The Securities and Exchange Board of India (Sebi) has relaxed the 90-day requirement for curing period following a default rating, as such cases are likely to rise in the wake of Covid-19 pandemic.
Under the existing framework, after a default is cured and the payments regularised, a rating agency shall generally upgrade the rating from default to non-investment grade (speculative grade) after a period of 90 days, based on the satisfactory performance by the company during this period.
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In its circular, Sebi said rating agencies may deviate from the period of 90 days on a case to case basis, subject to rating agencies framing a detailed policy in this regard.
Sebi said these policies can be used to factor in scenarios such as technical defaults, change in management, acquisition by another firm, sizeable inflow of long-term funds or benefits arising out of a regulatory action, etc. which fundamentally alter the credit risk profile of the defaulting firm.
The policy shall also be placed on rating agency’s website. Cases of deviations from stipulated 90 days shall be placed before the ratings sub-committee of the board on a half yearly basis, along with the rationale for such deviation.
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However, Sebi didn’t specify any relaxation on the 365 day curing period required to move the company back to investment grade following a default.
Under the existing framework, after a default is cured and the payments regularised, a rating agency shall generally upgrade the rating from default to non-investment grade (speculative grade) after a period of 90 days, based on the satisfactory performance by the company during this period.
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In its circular, Sebi said rating agencies may deviate from the period of 90 days on a case to case basis, subject to rating agencies framing a detailed policy in this regard.
Sebi said these policies can be used to factor in scenarios such as technical defaults, change in management, acquisition by another firm, sizeable inflow of long-term funds or benefits arising out of a regulatory action, etc. which fundamentally alter the credit risk profile of the defaulting firm.
The policy shall also be placed on rating agency’s website. Cases of deviations from stipulated 90 days shall be placed before the ratings sub-committee of the board on a half yearly basis, along with the rationale for such deviation.
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However, Sebi didn’t specify any relaxation on the 365 day curing period required to move the company back to investment grade following a default.
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