S&P: India's foreign currency convertible bond issuers face hurdles funding upcoming maturities

By Rebecca Melvin

New York, June 28 - The slowing global economy has derailed the debt repayment plans of many Indian companies that issued foreign currency convertible bonds, or FCCBs, in recent years, and restructuring and other options are being considered now for a raft of maturities in 2012, Standard & Poor's said in recent commentary.

During 2006-2008 the stock market ran up and several Indian companies raised funds through FCCBs, which typically mature in five years and carry low, often 0%, interest rates.

Investors and companies expected India's stocks would continue to run up and that share prices would exceed conversion, and that the convertibles could be paid off in stock and not in cash. But a recession and 30% depreciation of the Indian rupee against the U.S. dollar has depressed share prices.

About half of the 48 companies that have FCCB maturities in 2012 will default, S&P CreditMatters' commentary, "How Accumulation of Foreign Currency Convertible Bond Maturities Will Test Indian Issuers," said.

Only five companies are well placed to take care of their maturities.

Refinancing options are limited and asset sales are not a possibility, S&P said. Among options are either restructuring, granting higher coupons and longer maturities, altering conversion, offering more shares per bond, or making only partial payment.

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