Debt servicing to be delayed due to rating downgrade by CARE last year: RCap

New Delhi: Reliance Capital (RCap) will not be able to service its debt in a timely manner following downgrading of its bond programme by CARE Ratings, which triggered an accelerated repayment which otherwise was to take place in a phased manner over eight years, the company said.

RCap, in a regulatory filing last night with regard to disclosure on payment of interest/principal on Non-Convertible Debentures (NCDs) said, it is unable to proceed with asset monetisation, and thus there will be a delay in repayment.

In September 2019, CARE Ratings had downgraded the Anil Ambani-controlled RCap's entire outstanding debt programme to default "CARE D" rating, which the company had objected to, calling it "completely biased, unwarranted and unjustified rating action".

CARE had downgraded RCap's long-term debt programme, market linked debentures and subordinated debt due to delay in payment of interest.

On September 21, a day after the rating action, RCap had said the rating agency's action was unwarranted as there was no overdue on principal or interest payment to any lender.

Further on October 11, 2019, it had said that "this rating downgrade has initiated acceleration of various facilities and consequential demands for immediate payment of amounts that were otherwise due and payable in a phased manner over the next 8 years till March 2028, as per the original terms of debt".

"It is expected that the debt servicing of the company in relation to the accelerated amounts and otherwise will be delayed," Reliance Capital said in the filing on Saturday.

Further, the company is prohibited to dispose off, alienate, encumber either directly or indirectly or otherwise part with the possession of any assets, pursuant to November 20, 2019 order passed by the Delhi High Court, it said.

The Delhi High Court in a matter had passed an order placing restrictions on any sale, disposal or creation of any encumbrance on any assets of RCap, which also included it's 4.28 per cent shareholding in Reliance Nippon Life Asset Management Ltd.

The company is also prohibited from transferring, alienating, encumbering or otherwise parting with the possession of assets owned by the company pursuant to proceedings initiated by Vistra ITCL (India) Limited, the Debts Recovery Tribunal vide its order dated December 3, 2019, the filing said.

Vistra ITCL (India) is a debenture trustee and the matter related to failure on part of RCap to provide certain information and clarification of its financial status, availability of security covered, non-alienization of the subsidiary business, among others.

"In view of the above the company is unable to proceed with its asset monetization resulting in delay in its debt servicing of the interest/principal obligations due on June 20, 2020 with respect to the Non-Convertible Debenture," RCap said in the filing.

On Friday, the company had informed about defaulting on interest payment of Rs 4.77 crore to HDFC Ltd and Rs 0.71 crore to Axis Bank. The defaults were dated May 31, 2020.

The company had said it had secured term loans of Rs 523.98 crore from mortgage lender HDFC Ltd and of Rs 100.63 crore from Axis Bank.

The total amount of outstanding borrowings (from these two lenders) stood at Rs 662.99 crore, including accrued interest up to May 31, 2020, it added.

RCap's total financial indebtedness including short-term and long-term debt was Rs 19,380.70 crore, including accrued interest up to May 31, 2020.