Senior Credit Analyst, Lucror Analytics

Trung Nguyen

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

Azure Power is marketing 5.25NC3 144A/RegS green bonds due 2024, with a total issue size of up to USD 350 mn. The proposed Notes are expected to be rated Ba2/BB by Moody’s and Fitch, i.e. one notch higher than the existing AZUPOE 22 (Ba3/BB-).  The structure of the new Notes is similar to that of the Azure 2022 Notes. They are both guaranteed by the parent guarantor. That said, the guarantee will be removed if Debt/EBITDA improves to 5.5x or below. The key difference is the restricted subsidiaries’ counter party exposure. While the restricted subsidiaries of the 2022 Notes have c. 33% exposure to stronger, sovereign-backed entities, those of the proposed Notes have c. 70%. Thus, the quality of revenue stream of the proposed Notes is better.  We believe the proposed Notes could price tighter than the IPT (c. 6%), at 5.5%-5.75%, and see fair value these levels. We maintain our "Hold" recommendation on the existing AZUPOE '22s.    .

   Azure Power is marketing 5.25NC3 144A/RegS green bonds due 2024, with a total issue size of up to USD 350 mn. The proposed Notes are expected to be rated Ba2/BB by Moody’s and Fitch, i.e. one notch higher than the existing AZUPOE 22 (Ba3/BB-).     The structure of the new Notes is similar to that of the Azure 2022 Notes. They are both guaranteed by the parent guarantor. That said, the guarantee will be removed if Debt/EBITDA improves to 5.5x or below. The key difference is the restricted subsidiaries’ counter party exposure. While the restricted subsidiaries of the 2022 Notes have c. 33% exposure to stronger, sovereign-backed entities, those of the proposed Notes have c. 70%. Thus, the quality of revenue stream of the proposed Notes is better.     We believe the proposed Notes could price tighter than the IPT (c. 6%), at 5.5%-5.75%, and see fair value these levels. We maintain our "Hold" recommendation on the existing AZUPOE '22s.    . 

Azure Power - Event Flash - Roadshowing Up To USD 350 Mn 5.25NC3 Notes - Lucror Analytics

Leonard Law, CFA

In this month’s “In-Focus” section, we provide an update on the Chinese property sector, including trends in contracted sales and operations, as well as regulatory developments. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

   In this month’s “In-Focus” section, we provide an update on the Chinese property sector, including trends in contracted sales and operations, as well as regulatory developments.    The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Chinese Property Update - Lucror Analytics

The Asia HY Trade Recommendations report for August includes a summary of our recommendations, as well as our high-conviction ideas. We also provide relative-value charts and lists of the bonds in the Lucror Asia HY index.

   The Asia HY Trade Recommendations report for August includes a summary of our recommendations, as well as our high-conviction ideas. We also provide relative-value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Recommendations - August 2019 - Lucror Analytics

We view Azure Power as “Medium Risk” on the LARA scale. We like the stable and predictable revenues and EBITDA, which are supported by: [1] a stable amount of solar radiation; [2] fixed tariffs based on long-term PPAs (25 years); and [3] minimal operating costs, as solar panels have no moving parts. However, the credit profile is weighed down by the company's high leverage, limited scale and short track record. The key risk is that the PPAs could be cancelled or re-negotiated. Our fundamental Credit Bias is “Stable”, due to the stable and predictable revenues and EBITDA. We view Azure’s corporate governance as “Moderate” on the LAGA scale, mainly owing to the reputable and diversified institutional shareholder base, experienced Board directors and public listing on the NYSE.

   We view Azure Power as “Medium Risk” on the LARA scale. We like the stable and predictable revenues and EBITDA, which are supported by: [1] a stable amount of solar radiation; [2] fixed tariffs based on long-term PPAs (25 years); and [3] minimal operating costs, as solar panels have no moving parts. However, the credit profile is weighed down by the company's high leverage, limited scale and short track record. The key risk is that the PPAs could be cancelled or re-negotiated.    Our fundamental Credit Bias is “Stable”, due to the stable and predictable revenues and EBITDA.    We view Azure’s corporate governance as “Moderate” on the LAGA scale, mainly owing to the reputable and diversified institutional shareholder base, experienced Board directors and public listing on the NYSE. 

Azure Power - Tear Sheet - Lucror Analytics

In our view, Azure Power’s Q1/19-20 results were acceptable. Positively, revenue and operating capacity rose more quickly than expected. That said, earnings growth failed to match the revenue increase, due to one-time costs related to the management changes. Debt grew faster than earnings, leading to slight deterioration in leverage. That said, we maintain our forecasts for FY 2019-20 and foresee that leverage will be stable. On the call, the new management team said it plans to reduce leverage and improve disclosures, which bodes well for creditors.

   In our view, Azure Power’s Q1/19-20 results were acceptable. Positively, revenue and operating capacity rose more quickly than expected. That said, earnings growth failed to match the revenue increase, due to one-time costs related to the management changes. Debt grew faster than earnings, leading to slight deterioration in leverage. That said, we maintain our forecasts for FY 2019-20 and foresee that leverage will be stable. On the call, the new management team said it plans to reduce leverage and improve disclosures, which bodes well for creditors. 

Azure Power - Earnings Flash - Q1 FY 2019-20 Results - Lucror Analytics

India

Azure Power is an Indian solar power company that develops, constructs, owns, and operates utility-scale solar, wind, and hybrid power projects. The company sells energy to government utilities and independent industrial and commercial customers in India. Azure Power was founded in 2008 and is headquartered in New Delhi, India.

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Azure Power (AZREF US)

Azure Power - Event Flash - Roadshowing Up To USD 350 Mn 5.25NC3 Notes - Lucror Analytics

Azure Power is marketing 5.25NC3 144A/RegS green bonds due 2024, with a total issue size of up to USD 350 mn. The proposed Notes are expected to...

Lucror Analytics

Asia HY Monthly - Chinese Property Update - Lucror Analytics

In this month’s “In-Focus” section, we provide an update on the Chinese property sector, including trends in contracted sales and operations, as...

Lucror Analytics

Asia HY Trade Recommendations - August 2019 - Lucror Analytics

The Asia HY Trade Recommendations report for August includes a summary of our recommendations, as well as our high-conviction ideas. We also...

Lucror Analytics

Azure Power - Tear Sheet - Lucror Analytics

We view Azure Power as “Medium Risk” on the LARA scale. We like the stable and predictable revenues and EBITDA, which are supported by: [1] a...

Lucror Analytics

Azure Power - Earnings Flash - Q1 FY 2019-20 Results - Lucror Analytics

In our view, Azure Power’s Q1/19-20 results were acceptable. Positively, revenue and operating capacity rose more quickly than expected. That...

Lucror Analytics

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