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Strategy
India convertibles
FCCBs – relief at a crucial juncture. Clouds begin to clear over the Indian convertibles
space as its largest FCCB issuance (RCOM) has been refinanced through a consortium
of Chinese banks. The concerns regarding the repayment ability of larger Indian issuers
may begin to ease as the biggest worry of the ‘redemption season’ has been adeptly
handled. Having said this, dark clouds will continue to loom over the weaker issuers as
another US$5.8 bn needs to be repaid or refinanced in CY2012E alone.
RCOM paves the way forward – Chinese banks to the rescue
RCOM announced recently that it has tied refinancing for its FCCB obligation worth US$1.18 bn
maturing on March 1, 2012. As per the company, the refinancing is being funded by ICBC, CDB,
EXIM, among others with an extended loan maturity of seven years and an attractive interest cost
of 5%. Being the largest FCCB in the Indian space, RCOM’s refinancing ability has been expected
to give insights on the ability of larger Indian issuers to pay off their upcoming redemptions.
Having done so successfully, concerns regarding the borrowing ability of large Indian issuers
through the ECB route have been put at ease.
FCCB landscape – redemptions worth US$5.8 bn in CY2012E still left
Although the average FCCB yields have declined from their highs, they still remain at ~19-20%
even as the Rupee has risen from its record lows. FCCB redemptions are expected to be US$5.8 bn
in CY2012E alone even after excluding the refinanced obligations of RCOM and Orchid Chemicals.
While a failed FCCB buyback for Welspun Corp. could be considered positive in terms of its
implied credit risk, a delay in repayments by Assam Co. may be an indicator of an impending
default on its part. While SUEL continues to yield in excess of 40% for many of its tranches,
Vedanta Group companies like Sesa Goa and Sterlite have witnessed yields fall from 14-15% to
10-12% in January.
Weaker issuers continue to imply a high probability of default
The convertible yields for the likes of Subex, Moser Baer, Sterling Biotech and 3i Infotech are
implying a high probability of default, indicating that concerns regarding these weaker issuers
continue to persist.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strategy
India convertibles
FCCBs – relief at a crucial juncture. Clouds begin to clear over the Indian convertibles
space as its largest FCCB issuance (RCOM) has been refinanced through a consortium
of Chinese banks. The concerns regarding the repayment ability of larger Indian issuers
may begin to ease as the biggest worry of the ‘redemption season’ has been adeptly
handled. Having said this, dark clouds will continue to loom over the weaker issuers as
another US$5.8 bn needs to be repaid or refinanced in CY2012E alone.
RCOM paves the way forward – Chinese banks to the rescue
RCOM announced recently that it has tied refinancing for its FCCB obligation worth US$1.18 bn
maturing on March 1, 2012. As per the company, the refinancing is being funded by ICBC, CDB,
EXIM, among others with an extended loan maturity of seven years and an attractive interest cost
of 5%. Being the largest FCCB in the Indian space, RCOM’s refinancing ability has been expected
to give insights on the ability of larger Indian issuers to pay off their upcoming redemptions.
Having done so successfully, concerns regarding the borrowing ability of large Indian issuers
through the ECB route have been put at ease.
FCCB landscape – redemptions worth US$5.8 bn in CY2012E still left
Although the average FCCB yields have declined from their highs, they still remain at ~19-20%
even as the Rupee has risen from its record lows. FCCB redemptions are expected to be US$5.8 bn
in CY2012E alone even after excluding the refinanced obligations of RCOM and Orchid Chemicals.
While a failed FCCB buyback for Welspun Corp. could be considered positive in terms of its
implied credit risk, a delay in repayments by Assam Co. may be an indicator of an impending
default on its part. While SUEL continues to yield in excess of 40% for many of its tranches,
Vedanta Group companies like Sesa Goa and Sterlite have witnessed yields fall from 14-15% to
10-12% in January.
Weaker issuers continue to imply a high probability of default
The convertible yields for the likes of Subex, Moser Baer, Sterling Biotech and 3i Infotech are
implying a high probability of default, indicating that concerns regarding these weaker issuers
continue to persist.
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