Don't consider repayment delays as default: Sebi to credit rating agencies

The market regulator, Sebi, asked the rating agencies on Monday not to consider as default any delay in the payment of interest or the amount of the main loan due solely to the blocking conditions at the national level.

The move follows a three-month moratorium on payments authorized by the Reserve Bank of India to ease the burden of debt service due to the disruption caused by the coronavirus pandemic and to ensure the continuity of viable operations.

In a circular, the Securities and Exchange Board of India (Sebi) stated that differentiation in the treatment of default, on a case-by-case basis, must be made as to whether such a default has occurred solely because of the freeze or the moratorium on loans.

“Based on its assessment, if the credit rating agency (CRA) is of the opinion that the delay in the payment of interest or principal is due only to the blocking conditions creating temporary operational problems in the service of debt, including due to procedural delays in approving the moratorium on loans from credit institutions, the CRA may not view the same as a default event, “said Sebi.

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This will also apply to any rescheduling of debt payments made by the issuer, before the due date, with the approval of investors or lenders, he added.

The relaxation was extended until the moratorium period granted by the RBI.

In addition, the regulator has also relaxed rating agencies for certain disclosure requirements.

As credit rating agencies depend on issuers and third parties for the collection of information that could be compromised due to the current foreclosure, Sebi has relaxed the timelines for rating actions or the publication of a press release by rating agencies.

However, rating agencies should strive to complete the exercise as well as possible. These cases will be submitted for ratification to the rating subcommittee of the rating agencies’ boards of directors.

In addition, a 30-day extension has been granted for annual and semi-annual disclosure by credit rating agencies on their websites for the periods ending March 31, 2020.

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