Sebi modifies ratings withdrawal norms

Credit rating agencies can downgrade the rating assigned to firms or instruments to non-investment grade with issuer not cooperating (INC) status, if an issuer has all the outstanding ratings as non-cooperative for over 6 months, regulator Sebi on Friday.

If non-cooperation by the issuer continues for another six months from the date of downgrade to non-investment grade, no new ratings to such issuer should be assigned until it resumes cooperation or rating is withdrawn, the regulator said in a fresh guideline on 'issuer not cooperating' (INC) ratings.

The new guidelines will come into effect from July 01, 2020, Sebi said.

The regulator also modified norms with respect to withdrawal of ratings assigned to an instrument.

In case of multiple ratings on an instrument, where there is no regulatory mandate for it, a credit rating agency (CRA) may withdraw a rating within stipulated time under certain conditions.

Laying down the conditions, Sebi said that the CRA should have rated the instrument continuously for 3 years or for 50 per cent of the tenure of the instrument, whichever is higher.

Additionally, the CRA must have received no-objection certificate from 75 per cent of bond holders of the outstanding debt for withdrawal of rating and received an undertaking from the issuer that another rating is available on that instrument, it added.

Further, at the time of withdrawal, the CRA should assign a rating to such instrument and issue a press release in the prescribed format mentioning the reason for withdrawal of rating.

These norms will be applicable with immediate effect, Sebi noted.