India Ratings downgrades GMR Hyderabad airport's project bank loan

India Ratings and Research has downgraded GMR Hyderabad International Airport Ltd's Rs 798 crore secured project bank loan, following a regulatory order that barred collection of user development fee (UDF).

It has been lowered to 'IND BBB+' from 'IND A-', besides placing the rating on 'Rating Watch Negative' (RWN).

Ind-Ra said the downgrade reflects the negative impact on GHIAL's credit profile after the Airport Economic Regulatory Authority's order which disallowed UDF at the Rajiv Gandhi International Airport for the rest of the control period ending 31 March 2016.

AERA's order took effect on April 1, 2014.

Ind-Ra said the downgrade follows the breach of its negative trigger, associated with the revenue relating to the charge of UDF, at the time of assigning the rating.

Based on AERA's ad-hoc UDF order in October 2010, GHIAL was earlier charging Rs 430 and Rs 1,700 per departing of domestic and international passenger respectively, from 1 November 2011 till 31 March 2014.

The company has challenged the order in Andhra Pradesh High Court, requesting it to set aside the AERA's order. The court is yet to deliver the judgment.

Ind-Ra said: "The RWN reflects GHIAL's cash flow mismatch for next two years, which could impair its ability to service debt on time. The management expects the airport to be eligible for charging UDF in the next control period.

"With the order in place, operational cash flows are estimated to be significantly constrained and therefore substantially lower than Ind-Ra's base case expectations. The management states that the liquidity is supported by surplus cash recovery of loan extended by GHIAL to an associate company and the commencement of liquidation of receivables from major airlines, particularly the Air India group.


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