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Moody's places Grab B3 ratings under review for upgrade

Sharanya Pillai
Published Thu, Apr 15, 2021 · 05:14 PM

CREDIT ratings agency Moody's Investor Service has placed the B3 credit ratings of Grab under review, ahead of its proposed US$39.6 billion listing via a merger with a US SPAC (special-purpose acquisition company).

The items under review include Grab's B3 corporate family rating and the B3 rating on the company's senior secured term loan. The borrowers are Grab and its wholly-owned subsidiary, Grab Technology. The loan is guaranteed by subsidiaries engaged in transport, food and delivery services.

Moody's outlook for Grab has also been changed from "stable" to "ratings under review". Its review comes as S&P Global Ratings on Thursday maintained its "B-" rating for Grab on the expectation that Grab will continue to be loss-making over the next two years.

"Grab's public listing will add US$4 billion to US$4.5 billion of liquidity buffer upon successful completion, which will support the company's growth plans," said Stephanie Cheong, a Moody's Analyst.

"More importantly, all of Grab's convertible redeemable preference shares (CRPS) will convert into equity upon listing, thereby eliminating the redemption risk associated with these shares, which currently weighs on the company's credit profile."

Without an initial public listing (IPO), Grab's CRPS would have been redeemable anytime after June 2023. The company has raised over US$10 billion from investors since 2012, all in the form of CRPS, Moody's said.

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Similar to Moody's, S&P had also noted that the merger will eliminate Grab's 2023 refinancing risk and provide it with additional funds to buffer cash burn, support future expansion, and lower existing debt.

Grab expects to raise US$4.5 billion in cash from its listing, the company announced on Monday. This will comprise US$500 million cash from the shareholders of the SPAC, Altimeter Growth Corp, as well as US$4.04 billion from PIPE (private investment in public equity) investors.

The listing will add to Grab's cash balance, which stood at about US$5.5 billion as at the end of last year, Moody's said. The agency expects Grab to use the cash proceeds to fund its organic and inorganic growth plans.

Moody's also does not expect a "material change in Grab's aggressive growth strategy after the merger, as its founder and chief executive Anthony Tan will continue to control the company through his majority voting rights".

"Still, Moody's expects that Grab will maintain a prudent funding approach toward acquisitions and investments. Moody's also expects the company to maintain a large cash buffer relative to its cash operating needs over at least the next three years," it said.

As a public company, Grab will also benefit from access to additional liquidity and greater reporting transparency. Moody's will consider Grab's final capital structure, operating performance, financial policies and management and board practices. The review is expected to be completed in 90 days.

Grab's merger is expected to close in July, subject to approval from Altimeter's shareholders and regulators.


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