Reliance Capital blames older downgrade for fresh default

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Published: October 19, 2019 3:35:49 AM

In its rating rationale for the downgrade, CARE Ratings had said the rating revision took into account an instance of delay in servicing of coupon on several non-convertible debentures by the company.

Reliance Capital, downgrade, fresh default, industry news, RCL The coupon was subsequently serviced with a delay of one working day.

Reliance Capital (RCL) has blamed a ratings downgrade made last month for its default on interest and principal obligations due on October 16 and 17. The company informed the stock exchanges in a late-evening notification on Thursday that CARE Ratings’ September 20 downgrade of its debt worth Rs 17,000 crore to default grade had resulted in lenders making accelerated demands for repayments which the company was not in a position to fulfil.

“Further to the above, we, vide our communication dated October 11, 2019 submitted, this rating downgrade has initiated acceleration, etc. of various facilities by certain lenders and consequential demands for immediate payment of amounts that were otherwise due and payable in a phased manner over the next 8 years till March 2028, as per the original terms of lending. It is expected that the debt servicing of the company in relation to the accelerated amounts and otherwise will be delayed,” RCL informed the stock exchanges.

In its rating rationale for the downgrade, CARE Ratings had said the rating revision took into account an instance of delay in servicing of coupon on several non-convertible debentures by the company. The coupon was subsequently serviced with a delay of one working day.
“Coupon payments of certain non-convertible debentures (NCDs) of RCL were due on September 09, 2019. The debenture trustee for these NCDs has informed CARE (via its email dated September 11, 2019) that RCL has delayed the payment of coupon on these NCDs by one working day and paid the same on September 11, 2019. This constitutes an event of default as per CARE’s default recognition policy,” the ratings firm had said.

RCL’s liquidity is critically dependent on monetisation of its sale of group assets/investments within the given timelines, given that there are scheduled repayments of standalone debt worth Rs 1,642 crore from August 2019 to December 2019, CARE had said.

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