MUMBAI: HIGHLIGHTS CARE Ratings has downgraded businessman Anil Ambani-led Reliance Home Finance's long-term debt programme, market-linked debentures, subordinated debt, non-convertible debentures (NCDs) and upper tier-11 NCDs to ''D''. CARE said the action is primarily due to delay in servicing of principal on one of the NCDs.
Reliance Home Finance said the rating action is "untimely and uncalled for". Reliance Home Finance said its lenders have entered into an inter-creditor agreement for arriving at the debt resolution plan in accordance with the June 7 circular issued by the Reserve Bank of India on prudential framework for resolution of stressed assets. The company has been directed by lenders led by the lead bank to keep servicing only the interest obligation across all lenders. Debt servicing towards principal repayment irrespective of type of facility is to be made on parity.
"The company considers the above rating action untimely and uncalled for, specifically since it is working on the resolution plan," Reliance Home Finance said in a statement. In June, Reliance Home Finance had said that maturity of certain NCDs of Rs. 400 crore had been extended till October-end in view of the continuing severe liquidity crisis in the sector. The decision has formal written consent of the concerned debenture trustees and NCD holders. NCDs are fixed-income instruments which cannot be converted into shares or equities.
Extension of maturities by mutual consent is a recognised global practice to deal with severe dislocations in capital markets and does not constitute a default. "Reliance Housing Finance has already monetised over Rs. 5,000 crore of retail assets and will continue to do so to meet its debt servicing obligations," it said. COMMENT: The company said that housing finance sector is dealing with an extraordinary situation where all categories of lenders in the country have completely frozen new lending to private sector companies for nine long months, leading to a severe adverse impact on economic growth and a potential systemic threat to the stability of Indian financial system.
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