Fitch study shows 20% of India foreign-currency convertibles due in 2012 likely to default

By E. Janene Geiss

Philadelphia, Feb. 22 - A new report by Fitch Ratings reveals that 20% of India's estimated $7 billion of foreign-currency convertible bonds due for redemption in 2012 have an extremely high likelihood of default.

Another 17% of the convertibles due this year are likely to undergo restructuring with mostly maturity extensions, the report said.

The 63% of remaining foreign-currency convertibles have a high likelihood of redemption, Fitch said.

Fitch said it studied 59 companies whose foreign-currency convertibles are due in 2012.

Of the 19 companies found to have a high likelihood of default on their convertible payments, at least eight have already defaulted in other debt obligations, the agency said.

Given these companies' significantly weakened cash flow, unsustainable debt levels and existing default status, the prospect of recovery actions by domestic lenders against a number of these companies is high, Fitch said.

In the event of default on a foreign-currency convertible payment, the recovery may be low given their unsecured nature, the agency added.

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