DEFAULT RATING PUTS RELIANCE CAPITAL’S $5-BN DEBT AT RISK

Reliance Capital’s (Rcap’s) downgrade to default grade at CARE Ratings places the debt of Anil Ambani’s conglomerate at risk. CARE cut Rcap’s bonds by eight notches to ‘D’, citing a delay in coupon payments on several of the lender’s nonconvertible debentures. Rcap’s debt stood at about $5 billion as of September.

Reliance Capital’s (Rcap's) downgrade to default grade at CARE Ratings places the debt of embattled tycoon Anil Ambani’s conglomerate at risk, reigniting India’s credit scare.

Mumbai-based CARE cut Reliance Capital’s bonds by eight notches to ‘D’ from ‘BB’, citing a delay in coupon payments on several of the lender’s non-convertible debentures, the ratings company said on Friday. Reliance Capital group’s debt stood at about $5 billion as of September, according to a company’s spokesman.

The delay in coupon payments was caused by a “technical glitch in bank servers,” Reliance Capital said on Saturday in an exchange filing, adding that the ratings company did

not give the lender the opportunity to provide comments on the downgrade. Payment went through on the next working day after the delay, the shadow lender said.

The downgrade “will precipitate a

chain sequence of events that will gravely harm the interests of millions of retail and institutional investors having direct or indirect exposure to the securities of the company,” Reliance Capital said. The debt of the Reliance ADAG Group ballooned to about ~93,900 crore at four of its biggest units as of March.

The default rating is set to exacerbate a year-long credit crunch among India’s shadow lenders, which started with the collapse of IL&FS Group last year. Mumbai-based Reliance Capital has been trying to sell off assets to raise funds while its shares tumbled more than 90 per cent over the past year amid the cash squeeze.

The liquidity profile of the group remains under stress due to delays in fundraising from asset monetisation plan and upcoming debt repayments, CARE Ratings said.