Missed payments could affect ratings: S&P

Standard & Poor's (S&P) today said it was examining the circumstances surrounding the missed interest payments by two public sector companies in December 2004.

The missed payments on bonds issued by Instrumentation Ltd and HMT Ltd had become the direct obligation of the government, the rating agency said.

Hence, "progress in fulfilling these obligations has potential implications for the sovereign's credit rating", S&P said in a statement.

S&P had earlier this month raised India's long-term foreign currency rating one notch up to BB+, which is just below investment grade. The rating agency has expressed concern about the missed payments since India has consistently been running a high level of outstanding government-guaranteed debt.

The rating agency said this translated into a sizeable contingent liability for the sovereign.

High debt level at 81.2 per cent of GDP in 2004, coupled with its extensive contingent liabilities, constitute the key constraining factors for the ratings on India," S&P said in a statement.

While HMT had in mid-January this year made a part payment of Rs 13.17 crore towards the interest obligation on its Bond Series F, it had promised to pay up the balance "shortly". "The balance 50 per cent of the interest amount will be arranged shortly," the company said in a letter to bond holders.