upgrade

for a corporate in a developing market to have a better credit rating than the sovereign first the sovereign has to be upgraded

moodys kindly upgraded the sovereign despite lenders making bad loans one out five times to the trough and an equity market trading at 27 x earnings with no growth in earnings

the footnotes to the corporate upgrade for a $800 million dollar offering is that the money is for refinancing (presumably rehabilitating the local lenders) and the issuer expects to be cash flow negative for a while because the supply chain is waiting to be paid

to wit

upgrade

Halan, who is also Moody’s lead analyst for RIL, said that the Baa2 rating also incorporates the increase in RIL’s business risk because of its growing digital services segment “and our expectation that the high cash outflow for capital spending will keep its free cash flow negative over at least next 18 months”.

Even though RIL’s projects in the refining and petrochemical segments are nearing completion, the cash outflow for capital spending will remain high as payments to creditors for past capital expenditure are made over the next 12-18 months, according to Moody’s. Such payments along with additional capital spending in the digital services business will constrain any reduction in net borrowings until fiscal ending March 2019, the global rating agency said.