Standard & Poor’s Ratings Services has lowered the credit rating on India’s largest private lender ICICI Bank’s $375 million commercial paper programme to ‘A-1’ from ‘A-1+’. The short-term debt instrument issued by ICICI Bank is supported by an irrevocable letter of credit furnished Bank of America N.A. (BofA).
This action follows its downgrade of the counterparty credit ratings on BofA to A+/Negative/A-1 from AA-/Negative/A-1+, S&P said in a statement. In case the issuer defaults, the commercial paper investors will be paid directly by BofA on the maturity dates.
As a result, the commercial papers bear the credit risk of BofA and carry a rating equivalent to the short-term counterparty credit rating on BofA. This commercial paper has a maximum tenor of 360 days and proceeds from this issue are expected to be used for general corporate purposes. The letter of credit issued by BofA is set to expire on September 30.
On May 17, 2008, S&P’s domestic arm Crisil had downgraded ICICI Bank’s securitised commercial vehicle loan pool worth over Rs 82 crore from “AA- (so)” to “BBB+ (so)” due to a drop in collections from repayments.
That followed an April downgrade of the private sector bank’s securitised car and personal loan pool worth over Rs 203 crore due to rising defaults on payments by borrowers. The BofA-backed US commercial paper was the second of its kind to be issued by ICICI Bank. The first was a $300 million US commercial paper backed by Fortis Bank.
