Delhi International Airport Limited (DIAL) had been downgraded by Fitch to BB from BB+ while maintaining a negative outlook. The downgrade of India’s largest airport comes on the back of low traffic volume in 2020 due to the pandemic and a prolonged recovery back to normal. Fitch expects DIAL’s net debt/EBITDAR to increase to 10.0x on weaker earnings. Even though the pandemic has stabilized in India, the risk of increase in the infection rate could result in further restrictions on air travel. On the upside, the rating agency acknowledges the strong market position of India’s largest airport by passenger traffic. The airport handled ~67mn passengers in FY2020 alone. The strength of the airport also comes from the increasing domestic air travel and DIAL’s access to domestic banks and capital markets to address short term liquidity needs. DIAL also has plans to expand over the next four years through a project costing INR 98bn ($1.34bn) expected to be financed through proceeds from its offshore US dollar bonds and internal accruals. The airport’s debt structure primarily comprises US dollar bullet bonds. The bonds are secured through an escrow account with a cash waterfall mechanism. According to the provisions, any additional leverage would be possible only in case there is no default and the fixed-charge coverage ratio test is not less than 2.5x till 2026 and 2.25x till 2029. DIAL has also mitigated any refinancing risk of its bullet bonds by ensuring a laddered maturity over 2022 to 2029, and its current concession term until 2036.

DIAL’s 6.125% 2022s and 2026s were unchanged and trade at 100.875 and 102 respectively.

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