Companies need not worry defaults impacting rating during lockdown: Crisil

Companies need not worry about missed payments impacting ratings if these are due to operational challenges in the lockdown, ratings agency Crisil said.

The statement comes following the Reserve Bank's decision to have a three-month moratoriumon loan repayments, and also capital market regulator Sebi's circular on Monday allowing credit rating agencies (CRAs) to relax temporarily their norms for recognition of default on rated instruments.

"Crisil may not recognise missed payments as defaults if they occurred because of temporary operational challenges caused by the lockdown," the agency said in a note.

Exercise of this discretion will be a function of the analytical judgement and specific feedback from lenders and investors, it said, adding that this practice will be followed for all kind of borrowing instruments.

 

The agency explained that typically, in cases of rescheduling or restructuring, it looks at prior formal sanction of the revised terms of debt before deciding whether an instance is one of default or not.

However, given the unprecedented operational challenges at present, it would factor the inclination of lenders and investors to restructure or re-schedule than wait for a formal document that grants such approval, it said.

Its senior directorSomasekhar Vemuri clarified that while it may not consider a default for any missed payment after factoring in the perspective of lenders, it will "continue to take appropriate rating action which would reflect the resilience of the company to withstand cash flow pressures arising out of the lockdown".

After the moratorium period ends, Crisil will revert to its normative default recognition policy on revised payment schedules approved by banks and investors, the note said.