Credit rating agency ICRA Ratings has placed the term-loan rating of Coffee Day Enterprises Limited (CDEL) on watch with negative implications. This represents credit risk with unclear implications.
“ICRA had downgraded CDEL long-term rating ‘D’ with negative outlook from ‘BB+’ (Negative) based on `315 crore term loans. The rating action follows the delay in debt servicing by CDEL’s flagship subsidiary Coffee Day Global Limited and Sical group of companies,” said CDEL in a regulatory filing.
The recent developments, which include the death of its founder V G Siddhartha, could have a negative impact on the company’s operation, the extent of which was too early to ascertain, ICRA noted.However, Coffee Day is in the process of deleveraging its assets to ensure liquidity position for the company. Recently, CDEL’s board of directors approved the sale of its Global Village Technology Park in Bengaluru to Blackstone for up to `3,000 crore.
After required statutory payments, the debt position of Coffee Day Group will come down by `2,400 crore,” Coffee Day said in a regulatory filing. The debt position is expected to be around `1,000 crore in the next 45 days, it added. According to the filing, total debt of Coffee Day Enterprises as on July 31, 2019 was `3,472 crore.
CDEL has also appointed IDFC Securities to evaluate strategic options for the company, including divestment of its holding in Coffee Day Global and other group companies, excluding Sical Logistics. “The proceeds from the divestment of its arm Sical Logistics is expected to significantly reduce the debt in Sical. Total debt of Sical Logistics is `1,488 crore,.” the company said.