Global rating agency Fitch today downgraded its long-term corporate credit rating on Rolta India on account of non-payment of bank loans by the IT services firm.
Fitch has downgraded Rolta India to ‘RD’ (Restricted Default), which indicates that in the rating agency’s opinion the issuer has experienced an uncured payment default on its financial obligations but which has not entered into bankruptcy filings and not ceased operating.
At the same time, rating on Rolta India bonds have been lowered to ‘C’ grade from ‘CC’, representing ‘exceptionally’ high levels of credit risk wherein the default is imminent.
The rating action is on account of Rolta’s disclosure that bank loans of USD 35 million due on March 31, 2016 are still outstanding.
“In our understanding there has been no agreement between the lenders and Rolta to extend this maturity,” Fitch said in a statement.
In addition to the USD 35 million bank loan, the company has missed a coupon payment of USD 6.8 million on its 2018 bond on May 16, 2016, the agency noted.
Fitch said while the IT company has stated its intention to pay the bond coupon within the 30-day grace period, it has not shared any plan to improve its liquidity position for which it would need to have USD 58 million.
Further, it noted that Rolta has not been transparent in providing the credit rating agency and other relevant market participants with details about its liquidity situation.
“Unless the company provides us with timely updates on how it intends to meet its upcoming commitments, we may have to withdraw the ratings due to lack of information,” it added.
According to Fitch, Rolta’s short-term liquidity is critically weak.
“We understand that non-payment of the bank loan may trigger a cross-default under the bond documents if such non-payment continues for 45 days following written notice from either 25 per cent of the bondholders or the bond trustee,” the credit rating agency noted.
Fitch has also lowered the recovery rating on Rolta’s bonds to ‘RR5’ owing to its weaker-than-expected results.
An ‘RR5’ recovery rating indicates a recovery of 11-30 per cent of current principal and related interest.
Recently, global rating agency S&P had also lowered Rolta India rating for missing interest payment on its 2018 notes.
Shares of Rolta India were trading at Rs 68.50 apiece — down about 5 per cent from the previous close, on the BSE in the afternoon trade.