Chairman of Securities and Exchange Board of India (Sebi) Ajay Tyagi on Wednesday said that the delayed downgrade of firms that have defaulted on loans by credit rating agencies (CRAs) is a “matter of concern” and the regulator is going to bring a regulatory framework for credit rating agencies to prevent such incidents in future.
“It is a matter of concern and we working on a paper there too on rules and regulatory framework for credit rating agencies and we are trying to come out with it in near future for consultation. That’s an area of concern including in fact CRAs and debenture trustees,” said Tyagi.
According to reports, the regulator has questioned the rating agencies on their failure to flag the loan default of Reliance Communications (RCom). Sebi wants to know whether investors could have been alerted and rating actions on RCom could have been initiated earlier.
RCom had defaulted on a non-convertible debenture installment of Rs 375 crore, which was due on February 7. However, the agencies didn’t take any action until May 27, when the firm admitted in its quarterly earnings that it had defaulted on an installment. Subsequently, on June 2, lenders of RCom decided to invoke strategic debt restructuring and gave a deadline till December 2017 for debt reduction to the firm.
RCom chairman Ambani said the firm plans to sell part of its wireless and tower business by September 2017. In 2015, a few agencies had failed to monitor the quality of Amtek Auto’s bonds and the quality of JP Morgan’s bond fund’s holdings — and brought on a redemption crisis in August 2015 when Amtek Auto was on the verge of defaulting on Rs 800 crore of bond repayments. A similar thing happened with Jindal Steel and Power (JSPL) last year.