Anil Ambani's Reliance group downgrade spells more trouble for debt funds

Our Bureau Mumbai | Updated on April 28, 2019

CARE Ratings has now downgraded long-term bank facilities worth ₹12,700 crore from BBB+ to D

In less than 10 days of downgrading three Anil Ambani-led Reliance Group companies — Reliance Commercial Finance (RCFL), Reliance Capital (RCL) and Reliance Home Finance (RHFL) — CARE Ratings has now downgraded long-term bank facilities worth ₹12,700 crore of Reliance Commercial Finance from CARE BBB+ to Care D.

According to CARE Ratings, a rating of ‘D’ means instruments in this category are either in default or expected to soon be in default. The ratings agency also downgraded another ₹5,000 crore worth debt of Reliance Commercial Finance to CARE C from BBB+.

Many debt-oriented mutual fund schemes have exposure to the papers issued by the Reliance ADAG group.

A Reliance Mutual fund spokesperson said the fund house has an exposure of ₹535 crore and ₹1,083 crore to long-term non-convertible debentures by RCFL and RHFL respectively. These exposures are held in only roughly 10 per cent of Reliance Mutual Fund’s total 166 fixed income and hybrid schemes.

The managements of the above issuer companies have stated their intent to service all capital market and other loan obligations in a timely manner on the respective due dates, through fast track asset securitisation and monetisation, he added.

Meanwhile, he said that until these instruments mature and in line with SEBI’s regulations, there will be a mark-to-market valuation impact on the above revised valuation provided by independent agencies, with corresponding impact on the net asset values of the schemes holding these investments.

RMF also holds ₹205 crore in secured long-term non-convertible debentures of RCL, which continue to be rated as investment grade “A” by CARE and A plus by Brickworks. There will no impact on these instruments, he added.

Published on April 28, 2019

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