As many as 17 of 23 companies, holding foreign currency convertible bonds (FCCBs) worth $1.51 billion maturing by March 2013, are unlikely to redeem them on time, a new report says.
“For the remaining period of this fiscal, FCCBs worth $1.51 billion belonging to 23 companies are due. We expect that 67 per cent of the outstanding dues belonging to 17 companies are unlikely to be redeemed on time. These may be restructured or go into outright default,” India Ratings said in a report here.
FCCBs or convertible bonds issued in a foreign currency are a mix of debt and equity. Redeeming the bonds are likely to be hard for most FCCB issuers due to limited access to funds, higher borrowing rates for external commercial borrowings and loans from domestic commercial banks, it said.
In line with expectation, as many as 66.5 per cent of FCCBs maturing between March 1 and October 15, 2012 from 19 companies were redeemed on time. Three companies (8.9 per cent) redeemed their dues fully, though within two months after the due date, the report said.
During the same period, FCCBs worth $6 billion belonging to 45 firms had matured, it added.
The report noted that three FCCB issuers redeemed their dues post due date.
Another four companies converted FCCBs into equities at a much lower rate.
Of the 19 companies which successfully redeemed FCCBs, only five had used internal accruals. The remaining 14 had used foreign currency or rupee loans or even fresh FCCBs for redemption, the report said.