Jain Irrigation Systems cut to 'selective default' by S&P Global Ratings

Jain Irrigation Systems has been cut to “selective default” by S&P Global Ratings, as more cracks emerge in the country’s offshore junk bond market.

The company missed certain principal payments under its working capital facilities and S&P sees a “high likelihood” that the firm would be classified as a nonperforming asset by its bankers. A selective default means S&P believes a firm has defaulted on a specific issue but will meet its other obligations.

“In our view, there is a significant likelihood that Jain Irrigation’s liquidity crunch would spread to its international business, leading to a default on its US dollar bonds as well,” S&P said in a statement.

Jain Irrigation hasn’t received any recall notices from its dollar bondholders, a representative said in an email reply to a Bloomberg News query. Advisory firm Brescon & Allied Partners LLP has been appointed the restructuring consultant by the lenders and the firm will honor its financial obligation toward its bondholders on the due date, the company said.

Delayed collection of government receivables and erratic monsoons in India continue to stress Jain Irrigation’s cash flows, according to S&P. 

The company’s financial stumble comes after a unit of Reliance Communications filed for bankruptcy protection last month, as a funding crunch due to turmoil in the shadow banking system 

sours sentiment in the country’s debt market.