Fitch sees 20% of $7 b FCCB redemptions falling this year

Nearly 20 per cent of the country’s estimated US$ 7 billion foreign currency convertible bonds (FCCBs), due for redemption this year, have an extremely high likelihood of default, Fitch Ratings said in a report.

Another 17 per cent of the FCCBs, due this year, are likely to undergo restructuring (mostly maturity extensions), says the report, adding that the rest 63 per cent have a high likelihood of redemption.

Fitch studied 59 companies whose FCCBs are due in 2012. The companies were divided into four broad groups with respect to FCCB redemption possibilities, namely, likely to redeem, likely to restructure, likely to restructure with significant distressed debt exchange features, and default/imminent default with low recovery.

The report says of the 31 corporates in the ‘likely to redeem’ category, five are better-placed to redeem their FCCBs using a financing option of their choice, while the remaining 26 companies have a relatively weaker financial profile, but would still be able to access low-cost ECB funding or even high-cost domestic debt.