Fitch Assigns 'B+' Rating to IIFL Finance Ltd's USD500 Million Senior Secured Notes
Fitch Ratings has assigned a final rating of B+ and a Recovery Rating (RR) of RR4 to the senior secured notes issued by IIFL Finance Limited. These notes, valued at USD500 million with a 7.6% interest rate, are due in September 2029 and form part of IIFL Finance's US$1 billion Global Medium Term Note Programme.The rating assignment followed Fitch's review of the final documentation for the instrument. The senior secured notes are backed by collateral that includes specified assets and receivables from the issuer.
Credit Structure and Covenants
These notes operate within the international market framework established under the Reserve Bank of India’s external commercial borrowings rules.The terms of the notes include maintenance-based covenants requiring IIFL Finance and its principal subsidiaries to maintain specific financial standards. These requirements stipulate that the issuer must meet regulatory capital requirements and keep net 90-day nonperforming loan ratios at no more than 5%. Additionally, a security coverage ratio for standard assets must be maintained at a minimum of 1.0x at all times.
The senior secured notes are rated in line with IIFL Finance’s LongTerm ForeignCurrency Issuer Default Rating (IDR), as the obligations are secured and rank pari passu with other secured debt. Fitch noted that nonpayment of this senior secured debt would reflect a uncured failure of the issuer.
Key Rating Details
The assignment details for the rated entity are summarized below:| Entity/Debt | Rating Type | Rating | Rating Action | Recovery | Prior (EXP) |
|---|---|---|---|---|---|
| IIFL Finance Limited senior secured | LT | B+ | NewRating | RR4 | B+ |
The Recovery Rating of RR4 reflects Fitch's expectation of an 'Average' recovery prospect in the event of default, which aligns with criteria for India-based entities with a LongTerm IDR of B+ or below.
Risk Factors and ESG Considerations
Fitch’s assessment highlighted several factors relevant to the rating. It was noted that the notes are subject to a crossacceleration clause, where any acceleration of debt from the issuer or its principal subsidiaries could constitute an event of default. While Fitch understood that IIFL Finance's microfinance subsidiary had breached certain loan covenants related to delinquencies, it observed that lenders had not yet taken adverse action regarding this breach.In terms of ESG considerations, IIFL Finance was given an ESG Relevance Score of '4' for Management Strategy and '4' for Governance Structure. This was due to the company's operations being sensitive to management’s ability to maintain sound implementation of internal controls and return the business to adequate profitability following the lifting of Reserve Bank of India sanctions on its gold loan business.
IIFL Stock Price Movement
Today, IIFL Finance Limited's shares edged higher, settling at ₹508.05 after gaining 3.00% in post-market trading. The stock was actively traded through a volume of 1.82 million shares.Disclaimer: Due care and diligence have been taken in compiling and presenting news and market-related content. However, errors or omissions may arise despite such efforts.
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