COVID-19: Moody's Downgrades Delhi Airport Ratings, Places Hyderabad Airport's CFR on Review

Moody's Investors Service has placed GMR Hyderabad International Airport Limited's (HIAL) Ba1 Corporate Family Rating (CFR) on review for possible downgrade even as it downgraded Delhi International Airport Limited's (DIAL) CFR and senior secured ratings to Ba3 from Ba2.

At the same time, Moody's has downgraded DIAL's Baseline Credit Assessment (BCA) to ba3 from ba2. The ratings have also been placed on review for further downgrade and the outlook has been changed to rating under review from stable.

The rating action reflects the worsening coronavirus outbreak and the increasingly stringent travel restrictions imposed both in India and globally, including ongoing measures introduced by the Government of India (Baa2 negative), Moody's said in a press release on Wednesday.

"The downgrade to Ba3 reflects our expectation of a sharp decline in passenger and aircraft traffic at Delhi Airport in the coming months and the uncertainty over the timing and extent of a recovery, which coincides with increased debt issuance as the airport enters the peak stage of its INR 98 billion expansion project," Spencer Ng, a Moody's Vice President and Senior Analyst, said.

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets, Moody's said.

The combined credit effects of these developments are unprecedented. The airport sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment, it said.

While the current environment is unpredictable, Moody's expects a recovery in airport traffic to commence in the second half of the year.

Nevertheless, Moody's expects that the airport's traffic levels for the next two to three years will be lower as a result of the coronavirus , which will reduce DIAL's available cash flow for its Rs 9800 crore expansion project and increase its reliance on debt funding.

The rating action reflects the expectation of a sharp decline in passenger and aircraft traffic at Hyderabad Airport in the coming months and the uncertainty over the timing and extent of a recovery, which coincides with increased debt issuance as the airport enters the peak stage of its Rs 5500 crore expansion project, Spencer Ng, said