Fitch: India project loans risky

Fitch Ratings said in a new report that its analysis of the default risk while assigning new national ratings to India infrastructure project loans incorporates multiple stresses, including project delays, construction cost overruns, interest rate spikes, cash flow volatility and economic headroom.

The low ratings profiles for most of these projects reflect the multiplicity of risks, the agency said. The currently harsh macroeconomic and financial markets environment makes this conservative ratings approach all the more relevant, Fitch added.

The agency noted that while a majority of rated infrastructure project loans should maintain stable outlooks in 2009, selective downgrades could occur due to event-driven risks.

As projects currently under construction become operational over the next few years, issues related to the willingness of the banks to voluntarily restructure project loans and ability of project usage and revenue ramp-up to meet debt service requirements will become critical credit considerations, Fitch said.

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