Posts Tagged: fccb

'20% redemption-due FCCBs to default'

22 February 2012 - 19:25 pm
 

About one-fifth of the USD 7 billion worth FCCBs issued by Indian companies that are due for redemption in 2012 have an “extremely high likelihood” of default, credit ratings agency Fitch has said.

In a report ‘Indian FCCB Redemption in 2012: Quantifying the Problem’ released today, Fitch also said that another 17 per cent of the FCCBs due this year are likely to undergo restructuring.

“… 20 per cent of India’s estimated USD 7 billion FCCBs due for redemption in 2012 have an extremely high likelihood of default. Another 17 per cent of the FCCBs due this year are likely to undergo restructuring, mostly maturity extensions,” it said.

Fitch said that the rest 63 per cent of FCCBs due in 2012 have a high likelihood of redemption. >> Read More

’20% redemption-due FCCBs to default’

22 February 2012 - 19:25 pm
 

About one-fifth of the USD 7 billion worth FCCBs issued by Indian companies that are due for redemption in 2012 have an “extremely high likelihood” of default, credit ratings agency Fitch has said.

In a report ‘Indian FCCB Redemption in 2012: Quantifying the Problem’ released today, Fitch also said that another 17 per cent of the FCCBs due this year are likely to undergo restructuring.

“… 20 per cent of India’s estimated USD 7 billion FCCBs due for redemption in 2012 have an extremely high likelihood of default. Another 17 per cent of the FCCBs due this year are likely to undergo restructuring, mostly maturity extensions,” it said.

Fitch said that the rest 63 per cent of FCCBs due in 2012 have a high likelihood of redemption. >> Read More

 
 
 
Anil Ambani-Befriending The Chinese Bear?

2011 has not been a great year for Anil Ambani.
The companies in his telecom-to-energy conglomerate are sitting on a mountain of debt, a chunk of which is denominated in foreign currencies and is coming up for redemption; three of his executives at Reliance ADAG were implicated in India’s biggest corruption scandal, and he himself had to suffer the ignominy of an informal chat with the CBI; stocks of his companies have been battered down; attempts to sell parts of his business to raise funds to retire debt have not yet fructified; fresh borrowing costs have shot up, and have been compounded by the sharp fall in the rupee in recent months; and, in recent days, he has even been the victim of an anonymous defamation campaign.
About the only good thing to happen to the group was a lessening of tensions with brother Mukesh Ambani, but the vultures were circling overhead anyway.
And just when the perfect storm of bad karma was threatening his empire, Anil has been thrown a lifeline. It comes in the form of a $1.2 billion loan to Reliance Communications (RCom) from three Chinese state-owned banks – the China Development Bank (CDB), the Export Import Bank of China, and the Industrial and Commercial Bank of China (ICBC).
This is, in fact, the second time RCom has borrowed from Chinese banks; last March, Anil borrowed $1.9 billion from the CDB, much of whose proceeds were used to purchase telecom equipment from China’s Huawei Technologies.
According to HSBC, the latest loans will help Reliance Communications cap its interest expenses at 5 percent, compared to the dollar funding cost of 6.8 percent.
Analysts point out that this is a really, really big deal – not just for Reliance, but also for other Indian corporates, since they too face redemptions on their foreign currency convertible bonds (FCCB), and would have been slammed if Reliance hadn’t been able to secure the finance.
Raj Kothari, a convertible trader based in London, told Bloomberg that “If Reliance Communications had defaulted, the whole Indian convertible market would have collapsed”.
Juergen Maier, a fund manager at Raiffeisen Capital Management, noted that “without the Chinese, they (Reliance) would have been in big trouble.. The Chinese are the last lenders left…”
What’s in it for the Chinese? >> Read More

RBI raises FCCB limit to $750 mn

05 January 2012 - 23:35 pm
 

RBI today raised the annual limit of Foreign Currency Convertible Bonds (FCCBs) for companies to USD 750 million under the automatic route, which does not require prior permission from it. 

The limit, up from USD 500 million in a fiscal year, will not only help Indian corporate across all segments access higher quantum of overseas funds but also encourage greater inflow of foreign exchange. 

“…eligible borrowers under the automatic route can raise FCCBs up to USD 750 million or equivalent per financial year for permissible end-uses,” the Reserve Bank said in a circular.  >> Read More

Tata Motors’ CDS spread widens

09 June 2011 - 10:29 am
 

Three Consecutive close below 1027 will take to 980-965 level very soon.

Mumbai: The spread on Tata Motors Ltd’s credit default swaps (CDS) has been widening in the past one month, indicating worsening investor perception about the firm’s ability to service its debt, even as the UK unit JaguarLand Rover (JLR) helped India’s largest auto maker by revenue post strong earnings for fiscal 2011.

The instrument is insurance bought by bond investors. In case the issuer defaults on payments, the insurer pays the investor. The insurance premium, known as spread, is independently traded in the market. Globally, the outstanding CDS being traded is close to $70 trillion (Rs. 3,122 trillion).

An increase in CDS spreads is “not representative of a rise in international investors’ risk perception about Tata Motors”, company spokesperson Debasis Ray said in an email to Mint.

Tata Motors’ CDS are not traded on the exchanges and thus do not have enough volume, making them vulnerable to demand-supply mismatches and the widening of spreads, Ray added. >> Read More

FCCB – Boon or Bane

02 June 2011 - 21:40 pm
 

The Indian Context

 Foreign currency convertible bonds (FCCBs) worth Rs 315 billion ($7 billion) are due for redemption over the next 2 years for S&P CNX 500 companies. 

Of these, FCCBs worth Rs 220-240 billion (almost 80% of the total outstanding FCCB’s) may not get converted into equity shares or see a downward revision in their conversion price, based on the analysis of the capital structure, promoter holding, parent company support, profitability and cash flows., as the current stock prices of issuing companies are significantly below their conversion prices.

Implications

 Refinancing FCCBs with fresh debt will increase the interest burden of companies as most of the FCCBs carry very low or zero coupon rate. Companies that revise their conversion price downwards could witness a sharp dilution in their equity, which will lead to further decline in their share prices. This would further stretch the company’s balance sheet.  >> Read More

 

Leading research firm Crisil has warned that the continuing fall in the equity markets will put tremendous pressure on India Inc to redeem their FCCBs worth around Rs 24,000 crore.  

“Around Rs 22,000-24,000 crore worth of foreign currency convertible bonds (FCCBs) are unlikely to get converted to equity shares out of the Rs 31,500 crore worth instruments issued by domestic companies, as the present stock prices of these issuing companies are significantly below their conversion prices. These are nearing their maturities by March 2013,” Crisil Research said in a note today. Over 80 per cent of the Rs 31,500-crore FCCBs, which work out to be around Rs 24,000 crore, issued by the S&P CNX 500 and BSE 500 firms are trailing below their conversion prices (as on May 3, 2011), possibly resulting in investors opting for redemption of their bonds rather than converting them into equities, it warned.  >> Read More

Reader Discretion & Risk Disclaimer

Our site is objectively in letter and spirit, based on pure Technical Analysis. All other content(s), viz., International News, Indian Business News, Investment Psychology, Cartoons, Caricatures, etc are all to give additional ambiance and make the reader more enlightening. As the markets are super dynamic by very nature, you are assumed to be exercising discretion and constraint as per your emotional, financial and other resources. This blog will never ever create rumors or have any intention for bad propaganda. We report rumors and hear-say but never create the same. This is for your information and assessment. For more information please read our Risk Disclaimer and Terms of Use.

Technically Yours,
Team ASR,
Baroda, India.