Fitch Ratings has downgraded CDPQ-backed Azure Power Energy’s (Azure RG3) US dollar bond to ‘BB’ from ‘BB+’ on corporate governance concerns, which, it said, is evident from the firm’s failure to manage regulatory financial disclosures past statutory timeline.
It also cut rating on Azure Power Solar Energy’s (Azure RG2) US dollar bond from ‘BB’ to ‘BB-’. RG stands for restricted group
In addition, the rating watch negative reflects the continued lack of clarity in relation to the impact of Azure Power Global Limited’s (APGL) unresolved internal controls and compliance framework matters, and the recent changes in management, on overall performance and financial flexibility of the restricted groups.
“APGL missed its statutory deadline in filing its Form 20-F audited financial statements for the financial year ended March 2022 (FY22) with the US Securities and Exchange Commission (SEC) in August 2022. However, there is still no clear indication on the group publishing its audited financial statement, and further delays could lead to delisting from the New York Stock Exchange," the report said.
The structure of the restricted groups, covenants and standard cash distribution waterfall provide some safeguard to bondholders from the implications stemming from a series of events at the APGL level.
Both restricted groups have released their FY22 unaudited financial statements, while audited financial statements could only be released upon filing with the US Securities and Exchange Commission.
Fitch Ratings said Azure RG2’s rating headroom has also reduced significantly in light of continuing under-performance of the portfolio.
Continuing operational underperformance and/or material difference in audited financial statements will warrant higher stress in our rating case and may affect the credit assessment further.
On the other hand, Azure RG3’s operational and financial performance according to the unaudited numbers remain in line with our expectations, Fitch added.
