MTNL deposits bond interest payout after government guarantee invocation

Mahanagar Telephone Nigam

17/07/2024 08:58

MUMBAI, July 17 (Reuters) - India's Mahanagar Telephone
Nigam Ltd (MTNL)  MTNL.NS  has made the requisite payment due to
be paid to its bondholders later this week, the state-run
telecom operator informed the exchanges on Wednesday.
    MTNL had to deposit the interest for the semi-annual 7.59%,
July 2034 bonds in the third-party escrow account 10 days ahead
of the due date, according to the terms of the bond issue, but
it failed to do so.
    As a result, the government guarantee was invoked in what is
likely the first such case, according to merchant bankers.
    The struggling state-run company had received 936 million
rupees ($11.21 million) from the government for the interest
payment as per the guarantee agreement for the bonds, as it did
not have sufficient funds for the payout.
    Due to the invocation of the guarantee, the government had
to transfer the funds three days before the actual payout date.
    "There was not much of a concern of default but possibly the
communication could have been better and done in advance. It
seems like the government may have wanted to react as per the
sequence of the payment structure," a merchant banker said
requesting anonymity.
    The bonds are rated AAA (CE) by India Ratings and Careedge
because the interest and principal payment are guaranteed by the
federal government. 
    Indian bond market participants are also expecting the
government to help towards other upcoming interest and principal
payments for MTNL bonds. 
    The struggling state-run telecom services provider has to
clear an interest payment of 1.4 billion rupees from other bonds
over the next two months.
    
($1 = 83.5330 Indian rupees)

 (Reporting by Bhakti Tambe and Dharamraj Dhutia; Editing by
Janane Venkatraman
)
 ((Bhakti.Tambe@thomsonreuters.com))