About 67 per cent of $1.51 billion-worth foreign currency convertible bonds (FCCB) that are due for redemption in this fiscal are likely to default or restructure by majority of issuers, a report has said.
According to India Ratings, a Fitch group company, up to March 2013, FCCB redemption amount of USD 1.51 billion belonging to 23 companies is due, out of which around 67 per cent of the outstanding dues belonging to 17 companies are
unlikely to be redeemed on time.
"Of the USD 1.5 billion worth of FCCBs due for redemption for the rest of FY13, around 67 per cent are expected to either default or restructure," the report said.
During March 1 to October 15, 19 companies successfully redeemed FCCB, of which only five companies had used any internal accruals. The remaining 14 companies used foreign currency loans or domestic loans or fresh FCCB issuance to redeem the outstanding FCCB.
Of the 26 companies which defaulted on FCCBs on due date, three companies redeemed FCCBs post due date. These three companies are Suzlon Energy, KSL & Industries, and Hotel LeelaVenture Ltd.
Meanwhile, investors in four companies converted FCCB into equity at a conversion price much lower than the original conversion price.
Of these four companies, three companies namely Surana Industries Ltd, Kamat Hotels India Ltd and Grabal Alok Impex Ltd (now merged with Alok Industries Ltd), converted FCCB into equity prior to due date. However, for 3i Infotech the
conversion into equity happened after the FCCB due date.
Redemption is still due for 19 companies which had defaulted on FCCBs, the report said.