Bank loans

Tangedco’s bank loans fall out of the Rating Watch Negative category

It has been removed due to the extended resolution period for insolvency cases at the National Company Law Court

It has been removed due to the extended resolution period for insolvency cases at the National Company Law Court

India Ratings and Research has withdrawn Rating Watch Negative (RWN) status on Tamil Nadu Generation and Distribution Corporation (Tangedco) ‘bank loans’ citing an extended resolution period for insolvency cases against the utility .

In December 2021, the rating company assigned RWN ratings to the term loans after the sellers approached the National Company Law Tribunal (NCLT) against Tangedco. Loans include long-term loans, cash credit working capital limits and non-funds based working capital limits.

The resolution was monitored throughout the “monitoring period”. As more operational creditors have approached the NCLT for the collection of Tangedco’s arrears, the agency said it continues to monitor events.

However, he resolved the RWN given the extended resolution period and ongoing cases at NCLT. He noted that two suppliers who are either material suppliers, coal handlers or have power purchase agreements with Tangedco have approached NCLT to collect arrears.

Although Tangedco has challenged the insolvency proceeding, saying it is a utility, the Department of Energy has asserted that insolvency proceedings can be brought against the utility-owned power utility. State as well as against production companies in the event of default of payment as distribution companies. are public companies incorporated under the Companies Act, India Ratings noted.

Recently, NCLT had allowed Tangedco to file additional documents in an insolvency case filed against it by South India Corporation Pvt. ltd.

India Ratings said it expected Tangedco to continue to show high leverage and a tight liquidity position due to the absence of tariff reviews and its continued inability to pass on operating costs. high on consumers.

Net losses of the state electric utility fell from ₹11,964.9 crore in FY20 to ₹13,407.30 crore in FY2021. Total debt fell from ₹1,08,538.8 crore in financial year 2020 to ₹1,24,190.1 crore in financial year 2021, it noted. The rating company expects the net loss to remain high in FY22-26 due to continued high operating costs.

Tangedco continues to rely on short-term working capital facilities to fund long-term debt service obligations, he added.

India Ratings confirmed Tangedco’s bank loans at BBB rating with a negative outlook. BBB rates a moderate degree of security regarding the timely service of financial obligations. He also removed the unsupported note from RWN.

The unsubstantiated rating is based on its standalone credit assessment of Tangedco without considering explicit credit enhancement provided by its parent company (the state government).