dollar Bond Risk Drops as Rating Firms Reassure: India Credit

(Bloomberg) -- The price of insuring against debt default is falling in India as rating companies downplay the credit impact of the world’s worst virus crisis after a sharp selloff in the wake of the tragedy last month.

• Credit-default swaps for State Bank of India bonds -- considered a proxy for India’s default risk -- have narrowed 2.6 basis points this month to 101.1, CMA data show. That compares with a 7.7 basis point expansion for the broad Asian gauge. The Indian proxy is down from a nine-month high of 124 basis points hit in late April

• S&P Global Ratings expects no change in India’s sovereign rating over the next two years, despite risks to economic growth from the health crisis, it said earlier this month. It rates India BBB-, the lowest investment grade, with a stable outlook
• Moody’s Investors Service, which has also assigned India the lowest investment grade but with a negative outlook, expects the impact of the second wave of infections on output to be limited to the April-to-June quarter. It forecasts a “strong rebound” in the economy in the second half of the year, it said last week
• The new wave of cases is unlikely to derail the economic recovery, Fitch Ratings said last month as it affirmed the rating at BBB- with a negative outlook

• Goldman Sachs Group Inc. last week put India’s investment-grade dollar bonds back among its favored sectors within Asian BBB debt, after lowering its view a month ago. Analysts including Kenneth Ho cited an expected sharp rebound in economic activity from the third quarter as well as under-performance against regional peers in recent months as reasons for their optimism
• Still, Indian bond buyers will have to contend with uncertainty as more states lock themselves down. Vaccine shortages have complicated efforts to tame the outbreak, leaving investors guessing how long states will have to remain shut

Primary Market -- Record Green Bond Sales

• One area of the market that’s been booming is green debt. Indian firms have sold a record $4.1 billion of such notes so far in 2021. Among the latest was JSW Hydro Energy, which issued $707 million green dollar bonds, according to an exchange filing Tuesday. The company joins six other such borrowers this year including Greenko, ReNew Power and Continuum Energy
• “High-yield renewable bonds may be a safe haven amidst India’s virus outbreak,” Bloomberg Intelligence analysts Sharon Chen and Sheenu Gupta said in a note

• Meanwhile, in the local-currency credit market, firms have sold 34.1 billion rupees ($466 million) of notes as of Wednesday and plan to sell as much as 19.5 billion in the remainder of the week. If they did, that would be a tad higher than the 48.9 billion rupees sold last week

Secondary Market -- Airport Bonds

• Indian dollar bonds gained 0.1% this month, compared to flat returns on a broader Asian gauge, Bloomberg Barclays indexes show. Read more about bargain-hunting investors moving into Indian dollar bonds here
• “Indian airports’ bonds could face further downside in the near term but may rebound once the pandemic situation improves,” Bloomberg Intelligence analysts Sharon Chen and Sheenu Gupta wrote. Yields on Delhi International Airport bonds could go above 7% while GMR Hyderabad International Airport notes may also under-perform

Credit Ratings -- Tata Motors

• S&P Global Ratings changed its outlook on Tata Motors Ltd.’s B ratings to stable from negative Monday as it expects the earnings and financial health of the Jaguar Land Rover owner to steadily improve over the next 12-18 months. Moody’s Investors Service also changed its outlook on the firm’s rating to stable from negative last week. Read about the carmaker swinging to profit in the three months ended March here

• Vedanta Resources Ltd.’s ability to meet debt maturities until at least June 2022 has strengthened because of the likely strong operating performance of its Indian unit Vedanta Ltd., S&P said in a note Tuesday. The rating company expects Vedanta Resources to use a combination of refinancing and dividends from the unit to pay debt of about $1.4 billion maturing between July 2021 and June 2022

Distressed Debt -- Bad Bank Concerns

• India’s planned bad bank will keep a tight leash on its own debt financing, according to Sunil Mehta, Chief Executive of the Indian Banks’ Association, which is helping with plans for the soured loan manager. The asset reconstruction company will keep its debt to equity ratio at 1

  • The bad bank may be operational by the end of June, according to a person familiar with the matter who asked not to be identified
• Meanwhile, the Delhi High Court is set to hear a plea against marking Anil Ambani’s company accounts as fraudulent Friday. Anil, the younger brother of Asia’s richest man Mukesh Ambani, has seen his personal fortune dwindle in recent years, losing his billionaire status. His Reliance Communications unit filed for bankruptcy in 2019

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