S&P: Delhi International Airport Pte. Ltd.'s Proposed "Masala" And US$ Bonds Assigned 'BB' Rating
The proposed refinancing will help lengthen DIAL's debt maturity profile and remove existing maintenance covenants. We also expect the company's planned hedging and earnings in foreign currency to mitigate currency risk. DIAL intends to refinance in part or in full its existing amortizing debt with bullet bonds with a maturity of more than five years. The company also intends to hedge the entire principal on the foreign currency borrowings and 25% of the interest payment.
We expect DIAL's financial position to materially weaken in the fiscal year ending March 2018, from the current strong levels, before recovering. The extent of the weakening and the recovery will significantly depend on the tariff cuts by the regulator, DIAL's capital expenditure (capex) for the next phase of growth, and the company's payment structure for commercial property development. We expect greater clarity on DIAL's aero revenues, capex, and property development plans by June 2018. We believe that cash accumulation due to over-recoveries will support DIAL's financial strength and liquidity even though the company's commercial property development is slower than we expected and there is a possibility of a sharp cut in tariffs.
We expect DIAL to maintain its good market position and operating efficiency over the next two years at least. The company's higher regulatory risk than that of its peers in Asia-Pacific, concentrated revenue base, and weak profitability are likely to temper these strengths.