Relevant Document:
Moody’s Rating November 2021
India-based ANI Technologies Pte. Ltd., the operator of Indian ride-hailing platform OLA Cabs, has launched a liability management exercise targeting a buyback of $250 million of its $500 million guaranteed senior secured term loan, according to an
announcement from S&P Global Ratings.
The $500 million term loan B was completed in December 2021, according to public information.
Moody’s assigned ANI Technologies a ‘B3’ rating to the proposed term loan in November 2021. ANI’s wholly owned subsidiaries - Ola Netherlands B.V. and Ola USA Inc. - are the borrowers, and the loan is guaranteed by ANI and its subsidiaries engaged in ride-hailing services.
S&P in its Aug. 9 announcement said it views the buyback as opportunistic, and affirmed ANI’s ‘B-’ ratings on adequate liquidity over the next 24 months for ANI to bear operating losses until it turns profitable. S&P added that it believes the proposed cash tender offer is opportunistic, rather than distressed, despite the potential for a below par buyback.
While a buyback of the term loan in about nine months after issuance is unusual and could hit ANI’s capital markets standing, it will benefit economically, mainly from reduced interest payments, the ratings agency said.
JPMorgan and Deutsche Bank were
arrangers of the $500 million five-year first-lien term loan, which priced at 625bps over the secured overnight financing rate, or SOFR, with a 0.75% floor and an issue price of 98 on Dec. 3, 2021. The facility is non-callable for two years, then callable at 105 and 103 in years three and four, respectively.
Cash Burn
Softbank-backed ANI Technologies is among emerging Indian technology companies that failed to get to an IPO. Those names include Oyo Hotels & Homes, which as
Reorg reported, had also looked to take advantage of India’s IPO boom, planning an around $1.1 billion-equivalent offering - at a $10-12-billion valuation - with proceeds to be used to pay down as much as half of its $600 million five-year TLB.
Oyo Hotels has thus far failed to list, as has ANI Technologies, according to local
media reports.
MoneyControl reported on March 22 that ANI Technologies was mulling a down round after being forced to shelve plans for an IPO. The same report notes that the proceeds from the $500 million TLB completed in December 2021 were still unavailable to the company as they were sitting in an overseas entity pending RBI approvals. The
MoneyControl report notes that the down round anticipated a raise of $150-$200 million at a valuation of $5 billion for ANI, compared to a $7 billion valuation on its previous fundraising round.
S&P said it expects ANI Tech's cash burn to reduce following a tempering of growth aspirations in the international mobility and non-mobility segments in India, and in its base case it expects ANI Tech to turn profitable at the EBITDA level in fiscal 2024 (ending March 31, 2024).
S&P said it projects the company's total negative operating cash flow at INR 8 billion-INR10 billion for fiscal years 2023 and 2024, 40%-50% lower than previous expectations and follows ANI Tech's plans to prioritize capital for the India mobility segment. On a segmental basis before corporate expenses, ANI Tech's India mobility segment has been profitable since fiscal 2020, the rating agency said.
A cash balance that was estimated at about $750 million as of March 31, 2022, should provide a sufficient buffer against S&P’s expectation of cash losses until the company turns profitable in fiscal 2024, and its INR4.8 billion of debt maturities over the same period, the same S&P announcement noted.
The proposed buyback, if fully accepted by investors, will reduce ANI Tech's negative carry by about INR2 billion annually. S&P also expected no impact on the company's operations or liquidity if the timeline for its IPO gets extended, the announcement further set out.