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<keyword id="125045" type="CITY" weightage="20" keywordseo="Fitch-Ratings">Fitch Ratings</keyword> has withdrawn the ratings on <keyword id="7940335" type="COMPANY" weightage="20" keywordseo="Macrotech-Developers">Macrotech Developers</keyword> (formerly Lodha Developers) but has retained its existing rating CCC, which is junk or below investment grade.Fitch has affirmed the long-term foreign currency issuer default rating on Macrotech at CCC and has also simultaneously withdrawn the ratings for commercial reasons, the agency said on Thursday.<br /><br />The rating affirmation reflects the assessment that there are no material changes to its credit profile since the last rating action on March 13.<br /><br />Normally ratings are withdrawn if the issuer is not cooperating or ask for withdrawal. <br /><br /><u><strong>Lodha's Response</strong><br /></u><br />Fitch had undertaken rating for our USD bond maturing in March 2020 which was repaid in full. On repayment, we have asked them to discontinue the rating which has now been done. The repayment of our bond on time inspite of the most difficult market circumstances demonstrates how weak the rating rationale of such agencies is." <strong>Said company spokesperson</strong>

Fitch withdraws Lodha's rating

<p><span style="line-height: 1.5em;"><div class="KonaFilter image-container float_right"><div class="image on-image"></div><p></p></div>In the world of economics, one policymaker towers above all others. </span></p><p><span style="line-height: 1.5em;">The head of America's central bank, Janet Yellen, presides over a $17 trillion economy. The empire of her nearest competitor, Mario Draghi, amounts to a relatively puny $10 trillion. </span></p><p><span style="line-height: 1.5em;">On top of this, the dollar's global role means Ms Yellen has a huge impact abroad, influencing more than $9 trillion in borrowing in dollars by non-financial companies outside America--more than enough to buy all the firms listed on the stock exchanges of Shanghai and Tokyo (see chart 1). As the dollar strengthens both in response to healthier growth in America and in the expectation that the Federal Reserve is getting ready to raise rates, this burden is becoming harder to bear.</span></p><p>Dollar borrowing is everywhere, but the biggest growth has been in emerging markets.</p><p>Between 2009 and 2014 the dollar-denominated debts of the developing world, in the form of both bank loans and bonds, more than doubled, from around $2 trillion to some $4.5 trillion, according to the Bank for <keyword id="6356001" type="COMPANY" weightage="60" keywordseo="international">International</keyword> Settlements (BIS). Places like Brazil, South Africa and Turkey, whose exports fall far short of imports, finance their current-account gaps by building up debts to foreigners.</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image"></div><p></p></div></div>Even countries without trade gaps have been borrowing heavily. <span style="line-height: 1.5em;">With interest rates on American assets so meagre--a five-year Treasury bond pays just 1.5%--those with dollars to invest have sought out more rewarding opportunities. </span></p><p><span style="line-height: 1.5em;">Firms based in emerging markets seemed to fit the bill. Some are big names: state-owned energy giants like Russia's Gazprom and Brazil's Petrobras have been issuing dollar bonds via subsidiaries based in Luxembourg and the Cayman Islands. </span></p><p><span style="line-height: 1.5em;">Others are smaller. Recent months have seen Lodha group, an Indian property developer, Eskom, a South African power generator, and Yasar, a Turkish firm that makes TV dinners, sell dollar-denominated bonds. By borrowing dollars at several percentage points below the prevailing interest rate in their domestic currency, CEOs have pepped up profits in the short term.</span></p><p>But finance rarely offers a free lunch.</p><p>The worry is that tumbling energy prices mean firms like Gazprom and Petrobras now have much lower dollar income than expected when they took on debts. Others, such as Lodha, Eskom and Yasar, have few dollar earnings.</p><p>Taking on debt just before a shift in exchange rates can be painful. In 2010 a Turkish firm borrowing $10m via a ten-year bond with a 5% coupon could expect to pay 22.5m lira ($15m) over the life of the bond. But the lira is down 43% against the dollar since then (see chart 2); the payments are now over 39m lira.</p><p><div class="KonaFilter image-container display-table float_right"><div><div class="image"></div><p></p></div></div>Where foreign debts and earnings line up there is little reason to worry. Asian firms' foreign-currency debts tripled from $700 billion to $2.1 trillion between 2008 and 2014, going from 7.9% of regional GDP to 12.3%, according to economists at Morgan Stanley, a bank.</p><p>To see whether the surge was bearable, the economists looked at the accounts of 762 firms across Asia. The findings were reassuring: on average 22% of their debt is dollar-denominated, but so are 21% of earnings. Although Asian firms are a big part of the emerging-markets' borrowing binge, on the whole they seem well placed to cope with a rising dollar.</p><p>Yet there are still two reasons to worry.</p><p>First, the outlook for China is a puzzle. The country holds $1.2 trillion in Treasury bills, many of which are sitting in its sovereign-wealth fund. When the dollar rises, the fund gets richer.</p><p>But even in a dollar-rich country, there can be pockets of pain. China's firms have built up a nasty currency mismatch. Almost 25% of corporate debt is dollar-denominated, but only 8.5% of corporate earnings are. Worse, this debt is concentrated, according to Morgan Stanley, with 5% of firms holding 50% of it.</p><p>Chinese property developers are the most obviously vulnerable. Companies like Evergrande, China Vanke and Wanda build and sell offices and houses, so most of their earnings are in yuan. Banned from borrowing directly from banks, they have been active issuers of dollar bonds.</p><p>They have also borrowed from trust companies, according to Fitch, a rating agency. The trusts are themselves highly leveraged and have borrowed dollars via subsidiaries in Hong Kong. This arrangement will amplify the economic pain if property prices in China continue to decline, as they have been doing for several months.</p><p>The second problem is that whole economies, rather than just the corporate sector, look short of dollars.</p><p>In Brazil and Russia, for instance, bail-outs of firms lacking greenbacks are blurring the lines between the state, banks and big companies. The general scramble for dollars has contributed to the plunge of the real and the rouble.</p><p>Others could follow this path. Turkey's dollar borrowing has grown rapidly since 2009: in addition to the debts Turkish firms have taken on, the state's external debt has grown to almost 50% of GDP, far above the average for middle-income countries (23%). South Africa looks worrying too: its current-account deficit is the widest of any big emerging market, and the government's external debt is 40% of GDP.</p><p>A wave of defaults would be unlikely to cause problems as widespread as the subprime crisis of 2008. Most bonds are owned by deep-pocketed institutional investors such as pension funds and insurers.</p><p>The banks that have made loans face far tougher regulation than they did eight years ago and are generally far better capitalised. An emerging-market rout would not cause another Lehman moment.</p><p>But it would mean big job losses at stricken firms.</p><p>As investors reprice risk it would probably also lead to a sudden tightening of credit. In countries like South Africa or Turkey, where growth is evaporating fast, that could still be very painful.</p><p>Click <a href="https://subscriptions.economist.com/nwcd">here</a> to subscribe to The Economist</p><p>This article was from The Economist and was legally licensed through the NewsCred publisher network.</p>    <div class="margin-top">        <h3>NOW WATCH: <a href="http://www.businessinsider.com/what-earth-would-look-like-if-ice-melted-world-map-animation-2015-2">Animated map of what Earth would look like if all the ice melted</a></h3>        <div>            <div>        <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="5xam5iczrSx4Ibx8MvarDsu3zOG88omE" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div>        </div>        </div>            </div>

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