Standard & Poor's has cut the long term credit rating of Amtek Global, reflecting the "heightened liquidity risks" at its parent company Amtek Auto, which might default on loan obligations.
"The downgrade reflects heightened liquidity risks at India-based parent company Amtek Auto. We see a risk that Amtek Auto may not have sufficient liquidity to meet its interest or debt obligations, which could lead to a default at Amtek Auto, or a debt restructuring," S&P Rating Services said in a statement.
Automobiles component maker Amtek Auto, which is grappling with financial stress, has cited the current market scenario "which caused decline in the sales and profit margins of the company", for the present situation.
Singapore-based Amtek Global Technologies Pte Ltd 's long-term corporate credit ratings has been cut to 'CCC+' from 'B+', indicating increased credit risks. Besides, S&P has lowered the issue ratings on Amtek Global's 235 million euro senior secured term loan and 30 million euro revolving credit facility (RCF).
"The heightened liquidity risks follow spending on acquisitions by Amtek Auto, coupled with high short-term debt and low cash balances as of March 31, 2015, as well as an increase in losses during the three months to June 30, 2015," the rating agency noted. Amtek Global has shown higher debt and weaker-than-expected leverage, it added. "We also see far weaker cash flow generation, with negative free operating cash flow (FOCF) of around 29 million euro for the nine months to March 31, 2015," S&P said.
As on March end this year, Amtek Global had cash balances of about 42 million euro, against short-term debt maturities of 49 million euro, it added. Even as Amtek Auto is looking to raise funds, concerns have been on the rise about its financial condition which has also created ripples in the mutual funds industry. Amtek Auto has also come under the Sebi scanner for alleged share price manipulation at its subsidiary Castex Technologies.
Amtek Auto shares closed 5.23 per cent down at Rs 49.85 apiece on the BSE today.
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