In a report titled 'Pile-up of Indian foreign currency convertible bond maturities will test issuers and investors', S&P said the likely additional interest payout of USD 700 million arises from the steep fall in their stock valuations since the time of debt issuance and the fall in rupee.
These companies had issued these foreign currency convertible bonds (FCCBs) between 2006 and 2008 (and mostly in 2007), before the Lehman fall when the stock prices where at record high, and the rupee was trading at 48 to the dollar. Most of these bonds are denominated in the US dollar and hence the mounting worries.
"A tepid global economy has slowed FCCB issuers' revenue and profit growth, dragged down their stock prices, and left them less able to service debt," said S&P credit analyst Vishal Kulkarni in a teleconference today.
The report said the recent rupee fall has added to the woes. Most of the FCCBs that mature in 2012 were issued in 2007-08, when the rupee was at about 42 to a dollar. The rupee has lost more than 30 per cent against the American currency since then.
"This would add about USD 2 billion to the value of FCCB maturities in 2012," said the rating agency.
Terming this debt as a "nightmare" for some of these companies, the report said the deep slump in stock markets globally and the fall in the value of the rupee against the US dollar over the past two years are hurting these companies.
