ICRA downgrades IL&FS sharply
Moneylife Digital Team 21 January 2019
Rating company has downgraded the debt-laden Infrastructure Leasing and Financial Services (IL&FS) by several notches citing cash crunch pressure. The rating company has downgraded the company’s bonds and long term loans to BB from AA+. "The downgrade of ratings takes into account the increase in liquidity pressure at the group level,” it said in a note on Saturday. 
 
“While the company is in the process to raise Rs8,000 crore of funds from the promoter group (through a mix of rights issue and long term line of credit), timely receipt of the same is important to improve the group’s overall liquidity profile.” 
 
The rating company has sought further clarity on the timing of these inflows and given the sizeable repayment obligations of the group’s debt, this remains a key rating sensitivity in the near term. 
 
IL&FS management met to chalk out plans for immediate fund raising, a key lifeline that will help the company running. It has decided to seek short-term bridge loans of Rs3,000 crore from LIC and the State Bank of India, two existing stakeholders in the group. 
 
ICRA has also downgraded the commercial papers, issued by the IL&FS to A4 from A1+, a significant fall in the grade. CPs are short-term debt instruments. Some small-size mutual fund houses are holding such papers.  IL&FS has also sought to roll over its corporate deposits as it has failed to repay more than three-fourths of one-year term deposits of Rs250 crore.
 
Small Industries and Development Bank of India (SIDBI) has received only Rs50 crore while the remaining Rs200 crore is not yet credited, said a person, who did not wish to be identified. The ratings also consider the company’s elevated debt levels owing to the funding commitments towards group ventures coupled with slow progress on asset monetisation. 
 
The ratings continue to be under watch with developing implications taking into cognizance the Group’s ongoing strategic initiatives for deleveraging its balance sheet and stream lining the portfolio, ICRA said. 
Comments
SURAJIT SOM
3 years ago
It would be interesting to know how much these (mis) rating agencies were paid by IL & FS and its subsidiaries.
G SANTANU KUMAR DORA
3 years ago
What's the point now...every Tom dick and harry already downgraded it....long before.....Rating agencies should have taken the same step when the news started floating....but didn't as there was no fee to be made there..
V.Krishnamoorthy
3 years ago
Is it in order to affix a rating for an institution, when there is a moratorium?
Sreepathid
3 years ago
It's a shame on part of ICRA and CARE. They were cluless . I doubt their own ratings.
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