Fitch Ratings has downgraded Tulip Telecom Limited?s national long-term rating to ?Fitch D (ind)? from ?Fitch BB+ (ind)?.
The rating agency has also downgraded Tulip Telecom?s Rs 1.25 billion non-convertible debentures to national long-term ?Fitch C (ind)? from ?Fitch BB+ (ind)?. All the ratings are on Rating Watch Negative (RWN).
The downgrade by Fitch reflects Tulip Telecom?s inability to timely redeem its $ 97 million outstanding foreign currency convertible bonds (FCCBs), which were due for redemption on August 26, 2012, at a premium of 44.506 per cent. Out of the total redemption amount of $ 145 million, it has so far managed to raise only $ 72 million through rupee debt. Additionally, it has also received firm commitments of $ 50 million towards the subscription of a fresh FCCB issuance, subject to the balance amount being deposited through a bank debt into an escrow account initiated specifically for redeeming the existing FCCBs.
The company is in the process of raising the balance amount for redeeming FCCBs and expects to complete the process by September 10, 2012.
Further Tulip Telecom has stated that the recent downgrade to D (ind) by Fitch Rating is not on account of any surveillance of operational performance of the company and is primarily due to extension of timeline beyond its due date to redeem the outstanding FCCB. It claims that the core operations of the company remain robust and profitable.
According to the company, it has commitments of $ 50 million in a fresh FCCB and funds from bank sanctions and internal accruals of $ 72 million, a total of $ 122 million. It plans to raise the balance $ 18 million in a timely manner to pay the FCCB within the time extension sought from investors.
