(ADPnews) - Oct 7, 2010 - CRISIL yesterday placed its ratings on the bank loan facilities of Bellary Iron Ore Pvt Ltd, except the company's foreign currency term loan, on a 90-day "notice of withdrawal" at BIOPL's request.
The ratings will be withdrawn at the end of the notice period, in line with CRISIL’s policy on withdrawal of its ratings on bank loans.
CRISIL’s rating on BIOPL’s foreign currency term loan continues to be on watch with "negative" implications. CRISIL had placed the rating on watch on December 21, 2009, following the Government of Andhra Pradesh’s order of suspension of operations, including transportation of mined material, at six mines (including the mine operated by BIOPL) in Andhra Pradesh’s Anantapur district. The suspension order was passed in the wake of allegations of irregularities in operations at the six mines.
In the absence of any clarity on either the timeline or the potential impact of the final ruling by the court on BIOPL, CRISIL, for arriving at its rating, has factored in the business risk profile of BIOPL’s wind-power generation operations. However, the scale of operations of BIOPL’s power generation business is very small, and the company is unlikely to scale up the capacity and operations over the medium term. The rating will factor in the business risk profile of the iron ore business as well, once the mining and trading operations resume.
CRISIL will remove the rating on BIOPL’s foreign currency term loan from watch once the court passes its final ruling on the suspension, and there is clarity on the impact of the same on BIOPL’s credit risk profile. The nature and quantum of punitive action, if any, on BIOPL is not yet ascertainable. BIOPL’s current strong liquidity will remain sensitive to any such action.
The ratings continue to reflect BIOPL’s strong financial risk profile marked by a large net worth, low gearing, strong cash accruals, and robust debt protection metrics, and the benefits that the company derives from the stable cash flows from its windmill business. These rating strengths are partially offset by BIOPL’s small scale of operations in the power generation industry.
Rating agency website: www.crisil.com
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