By Umesh Desai
HONG KONG (Reuters) - Rolta India Ltd bondholders are forming a group to negotiate a debt restructuring after the software services provider failed to make interest payments, according to a document seen by Reuters on Friday.
Rolta, whose biggest customer is the Indian government, said late on Friday its management was working on "addressing the overall situation in a comprehensive manner", blaming the cash crunch on significant expenses on a defence project and delays in payment collections.
Rolta failed to make a coupon payment on its $126 million 2018 bonds due last month and whose grace period expired this week. It had earlier failed to make payments on a $35 million loan.
It is now scheduled to pay the coupon on its $300 million 2019 notes on July 24. Both notes due 2018 and 2019 are trading at distressed levels of 16/18 cents on the dollar.
More than 25 percent of the holders of the two bonds have agreed to join the group being organised by Investment bank Houlihan Lokey and law firm Ropes & Gray, according to one source familiar with the formation of the group.
Rolta said in a stock exchange filing its management was working with banks and strategic advisors.
"The aim is to arrive at an acceptable solution in the interest of all stakeholders and the company will be informing all stakeholders at the earliest possible opportunity and is committed to finding a viable resolution," it said.
On Thursday, Fitch said delays in payments by the Indian government, along with banks' reluctance to lend, had triggered a severe liquidity crunch at Rolta.
The agency estimated that more than 45 percent of Rolta's 2015 revenue of $560 million was related to the Indian government, mainly for defence services.
It said Rolta's receivables as at end-March 2016 had increased substantially to $288 million, or about 190 days of its revenue, from 126 days a year earlier.Banks' reluctance to lend to Rolta comes at a time when India is taking measures to clean up a banking system weighed down by $121 billion of bad debt.
Fitch cut Rolta's rating to RD or restricted default, from CC, and S&P Global lowered its rating to SD, or selective default, from CCC-minus, due to missed interest payments.
Restricted default indicates there has been a failed payment but the company is yet to file for bankruptcy. A selective default indicates default on a specific issue or class of obligations but the borrower is expected to continue meeting its other payment obligations in a timely manner.
(Reporting by Umesh Desai; Aditional reporting by Devidutta Tripathy in Mumbai; Editing by Simon Cameron-Moore and Susan Fenton)
