NEW DELHI: Moody’s Investors Service has revised to negative from stable the outlook on the Ba3 corporate family rating and senior unsecured rating of Tata PowerBSE. The decision comes after the company announced its decision to buy Welspun Renewable Energy at an enterprise value of Rs 9,249 crore.
“The change in outlook to negative reflects the combined effect of entirely debt-funded nature of the transaction, which reduces headroom within the ratings, uncertainty regarding the terms and structure of the bank debt that will be raised to fund the acquisition, and limited details about the quality of the assets being acquired,” said Abhishek Tyagi, Moody’s vice president and senior analyst.
Moody’s Corporate Family Ratings (CFRs) are long-term ratings that reflect the relative likelihood of a default on a corporate family’s debt and debt-like obligations and the expected financial loss suffered suffered in the event of default.
Moody’s understands that Tata Power is raising a bridge bank facility to fund the transaction, and this facility could pressure the company’s liquidity profile depending on its terms, including maturity profile, he added. With this acquisition, Tata Power’s debt will increase by approximately 21%, thereby reducing the headroom within the rating, he added. With this transaction, Moody’s expects Tata Power’s Adjusted Debt/Capitalisation to increase, but to remain below the rating tolerance level of 75%.