CRISIL Ratings has taken note of the disclosure by Mahanagar Telephone Nigam Ltd (MTNL) dated July 11, 2024, pertaining to inadequacy of funds in the designated trust and retention account (TRA) for servicing the semi-annual interest obligation of MTNL Bond Series VIII A (ISIN INE153A08154) falling due on July 20, 2024. The said bond (INE153A08154) is not rated by CRISIL Ratings.

As per the structured payment mechanism agreed upon by MTNL, Department of Telecommunications, government of India (GoI) and debenture trustee for the bond series VIII-A (INE153A08154), the company was required to route sufficient funds in the escrow account 10 days prior to the due date, which the company has failed to comply with.

Consequently, the debenture trustee invoked the government guarantee on July 12, 2024, as requisite amount for debt servicing was not made available in TRA at the end of the eighth day before the due date.

CRISIL Ratings has outstanding ratings on other government-guaranteed bonds and non-convertible debenture (NCD) programmes of MTNL, for which interest obligation will be due from October 11, 2024. The ratings of these bonds centrally factor in the presence of a pre-default guarantee from the parent, GoI, along with a structured payment mechanism monitored by a third-party trustee. CRISIL Ratings will closely monitor the functioning of the payment mechanism for timely funding of interest in the TRA account for ISIN INE153A08154.  

Also, CRISIL Ratings will continue to engage with the company’s management and take appropriate rating action on its rated debt instruments.

On July 5, 2024, CRISIL Ratings downgraded the unsupported ratings of MTNL to ‘CRISIL D’  from 'CRISIL B-' following the recent delays in debt servicing in June 2024 by the company because of stretched liquidity. 

Payment structure for NCDs amounting to Rs 4,533.97 crore (to be serviced by the government)

NOTE: “T” refers to the due date for interest payments/ principal repayments.

If any coupon payment date falls on a day that is not a business day, the payment shall be made by the issuer on the following working day, in line with SEBI circular number CIR/IMD/DF-1/122/2016 dated November 11, 2016.

If the redemption date (also being the last coupon payment date) of the bonds falls on a day that is not a business day, the redemption proceeds shall be paid by the issuer on the immediately preceding business day along with interest accrued on the bonds until but excluding the date of such payment.

Payment structure for NCDs amounting to Rs 2,980 crore (to be serviced by MTNL)

NOTE: “T” refers to the due date for interest payments/ principal repayments.

If any coupon payment date falls on a day that is not a business day, the payment shall be made by the issuer on the following working day, in line with SEBI circular number CIR/IMD/DF-1/122/2016 dated November 11, 2016.

If the redemption date (also being the last coupon payment date) of the bonds falls on a day that is not a business day, the redemption proceeds shall be paid by the issuer on the immediately preceding business day along with interest accrued on the bonds until but excluding the date of such payment.

Payment structure for bonds amounting to Rs 6,500 crore (to be serviced by MTNL)

NOTE: “T” refers to the due date for interest payments/ principal repayments.

If any coupon payment date falls on a day that is not a business day, the payment shall be made by the issuer on the following working day, in line with the SEBI circular number CIR/IMD/DF-1/122/2016 dated November 11, 2016.

If the redemption date (also being the last coupon payment date) of the bonds falls on a day that is not a business day, the redemption proceeds shall be paid by the issuer on the immediately preceding business day along with interest accrued on the bonds until but excluding the date of such payment.

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