CARE scales down HMT

Domestic credit rating agency CARE today downgraded the rating assigned to the long-term and medium term bond issues of HMT.

The public sector undertaking's Rs 310-crore long term bond issue (guaranteed by Government of India) has been downgraded from 'CARE AAA (SO)' to 'CARE BB (SO)'.

Its Rs 40.4-crore medium term bond issue has also been downgraded from 'CARE AAA (SO)' to 'CARE BB (SO)', despite the central government guarantee.

The downgrading implies that the instruments are of speculative grade, with inadequate protection for interest and principal payments.

CARE in a statement said that the initial ratings were based on an unconditional and irrevocable guarantee from Government of India (GoI), supported by a structured payment mechanism to ensure timely servicing.

"The downgrade takes into account persistent delays in servicing the interest payment obligations in respect of the long term bonds, despite invocation of the GoI guarantee by the Trustees well in advance," it added.

The other domestic rating agency Icra had put HMT's bond issues under rating watch with negative implications last year.

Instrumentation Ltd's bond issue, which was earlier rated triple A (SO) by Crisil, had already been downgraded to 'D', implying default on December 31. This followed the delay in interest payment due.

The machine tools manufacturer is understood to have sought government permission to meet the balance interest payments through surplus funds, source stated.

The Centre has yet to get back to the company.