Action merely mirrors Outlook downgrading of State of Kerala
By CL Jose
SINGAPORE/SYDNEY/October 22-2022: Close on the heels of State of Kerala’s rating Outlook being downgraded from Stable to Negative more than a week ago, the Outlook on the storied Kerala Infrastructure Investment Fund Board (KIIFB) has also been revised down to Negative by Fitch Ratings, the international rating agency.
Mirroring the ratings on Kerala, the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) has been affirmed at ‘BB’.
Talking to businessbenchmark.news, analysts said the new move has nothing to do with current financial position or issuer default ratings of KIIFB specifically, but rather mirrors the recent action on the Outlook of the state, which guarantees the liabilities of KIIFB.
Fitch categorises KIIFB as credit-linked to the sponsor and equalises the ratings with that of State of Kerala. “As a result, we have taken similar rating action on KIIFB after the Outlook revision on State of Kerala,” Fitch stated.
The Fitch added that the rating drivers for KIIFB’s Long-Term Foreign-Currency IDR are unaffected and the IDR has been affirmed.
Basically, these ratings are useful while borrowing from overseas in dollar or any other foreign currencies, or even in rupee in the form of masala bond.
Any rating action on Kerala state will reflect on KIIFB too as the latter’s liabilities including overseas borrowings are guaranteed by the state.
However, with the controversy involving KIIFB’s masala bond is still raging with a pending case in High Court, an overseas borrowing on the part of KIIFB may easily be ruled out for the near future, and hence an Outlook downgrading is unlikely to have any discernible impact.
Debt Ratings
KIIFB’s Rs50 billion (Rs5,000 cr) medium-term note (MTN) programme enjoys ‘BB’ rating from Fitch.
The Rs21.5 billion (Rs2150 cr) 9.723 per cent senior secured notes (masala bond) due 2024, has also been affirmed at ‘BB’ rating.
