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Crisil downgrades SPV bond of IL&FS' Jharkhand project: Here's what experts have to say

Updated : January 22, 2019 07:52 PM IST

In a fresh setback for debt-ridden Infrastructure Leasing & Financial Services (IL&FS), rating agency Crisil has downgraded the non-convertible debentures of Jharkhand Road Projects Implementation Company to D or default status.

Jharkhand Road is a subsidiary or a special purpose vehicle (SPV) owned by the IL&FS' group company, IL&FS Transportation Networks. Crisil has warned that this and other projects are likely to stop interest rate payments contrary to the company's previous stance.

IL&FS group has defaulted on debt repayments due to financial mismanagement. The total debt of the group was pegged at Rs 94,215.6 crore as of October 8. The government in October superseded the board of IL&FS and appointed new members to rescue the group.

CNBC-TV18 caught up with Subodh Rai Senior, director at Crisil Ratings; Shardul Shroff, Shardul Amarchand Mangaldas & Co and A Balasubramanian, chief executive officer, Aditya Birla Sun Life AMC to discuss the downgrading of non-convertible debentures of Jharkhand Road Projects Implementation Company.

Shroff said, "The order was passed on October 15, 2018 and it prevented any lender effectively from making any step for foreclosure or enforcement acceleration, premature withdrawal of any term loan, corporate loan, bridge loan, commercial paper, debentures, fixed deposits, guarantees, letters of support against IL&FS and its 348 companies."

"So right from the inception, this is the first order passed by the NCLAT. There is also an order restraining lenders from accessing the properties or recovering anything from the properties of IL&FS group ending the entire restricting of the group or finding out the viability of individual companies. So this is effectively like a suspension order of acceleration from any accounts lying with the creditors," Shroff added.

Rai, said, "There is ample liquidity available, but the key challenge is around the legal issues as NCLAT order actually stops regular debt servicing as well. If the situation changes tomorrow, whether we will be reviewing it? Yes, of course we will be reviewing it and as and when situation changes, as and when we get more clarity on legal issues around this instrument and we will be reviewing this ratings within the boundaries of Sebi guidelines."
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