CRISIL downgrades AP Power Transmission Corp's bonds to default

Bonds carry guarantees from state government

CRISIL has downgraded its rating on bonds by Transmission Corporation of Andhra Pradesh Ltd (AP TRANSCO) to "D" default garde from "BB" for delay in servicing debt.

The bonds guaranteed by the state government have been put on ‘rating watch with negative implications'.

Post the bifurcation of states — Andhra Pradesh and Telangana — the matter of sharing of liabilities of AP TRANSCO has been under discussion with both states for some time now.

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Concerns of a likely dispute has heightened due to the possibility of differing stance being taken by the state governments on the sharing formula, CRISIL said in a statement.

CRISIL has been anticipating a likely dispute among the transmission corporations of Andhra Pradesh (AP) and Telangana. Going forward, it will continue to monitor the bifurcation of assets and liabilities between the two states. 

Following the continuing disputes about distribution of assets and liabilities, the interest payment on some bonds were not made in full by AP TRANSCO on the due date.

The downgrade also factors in the failure of the payment structure and the inability of the trustee to ensure adherence to the trustee-administered payment structure (non-invocation of guarantee).

In a similar case of Andhra Pradesh Power Finance Corporation (rated 'CRISIL D'), similar dispute and non-compliance on the payment structure (including non-invocation of guarantee) by the trustee had led to payment shortfall and delays in debt servicing on bonds, it added.