Fitch Ratings has assigned Mumbai International Airport Limited's (MIAL) proposed US dollar bonds an expected rating of 'BB+(EXP)'. The Outlook is Stable. The bond proceeds will be used to repay the bridge loan facility at MIAL, and for capex. The final rating on the proposed bonds is contingent upon the receipt of final documents conforming to information already received.
The rating reflects Mumbai's strong passenger growth potential in the medium-to-long term, MIAL's regulated asset base, higher contribution of domestic traffic than international traffic and adequate financial profile. The rating case assumes a full recovery of traffic to pre- pandemic levels by end-2024, with leverage, on average, of 7.6x over FY23-FY27 (financial year end March). The Stable Outlook reflects MIAL's large headroom against our negative rating action trigger of 10.0x.
MIAL's capex is mainly maintenance capex with some portion of the capex aimed at improving runway efficiency.
The expected rating also considers likely capacity constraints at the airport in the medium term and the operation of Navi Mumbai International Airport Limited (NMIAL) from FY25 to cater for additional traffic growth in Mumbai. The passenger base in the FY20 was 46 million and has grown at CAGR of 9% over the past five years.
MIAL is a SPV, incorporated in March 2006 to design, develop, construct, upgrade, operate, maintain and manage Chhatrapati Shivaji Maharaj International Airport (CSMIA) in Mumbai, has a 30-year concession from May 2006 with a provision for a 30-year extension.
The proposed dollar bonds benefit from seniority, security and a protective debt structure - ringfencing of all cash flow and a set of covenants limiting leverage, defined as net debt/EBITDA, to 5x and funds from operations/net debt is not less than 10% with a 40% margin up to 24 months after issuance or a shorter period at the company's sole discretion.