Reliance Nippon Life AMC to side-pocket NCDs of Reliance Capital

International News

Reliance Nippon Life AMC (RNam) has decided to use the side-pocket mechanism to separate its schemes’ exposures to non-convertible debentures (NCDs) of Reliance Capital (RCap) after the latter's long-term rating was downgraded to ‘D’ or default category by CARE Ratings on Friday.
“The debenture trustee for these NCDs has informed CARE (via its email dated September 11, 2019) that RCap has delayed the payment of coupon on these NCDs by one working day and paid the same on September 11, 2019. This constitutes an event of default as per CARE’s default recognition policy,” RNam’s note read.
Reliance Equity Hybrid Fund’s exposure to RCap’s NCDs stood at Rs 34.6 crore (at face value), while Reliance Equity Savings Fund’s exposure to the NCDs stood at Rs 95.7 crore. Fresh subscriptions in these schemes have been suspended for now.
Both the schemes are currently in midst of a 30-day load-free exit window given to investors, which is one of the regulatory provisions before any scheme can use the mechanism.Separate portfolios holding RCap’s NCDs will get immediately carved out after this exit window ends on September 24.RNam said it had received the trustees’ approval to create the separate portfolio.
While subscription and redemption will be suspended in these portfolios, these portfolios will be listed on the exchanges within ten working days of creating of the side-pockets to give an exit option to the unitholders.

In exchange disclosure, RCap has called CARE’s rating action as unjustified, saying that the dues were settled on the next working day and couldn’t be processed on the due date (September 9) on account of technical glitch in bank servers....Read More

Cox & Kings shares have declined 26% since credit rating downgrade

Company News
Shares of tour operator Cox & Kings have slipped 26 per cent since Friday, following a credit rating downgrade which highlighted delays in debt reduction and increase in receivables.
The stock declined 9.9 per cent on Wednesday to close at Rs 45 on the BSE after Brickwork Ratings downgraded rating of the company’s Rs 50-crore non-convertible debentures or NCDs, while retaining its commercial paper rating for Rs 2,060 crore.
On June 17, CARE Ratings had downgraded its rating. On a year-to-date basis, the stock is down 73 per cent.
Cox & Kings, which runs tours and hotels business in India and overseas, has been downsizing its operations since the last few years to pare debt.
Last October, the company sold its education tour business in Europe to Midlothian Capital Partners for an enterprise valuation of Rs 4,380 crore and used the proceeds for debt reduction.
Cox & Kings shares decline 26% following credit rating downgrade
However, lower-than-anticipated debt reduction and increase in receivables have worried investors. An industry source said Cox & Kings has been delaying salaries to its employees for the last few months. The firm’s suppliers, too, have become cautious on extending credit to the firm over fears of default.

 “Total debt of Cox & Kings in FY19 stood at Rs 3,238 crore, against Rs 4,014 crore in FY18. Sale of the education business has enabled the company to reduce debt to a certain extent. The firm has envisaged another monetisation of an overseas asset by the end of calendar year 2019 to pare debt. Timely asset sale and consequent reduction in debt will remain a key rating monitorable,” CARE Ratings said in its report, downgrading the company debt.