Ind-Ra downgrades Haldia Petrochemicals to AA-minus with negative outlook

India Ratings and Research (Ind-Ra) on Monday downgraded Haldia Petrochemicals Ltd’s (HPL’s) extended-expression issuer score to AA-minus from AA whilst resolving the score enjoy unfavorable (RWN).

The outlook is unfavorable, it stated.

In March, HPL signed an settlement to obtain Lummus Technologies — a technological innovation participant in the petrochemicals and refinery segments that has been carved into different entity by McDermott Worldwide Inc (MDR) — for two.seven billion bucks.

Ind-Ra stated it has viewed as the standalone profile of HPL and has not consolidated the personal debt of one.five billion bucks taken at the asset amount (Lummus) as the personal debt has been taken without having recourse to the promoters.

Additionally, the promoter entities have not given any promise on the personal debt elevated at the asset amount. In addition, Ind-Ra has not factored in any more outflow from HPL to assist Lummus or any dollars upstreaming from Lummus to HPL to arrive at the scores.

As on March 31, considering the fact that no transaction was initiated, financial consolidation was not demanded. The administration will just take a ultimate phone in because of program as for every the relevant norms for FY21. Even so, in spite of currently being a fifty seven for every cent owned entity by HPL, Ind-Ra has not consolidated the similar whilst arriving at the scores of HPL.

The resolution of RWN and score downgrade abide by the most likely boost in the web personal debt on account of the acquisition of Lummus. MDR, which is facing personal bankruptcy proceedings, has carved out Lummus into a different entity which is most likely to keep a personal debt of one.five billion bucks.

The equilibrium thing to consider of one.two billion bucks is to be furnished by HPL and Rhone Capital LLC (the other associate in the acquisition) in the ratio of their shareholding of fifty seven for every cent and forty three for every cent respectively, stated Ind-Ra.

Apart from, HPL remains a solitary merchandise-line entity creating polyolefins. This exposes it to the volatility and cyclicality of the phase whilst organizations inherently have confined pricing ability.

Even though polyolefins constitute all over two-thirds of the company’s full revenue, the remaining is constituted by chemical compounds that are the by-merchandise produced in the manufacturing of polymers.