India may intervene for interest payment of MTNL's other bonds, bankers say (updated)

Mahanagar Telephone Nigam

15/07/2024 11:23

(Recasts, adds banker comments in paragraphs 4-6)
    By Dharamraj Dhutia
       MUMBAI, July 15 (Reuters) - Indian bond market
participants are expecting the government to help towards the
payout of the interest and principal for Mahanagar Telephone
Nigam Ltd  MTNL.NS  bonds after a guarantee was invoked for one
issue, four merchant bankers said. 
    MTNL had raised 24.80 billion rupees ($296.97 million)
through 10-year government-guaranteed bonds in July 2023, at a
semi-annual coupon of 7.59%. Interest payment of around 941
million rupees from that is due on July 20. 
    The struggling state-run telecom services provider also has
to clear an interest payment of 1.41 billion rupees from other
bonds over the next two months.        
    "Looking at the current state of MTNL, there are no
expectations of improvement in its financial conditions, so
questions arise over future payments," a senior banker said. 
    Other bankers said investor sentiment has turned jittery,
though no one was expecting the government to not honour the
dues. 
    "There is no worry of a sovereign default, but further
issuance of such papers may become a 'rare occurrence," another
banker said.
     All of them requested anonymity, as they are not authorised
to speak to media. MTNL did not respond to a Reuters request for
comment. 
    The bonds are rated AAA (CE) by India Ratings and Careedge
because the interest and principal payment are guaranteed by the
federal government. 
    India Ratings said it will monitor developments as the
"breach of condition of the debenture trustee deed is considered
as event of default."
        MTNL has to put the semi-annual interest in the
third-party escrow account 10 days ahead of due date, according
to the terms of the deal, but it failed to do so. "Due to
insufficient funds, MTNL could not fund the ESCROW Account with
the adequate amount," the company said in a notice to the stock
exchanges last week.
    In case of a default, the government has to transfer the
funds three days before the actual payout date, according to the
agreement.    

($1 = 83.5090 Indian rupees)

 (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami and
Nivedita Bhattacharjee)
 ((Dharamraj.dhutia@tr.com))