TEXT-Fitch assigns ITNL Offshore's CNY bonds final 'BBB-'

Wed Apr 25, 2012 8:47am EDT

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(The following statement was released by the rating agency)

Apr 25 - Fitch Ratings has assigned ITNL Offshore Pte. Ltd.'s (IOPL) CNY630m bonds a final rating of 'BBB-'.

The bond's rating is linked to the rating of Export Import Bank of India (EXIM, 'BBB-'/Stable), which has provided an unconditional and irrevocable guarantee of up to USD114m. The rating is also supported by a debt service reserve account (DSRA) amounting to one semi- annual coupon payment and by a principal account of USD4m.

The guarantee, provided by EXIM, is available to both the bond investor and the swap provider on a pari passu basis. The latter swaps the CNY proceeds into USD. The DSRA will be available exclusively to the bond investor, while the principal account will be available on a pari passu basis to both the bond investor and the swap provider.

To mitigate the foreign exchange risk of the debt obligation in CNY while the guarantee payment is in USD, IOPL has entered into a swap agreement with Deutsche Bank AG ('A+'/Stable). In the event of the termination of the swap before maturity, USD118m, comprising the USD114m guarantee from EXIM and the USD4m in the principal account, is expected to be sufficient to meet bondholder payments as well as payments that may be due to the swap provider as termination value, even under severe adverse movements in interest rates and the CNY-USD exchange rate.

Further, the transaction benefits from a monitoring mechanism, under which the sum of the bond's USD guarantee and the balance in the principal account, adjusted for the notional mark to market value of the swaps (collectively adjusted value), is monitored monthly. If the adjusted value falls below an amount equivalent to 103% of the bond principal and one semi-annual interest coupon in USD terms, IOPL will cash collateralise the charged principal account, within three business days, to bring the adjusted value to 108% of the bond principal and one semi-annual coupon in USD terms.

IOPL is 100%-owned by its sponsor IL&FS Transportation Networks Limited (ITNL). ITNL has entered into a keepwell agreement with IOPL, under which ITNL will, in the event that IOPL does not have sufficient cash or other liquid assets to meet any of its obligations, indebtedness, liabilities, costs, expenses or other payment obligations, endeavour to make available to IOPL funds sufficient to meet such payment obligations in full. However, this is not a guarantee by the sponsor in favour of the issuer. The rating of the bonds to be issued by IOPL is linked to the guarantee by EXIM and the aforementioned features of the transaction.

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