Govt deposits Rs 92 cr to clear immediate bond interest dues of MTNL

The government has stepped in to make a Rs 92 crore payment towards bond dues of MTNL, a government source said, adding that another Rs 64 crore would also be paid in coming days towards interest obligations that are slated to become due in August.

The helping hand from the government is significant as it averts a crisis-like situation for the telecom corporation which has been teetering on the brink with regard to its debt obligations, particularly in this case government-guaranteed bonds. Last week, the debt-laden firm had expressed its inability to make interest payments to certain bondholders due to paucity of funds.

The government sources said Rs 92 crore is being deposited in an escrow account for payment towards interest on bond dues. Another Rs 64 crore would be paid later this month to clear interest dues that slated to come up in August, sources said.

The second semi-annual interest (7.59 per cent) on certain bonds is falling due on July 20, 2024.

Amid mounting financial woes, Mahanagar Telephone Nigam Ltd (MTNL) last week informed in a statutory filing that it is unable to make interest payments to certain bondholders "due to insufficient funds".

"The second semi-annual interest with regard to 7.59 per cent MTNL's bond series...is due on July 20, 2024. As per the structured payment mechanism of Tripartite agreement (TPA) signed among MTNL, Department of Telecom and Beacon Trusteeship Ltd, MTNL has to fund the semi-annual interest into the Escrow account with adequate amount 10 days before the due date," MTNL had said in a BSE filing on July 11.

MTNL had informed that in the wake of provisions of TPA, and due to insufficient funds, it could not fund the escrow account with an adequate amount.
 

MTNL, which offers telecom services in Delhi and Mumbai, has seen a steady erosion in its subscriber base over the past years. MTNL's losses mounted to Rs 3,267.5 crore for FY24, from Rs 2,915.1 crore in FY23. The revenue from operations for the year ended March 2024 fell to Rs 798.56 crore, down 14.6 per cent from a year ago.

In an update on MTNL on July 12, India Ratings and Research said it "received an intimation from the trustee dated 11 July 2024, confirming that the escrow account is not funded by T-10 days from the due date of payment of the interest which is due on 20 July 2024.

"This breach of condition of the debenture trustee deed is considered as event of default, as per the intimation received by the agency. Ind-Ra has also received confirmation from the trustee that as per the structured payment mechanism, if the designated trust and retention account is not funded to the requisite extent by (T-8)th day that is by end of day 12 July 2024, the trustees shall forthwith invoke the government of India guarantee by sending a notice of invocation to the Government of India by 12 July 2024 end of day," Ind-Ra had said at that time.

The term 'T' here refers to the due date for interest or principal payments.

"Ind-Ra has an outstanding rating of 'IND AAA(CE)'/Stable on these bonds, based on the presence of a pre-default guarantee from the parent, GoI, along with a structured payment mechanism monitored by a third-party trustee. As per the payment structure mechanism, the GoI shall deposit requisite funds in the designated trust and retention account as per the notice of invocation served by the trustees latest by T-3rd day," Ind-Ra had said.

Further, Ind-Ra said it will keep on monitoring the developments on the same and take the appropriate rating actions accordingly.