Fitch rates Tamil Nadu Electricity bonds A(ind)(SO)

Fitch Ratings said it assigned an expected A(ind)(SO) national rating to Tamil Nadu Electricity Board's Rs. 6 billion long-term bond program.

The outlook is stable.

The proposed Rs. 6 billion redeemable non-convertible taxable bond issue is expected to help finance part of the board's business plan and is expected to have a seven/10 year maturity with a put/call option at the end of the fifth/seventh year.

The agency said the issue's rating is based on the unconditional and irrevocable guarantee that the government of Tamil Nadu has extended for meeting the entire principal and interest obligations.

The rating also factors in the proposed tripartite agreement among the board, the Tamil Nadu government and the to-be-appointed bond trustee, Fitch said. The board will open two no-lien accounts: an issue account, where the bond proceeds will be collected, and an escrow account used exclusively for debt service. At least 45 days prior to an upcoming debt service due date, the board will give the details to the government, and the debt service checks will be dispatched to the bondholders at least five working days prior to the due date of payment.

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